Former New York lawyer Marc Dreier, who is now serving 20 years in prison for bilking investors out of more than $400 million by selling bogus promissory notes, was forced into involuntary Chapter 7 bankruptcy in 2009. As part of his criminal sentence, Dreier was ordered to pay $367.7 million in restitution to his victims, and most of his assets were seized by the federal government.
In an effort to recover any remaining assets that could be used to repay Dreier’s creditors, Chapter 7 bankruptcy trustee Salvatore LaMonica has filed a look-back lawsuit against a real estate developer on the Caribbean Island of Anguilla, where Dreier once owned property.
Under the Bankruptcy Code, trustees are given authority to look into any financial transaction involving the debtor for a certain period of time before the bankruptcy filing. If the trustee finds any assets that were hidden or should otherwise have been included in the bankruptcy, he or she can file a “look-back” lawsuit to reverse the transaction and reclaim the assets.
The Chapter 7 bankruptcy estate consists of any assets belonging to Dreier that the federal government has not already seized to be distributed among Dreier’s victims. According to LaMonica, that includes part of the value of real estate Dreier bought on Anguilla before his Ponzi scheme collapsed.
When Dreier’s assets were seized by the federal government, an Anguillan company called Temenos Development apparently handled the sale of a property Dreier owned on the island and then gave the proceeds to the feds. LaMonica alleges that Temenos intentionally short-changed the U.S. government on that sale to the tune of approximately $1.5 million.
Assuming LaMonica’s allegations are true, the $1.5 million that Temenos unlawfully kept was money originally belonging to Dreier, and therefore an asset that could be used to pay his creditors. If the federal government wishes to claim the money for the victim restitution fund, it could also file suit against Temenos. Unless it does, however, the Chapter 7 bankruptcy estate would get to claim it.
The look-back lawsuit was filed on Monday. A reporter from the Wall Street Journal tried to reach Temenos for comment but was unsuccessful.
Source: The Wall Street Journal Bankruptcy Beat blog, “Dreier Bankruptcy Trustee Sues Over Anguilla Property,” Jacqueline Palank, March 1, 2011