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Securities & Wire Fraud - Dreier Case - The Hayes Law Firm
By CHAD BRAY
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(November 9, 2009 - Monday) - Kosta Kovachev pleaded guilty to conspiracy to commit securities fraud and wire fraud, as well as a wire fraud charge, at a hearing before U.S. District Judge Naomi Reice Buchwald in Manhattan.
Mr. Kovachev, 58 years old, admitted to pretending to be an inside accountant for Solow Realty & Development at Mr. Dreier's request in a meeting with investors at their Manhattan offices and impersonating Solow's then-Chief Executive Steven Cherniak at Mr. Dreier's request in a separate phone call with investors.
"I helped him," Mr. Kovachev said. During the hearing, Mr. Kovachev, who sighed heavily several times before entering his plea, said he believed Mr. Dreier was affiliated with Solow Realty and hoped to get a job at the time.
He faces 51 months to 63 months in prison as part of a stipulated sentencing guidelines range under a plea agreement with prosecutors. Sentencing is set for March 5.
Mr. Kovachev was originally charged in the matter last December. He will forfeit $215,000, the amount he was allegedly paid by Mr. Dreier.
Prosecutors had alleged that Mr. Kovachev helped Mr. Dreier, the onetime managing partner of law firm Dreier LLP, carry out a scheme to defraud hedge funds through the sale of fraudulent promissory notes, in part by impersonating individuals at a real-estate development company.
Mr. Dreier was sentenced to 20 years in prison in July after pleading guilty to conspiracy, securities fraud and other charges in the scheme to sell $700 million in fake promissory notes and misappropriate client funds from his law firm.
The out-of-pocket loss to investors and clients when the fraud was discovered in December was more than $400 million, prosecutors said. The overall scheme allegedly ran from 2004 to 2008.
The government had alleged Mr. Kovachev was involved in the conspiracy to sell fake promissory notes from about October 2008 to about December 2008 and one victim, a hedge fund, lost $100 million.
At Monday's hearing, Assistant U.S. Attorney Jonathan Streeter said prosecutors could seek $100 million in restitution against Mr. Kovachev as part of his sentencing.
Prosecutors said Mr. Dreier used money obtained from the scheme to support a lavish lifestyle, including purchasing two beach-front homes in the Hamptons valued at about $12.5 million, a $10.4 million Manhattan apartment, a $18.3 million yacht, a 2007 Aston Martin DB9 Volante, more than $30 million in art work and funding the operations of his law firm.
His law firm, Dreier LLP, filed for bankruptcy protection on Dec. 16, 2008.
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