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Dreier’s Warhols Can’t Be Claimed by 360networks

Dreier’s Warhols Can’t Be Claimed by 360networks (Update2)
http://www.businessweek.com/news/2010-03-24/dreier-s-warhols-can-t-be-claimed-by-360networks-judge-rules.html
March 24, 2010, 12:44 PM EDT

By Thom Weidlich

March 24 (Bloomberg) — 360networks (USA) Inc. can’t claim a superior interest in five Andy Warhol artworks bought by Marc Dreier, the former lawyer now in prison for cheating hedge funds out of more than $400 million, a judge ruled.

Steven J. Reisman, the post confirmation representative of the 360networks bankruptcy estates, said Dreier bought the artwork in part with $50 million he stole when his law firm worked to recover money 360networks gave creditors before it filed for bankruptcy. New York-based Dreier LLP, now defunct, was hired by 360networks’s unsecured creditors. The artwork includes four “Jackie” paintings and a “Nureyev” by Warhol, in addition to a sculpture, “Love,” by Robert Indiana.

U.S. District Judge Jed Rakoff in New York disagreed with Reisman that broadband company 360networks had a superior claim over other Dreier victims for an interest in the paintings, which the ex-lawyer forfeited in his criminal case. The U.S. government, which prosecuted Dreier, opposed Reisman’s Sept. 14 petition.

“The court holds that under the facts here alleged, equity and good conscience are not compatible with the recognition of a constructive trust in the 360 estates’ favor,” Rakoff wrote in a March 22 order docketed today.

Reisman, a partner at Curtis, Mallet-Prevost, Colt & Mosle LLP in New York, didn’t immediately return a call for comment.

$9.24 Million in Art

Dreier, 59, bought the “Jackie” paintings in October 2007 for $6.5 million from Gagosian Gallery in London, according to Reisman’s petition. Half the amount was stolen from the recovery money, according to the petition. He bought the “Nureyev” for $2 million, of which $1.5 million was recovery money Dreier stole, and the “Love” sculpture for $735,000, all of which Dreier stole, Reisman said.

Dreier admitted selling phony promissory notes, including some purportedly issued by the firm of Sheldon Solow, a New York developer who was a client of Dreier LLP. Dreier is serving a 20-year prison sentence.

The case is U.S. v. Dreier, 09-cr-85, U.S. District Court, Southern District of New York (Manhattan).

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