Bankruptcy protection sought for Dreier's law firm

A court-appointed receiver sought bankruptcy protection Tuesday for a prominent Manhattan law firm embroiled in accusations of massive fraud, claiming the firm is in disarray and suggesting its founder may have doctored records after his arrest.

Court papers filed by the receiver, Mark Pomerantz, said Dreier LLP has been hit with an onslaught of lawyer resignations, threats of lawsuits and demands for payment since Marc Dreier was charged last week with tricking hedge funds into making bogus investments.

The fallout from the scandal has been compounded by "the very real possibility that the Dreier entities' books, records and accounts may have been manipulated by Mr. Dreier prior to (and even after) his arrest," wrote the receiver, Mark Pomerantz.

Pomerantz had notified a federal judge last week that he planned to seek bankruptcy protection for the firm, adding that he believed Dreier himself would file a personal petition for bankruptcy later. Dreier's attorney, Gerald Shargel, said Tuesday that his client had decided against doing so, but he declined to elaborate.

Dreier LLP, a mid-size firm, has represented celebrities including retired football star Michael Strahan and former News Corp. publishing executive Judith Regan.

The 58-year-old defendant was jailed last week without bail after being charged in a criminal complaint. He was also charged by the SEC in the alleged sale of fraudulent promissory notes in a New York City real estate development company.

Questions surround firm that handled Madoff audit

The office for Bernard Madoff's sole auditor exudes anything but wealth and intrigue: It is next door to a pediatrician in a drab suburban building. The tiny storefront is discreetly labeled "Friehling & Horowitz" on its single glass door.

The people milling around outside are not high-end investors; they are mothers with children, waiting for the doctor's office to open.

But the auditor, a 49-year-old accountant named David Friehling, is now enmeshed in one of Wall Street's biggest scandals and is under criminal investigation in a case that has left people in financial ruin around the world.

The fact that a such a small accounting business was the main auditor for Madoff's multibillion-dollar operation has emerged as one of the most mysterious elements of the case. Experts say it would be preposterous for a tiny firm to audit properly an operation the size of Madoff's.