NEW YORK CITY-A broker--who allegedly helped disgraced attorney Marc Dreier market millions of dollars in bogus promissory notes to hedge funds--was arrested Monday night. According to a criminal complaint unsealed Tuesday in the Southern District, Kosta Kovachev posed as the comptroller of the real estate developer Solow Realty when Dreier attempted to sell a New York City hedge fund $115 million in notes that purportedly were issued by Solow.

Kovachev, 57, was charged with a single count of conspiracy to commit wire fraud in violation of 18 U.S.C. §371. He was ordered held at his initial appearance before Magistrate Judge Frank Maas late Tuesday.

Meanwhile yesterday, a panel of the Appellate Division, First Department, suspended Dreier from the practice of law, effective immediately, "on the basis of uncontroverted evidence of serious professional misconduct." There may be more charges to come in the Dreier case, as the criminal complaint states that Kovachev joined the conspiracy with Dreier and "others known and unknown."

In 2006 and 2007, Dreier allegedly sold to a New York City hedge fund promissory notes with a face value of $115 million purportedly issued by Solow Realty. But in 2008, when the notes were not repaid in time, a hedge fund employee sought reassurance from Dreier and asked to meet with representatives of the developer at Solow's offices.

Dreier agreed and arranged a meeting at Solow for Oct. 15, 2008, without the knowledge of the real estate firm. At that meeting, the criminal complaint alleges, Kovachev pretended to be Solow's comptroller and answered questions about the company's finances.

Later that month, Kovachev, this time as himself, contacted the founder of another hedge fund for whom he had worked as a broker. Kovachev allegedly told the founder about the Solow notes and put him in touch with Dreier, who then sold the fund a $25-million note for the bargain price of $13 million.

Finally, when an employee of a third hedge fund wanted to speak with Solow's chief executive officer in connection with the purchase of $100 million in notes, Kovachev got on the phone and impersonated the executive. Federal officials said Solow was uninvolved in any of the transactions.

Dreier had access to the offices of Solow Realty because he had done extensive legal work for the company. "The company never authorized Mr. Dreier to negotiate any financing or issue any promissory notes on its behalf," a spokesman for Solow Realty says in a statement.

The spokesman adds, "As soon as the company learned that fraudulent and forged instruments purporting to be obligations of Solow Realty were circulating, the company reported the facts to the US Attorney's office and we have been cooperating fully with the investigation."

In the criminal complaint against Kovachev--signed on Dec. 18 by Southern District Magistrate Judge Theodore Katz, criminal investigator Jordan Goodman of the Southern District US Attorney's Office--said he interviewed Solow's chief executive, who assured him, "The developer did not issue any of the notes described above and has no note program."

It was that same executive who told Goodman that the signatures appearing on the notes were forgeries. Financial statements provided by Dreier to the hedge fund, Goodman said in the complaint, "were entirely fabricated." Kovachev, the investigator said, had an electronic pass that gave him access to Dreier LLP and also had access to computers and offices at the law firm.

Kovachev lost his broker's license in 2006 when he was implicated in a $28-million Ponzi scheme in which he and 11 others defrauded some 600 investors through the sale of unregistered securities structured as hotel timeshare rental interests. He was not criminally charged in the matter and denied any wrongdoing in a settlement with the Securities and Exchange Commission in which he paid $358,148 in disgorgement and penalties.

The New York Times reported in July 2004 that Dreier said Kovachev, then head of a dissolved Florida company called Evergence Capital Partners, was a client of his law firm. In a dispute between Solow Realty and developer Peter Kalikow, Solow and Dreier hired Evergence to place newspaper ads listing ex-creditors of Kalikow, the Times reported.

Dreier was arrested on Dec. 2 in Toronto on an impersonation charge and on Dec. 7 in Manhattan on securities and wire fraud charges for what prosecutors now say is a $380-million fraud.

He has remained in custody without bail as his 250-member firm, Dreier LLP, has imploded and gone into bankruptcy. What is left of the firm's assets and client escrow funds is in the custody of receiver Mark Pomerantz of Paul, Weiss, Rifkind, Wharton & Garrison, appointed by Judge Miriam Goldman Cedarbaum in a civil suit against Mr. Dreier by the Securities and Exchange Commission.

According to defense attorney Gerald Shargel, Dreier is cooperating with Pomerantz in identifying and locating assets, an effort Shargel says he hopes will reassure a judge that Dreier has not stashed assets abroad and can be trusted to be released pending trial or a plea.

Mark Hamblett can be reached at [email protected].