The agency accuses Friedman, convicted of grand theft in 1981, of stealing $17 million from investors. A judge freezes the assets of two Sherman Oaks firms he owns.
By Stuart Pfeifer
March 6, 2009
A federal judge in Los Angeles froze the assets Thursday of two Sherman Oaks companies owned by a convicted felon accused of stealing $17 million from investors and spending it on personal luxuries and high-profile charitable donations.
The judge's order was sought by the Securities and Exchange Commission, which sued Bruce Fred Friedman, who heads two investment firms, Diversified Lending Group Inc. and Applied Equities Inc. The SEC accused him of diverting investors' money to himself and to a charity he founded and operates.
Friedman, 59, is best known for his charitable activities in recent years, including a $5-million pledge to help the Dodgers Dream Foundation build 42 youth baseball fields and a $10-million gift to help build the Children's Museum of Los Angeles in Lakeview Terrace.
Neither Friedman nor his son and business partner, Daryn Friedman, could be reached for comment.
The lawsuit said that since 2004 Friedman had sold $216 million of "secured investment notes" to hundreds of investors across the United States, many of whom the SEC described as "older Americans." No investors were named in the lawsuit.
He attracted investors to his companies by describing his notes as a "safe, guaranteed, solid investment," according to the lawsuit, and offered a return of 9% to 12%. He sent investors monthly mailings in which he said he continued to invest their money in real estate and loans, while he was secretly diverting millions of dollars, the SEC said.
Friedman promised to invest the money in real estate and mortgage lending, but at least $17 million of it was diverted for Friedman's personal use, the SEC contended.
According to the lawsuit, he spent much of the money on luxuries that included a $6.5-million Malibu home, vacations, cars, jewelry and designer clothing. The SEC said Friedman gave at least $1.8 million of investor money to his charity, the Friedman Charitable Foundation.
The lawsuit comes 28 years after Friedman was convicted of grand theft and sentenced to 40 months in state prison for stealing $300,000 from Avery International Corp., according to court records.
Friedman pleaded no contest to the felony charge during a January 1981 hearing in Pasadena, court records show. Avery International, now Avery Dennison Corp., is a Pasadena manufacturer of labels and self-adhesive products.
Avery Dennison spokesman Jeffrey Pina said he was unable to provide any information about the theft or Friedman's employment with the firm.
The Friedman Charitable Foundation, founded in 2006, became a well-known Dodgers sponsor after pledging $100 to a team charity each time a player scored a run. In 2007, that amounted to a $37,600 contribution, according to a Dodgers news release.
Last year, Friedman stood with Dodgers owner Frank McCourt and Los Angeles Mayor Antonio Villaraigosa at events where his charitable donations were saluted.
At a news conference in November, McCourt announced a joint venture between the Dodgers Dream Foundation and the Friedman Charitable Foundation to build baseball fields throughout the greater Los Angeles region.
Friedman pledged to match the Dodgers' spending dollar for dollar, up to $5 million. In a video available on the Dodgers website, Friedman said the project "is a big effort for everyone who is involved."
Dodgers spokesman Charles Steinberg said the team had not started construction on the 42 ball fields it announced in November, so it had not yet asked Friedman for any of the money he had pledged.
Steinberg said the SEC's lawsuit "certainly raises a subject that we will look into." He said the team was unaware that Friedman was convicted of grand theft in 1981 and sentenced to more than three years in prison.
"The Friedmans have been good fans of the Dodgers and we hope that these allegations aren't true," Steinberg said.
At a separate news conference in November, Daryn Friedman disclosed that the foundation had been the anonymous donor that pledged $10 million in 2007 to help build the children's museum. Cecilia Aguilera Glassman, the museum's chief executive, said $10 million represented a significant portion of the $58.5 million budgeted for the museum, scheduled to open in June.
Of the Friedman family, she said: "As donors, they were incredibly interested in this project and its success and what it would mean to the children of Los Angeles."
"I understand what's been charged and I will be looking into it," she said. "I have no knowledge other than what I've read in an article. At this point, I have to seek counsel."
In addition to the money spent on himself and charity, the SEC said, Friedman spent $500,000 to help produce a rock documentary and gave $275,000 to his girlfriend, Tina Placourakis.
According to the Internet Movie Database, Bruce Friedman is an executive producer of "Rock Prophecies," a documentary featuring Carlos Santana and ZZ Top scheduled for direct release on DVD in October.
Friedman is another Madoff. Is there any qusetion what is going on?