A Sherman Oaks money manager accused of spending millions of his investors' dollars on a lavish lifestyle and high-profile charitable contributions agreed Tuesday to let a court-appointed receiver manage his companies' assets.
Bruce F. Friedman has agreed to meet with the receiver that U.S. District Judge Manuel L. Real appointed to operate his companies, Diversified Lending Group Inc. and Applied Equities Inc., said a lawyer for the Securities and Exchange Commission, which is suing Friedman. The judge froze the companies' assets last week at the SEC's request.
A court hearing on the case was canceled Tuesday, but a group of investors on hand quizzed SEC attorney John M. McCoy III in an impromptu meeting in the federal courthouse in Los Angeles. Investors wanted to know if they would get any money back from the investment companies.
McCoy told them it was too soon to tell. "The whole point of freezing [the assets] is to stop the bleeding," he said.
The FBI and U.S. attorney's office are conducting a separate criminal investigation of Friedman and his companies, McCoy told the investors.
The SEC filed a lawsuit last week that accused Friedman of securities fraud for allegedly diverting $17 million for personal use and failing to disclose what he was doing with investors' money. The allegations came 27 years after Friedman had been convicted and sentenced to prison for grand theft for stealing $300,000 from an employer in San Marino.
According to the lawsuit, Friedman spent the money on luxury homes, cars, vacations, jewelry and designer clothing. He had raised $216 million by selling "secured investment notes" to about 300 investors across the U.S., promising returns of 9% to 12% on investments in real estate and mortgage lending, the SEC said.
Instead, the lawsuit alleges, he used the money to purchase companies, equities and gave at least $1.8 million to his charity, the Friedman Charitable Foundation.
The foundation gave $10 million to help build the Children's Museum of Los Angeles and pledged an additional $5 million to help the Dodgers Dream Foundation build youth baseball fields throughout Southern California.
On Tuesday, investors discussed a class-action lawsuit and whether it would be possible to recover money that Friedman gave to charity.
One investor said he didn't know about Friedman's past criminal conviction when he chose to invest.
"I was led to believe this person was upstanding, that he'd take our money and put it in real estate," said the investor, who declined to give his name. "If I'd have known what he was doing, I wouldn't have put it in there at all."
Another investor, Camarillo resident Gerry Coulter, said he didn't want to rush to judgment simply because of the SEC's lawsuit. He said he invested "a substantial amount of money" one year ago and has received every interest payment as promised -- until this month.
"There's nothing I've heard from people who worked with him that he was doing anything illegal or underhanded," Coulter said. "Obviously, I'd like to get my money back. And I'd like them to give Bruce a chance to work through this."