Website Last Updated: May 15, 2012
INSURANCE ON LIFE OF BRUCE FRIEDMAN
[05/03/12] Bruce Friedman died in jail in France on March 4, 2012, awaiting extradition to the United States to face criminal charges arising out of his operation of Diversified Lending Group. When he died, there was in effect a prepaid life insurance policy on his life with a death benefit of $10 million. The beneficiary of the policy is the Friedman Charitable Foundation. The Receiver believes that the Friedman Charitable Foundation was just one small part of Bruce Friedman’s Ponzi scheme. Moreover, the money used to purchase the life insurance policy came from investor funds. To eliminate any doubt that the Friedman Charity Foundation was part of the receivership estate, the Receiver recently asked the Court to determine that the Charitable Foundation was part of the receivership and the Court did so by order dated April 27, 2012 [See update dated May 1, 2012 to “Pending Motions” section of the Receivership website]. The Receiver has also filed a claim for the proceeds of the policy; the Receiver understands that relatives of Bruce Friedman may also have filed claims. No money has yet been received by the Receiver. When and if it is received, the Receiver will propose to the Court how the money should be distributed. The California Attorney General, which supervises charitable foundations, may have a view on that subject. As the insurance proceeds have not yet been received, and the Court has not been asked for or given permission for the funds to be distributed, these funds cannot and will not be included in the current distribution.
BULLETIN: BRUCE FRIEDMAN REPORTED DECEASED
We were this morning, March 5, 2012, advised by the press that Bruce Friedman reportedly passed away over the weekend. We have no information other than that, but will update this post when we learn something. We would imagine a good source of information will be the Los Angeles Times.
[03/06/12] Please see the attached link for more information as reported by the Los Angeles Times. See Article.
NOTICE TO CREDITORS RE: PROCEDURE TO DISPUTE RECEIVER'S CLAIM AMOUNTS AND NOTICE TO FILE W-9 FORMS IN ORDER TO RECEIVE DISTRIBUTION. Please see, Recent Developments section below.This website will be updated from time to time, to reflect developments believed to be of interest to creditors and investors and official notices. This site does not contain all pleadings in this case. For same, please refer to the Court Docket at www.cacd.uscourts.gov.
Introduction
On March 4, 2009, David A. Gill, Esq., of Los Angeles, was appointed by Honorable Manuel L. Real, United States District Judge, as the Temporary Receiver of Diversified Lending Group, Inc., and Applied Equities, Inc. ("the Entity Defendants") and affiliates. His appointment was made permanent on March 10, 2009. The Receiver is not a government employee or official. He is a private attorney, acting as an "arm of the court" for the purposes for which he was appointed.
The SEC's complaint alleges that DLG, AEI, and Friedman raised at least $216 million from hundreds of investors nationwide, by promising guaranteed high returns through real estate-related investments. The complaint alleges that Bruce Friedman ("Friedman"), and the Entity Defendants diverted substantial investor money to ventures unrelated to real estate and to Friedman's personal lifestyle.
The SEC's complaint charges Friedman and his companies with selling securities in the form of one- or five-year "Secured Investment Notes," representing that DLG pools investor money and invests it 70 to 80 percent in real estate property and 20 to 30 percent in mortgage lending. The SEC alleges that once investors invested in the Notes, defendants continued to represent to them that their money was being used as represented, that DLG's investments were profitable, that their money was safe, and that returns of either 9 percent or 12 percent were "guaranteed."
By the Court's Orders, the Receiver was directed to take possession of the two mentioned entities and affiliates into his custody, to investigate to locate other assets, including any transfers of property, to preserve, account and to report to the court as to his recommendations for action and the disposition of proceeds to creditors, including investors. Contemporaneously with those instructions, the Court issued extensive injunctions. These injunctions specifically included actions by Friedman, Ms. Tina M. Placourakis and others and prohibit actions against the Entity Defendants and others.
On March 10, 2009, the Defendants either defaulted or stipulated to the appointment of the Receiver as Permanent Receiver and to preliminary injunctive relief. The Court also issued various mandatory and prohibitory injunctions against Mr. Bruce Friedman, Ms. Tina Placourakis and others. Some relevant pleadings can be found in the "Documents of Interest" section.
The Receiver is presently represented by general counsel Danning, Gill, Diamond & Kollitz, LLP. The Receiver's financial advisors/forensic auditors are LECG, Inc. He has special counsel in the litigation described in item 1 in the Pending Complaints section.
Recent Developments
[05/15/12] The Pending Complaints Section has been updated. Also, the Pending Motions section has been updated.
[05/02/12] The Pending Motions and Sale Information sections have been updated.
[05/01/12] The Pending Motions section has been updated.
[04/18/12] The Pending Motions section has also been updated.
[04/18/12] The Pending Complaints Section has been updated.
[04/04/12] The Pending Complaints section has been updated.
[03/19/12] The Pending Complaints section has been updated. Documents have been added to the Documents of Interest-Pt.3 section.
[02/07/12] Documents have been added to the Receiver's Reports section.
[02/07/12] Documents have been added to the Documents of Interest-Pt.3 section. The Pending Motions section has also been updated.
[01/26/12] Notice to Creditors Re: Procedure to Dispute Receiver's Claim Amounts and Notice to File W-9 Forms in Order to Receive Distribution.
On January 23, 2012, the court approved the Receiver’s distribution motion (which was served on you). A copy of the order approving the motion, is Document number 353 at Documents of Interest, Pt 3 on this website. The motion contained an exhibit, Number 4, setting forth the amount that the Receiver recommends for approval of your claim. A copy can be found on this website at Pending Motions, dated 12/16/11. The Receiver is sending a mailing to all investor claimants. This summarizes what he says in that mailing.
Pursuant to the motion and the order, if you are an investor claimant and disagree with the amount of your allowed claim, as shown on Exhibit 4, Column 6, you may contact the Receiver through his paralegal, Valerie Radocay, and they will attempt to work out any issues you wish to present. If we cannot come to agreement, you will have until February 22, 2012, to do one of the following two things to preserve your claim:
(1) file a motion with the Court seeking whatever relief you think is appropriate, or
(2) send a letter, with all necessary supporting documentation, explaining your position with respect to any dispute. If you pursue this course of action, the Receiver will aggregate all such letters received and provide them to the Court with his recommendation as to how the dispute should be resolved. He will give you notice of the hearing date and you will be able to attend the hearing to explain your position to the judge.
Important: Before the Receiver can make any distribution to you, he must have your completed IRS form W-9. Your failure to return the form promptly will delay payment of any distribution to you. You may return it to him in one of three ways: (1) mail it to him at the above address, or (2) fax it to him at (310) 277-5735 attention: V. Radocay, or (3) scan and e-mail the form to vradocay@dgdk.com. If you did not yet receive his mailing you can access and print a copy of the W-9 form at www.irs.gov at Forms and Publications.
[01/24/12] The Pending Motions section has been updated.
[01/13/12] The Pending Motions section has been updated.
[12/22/11] The Pending Motions section has been updated.
[12/22/11] The FAQs section has been updated.
[12/22/11] Documents have been added to the Sales Information section.
[12/22/11] Bruce Friedman not yet extradited from France. Please see the attached link for more information as reported by the Los Angeles Times. See Article.
[12/21/11] The Pending Motions section has been updated.
[12/20/11] Amended documents have been added to the Sales Information section.
[12/16/11] Documents have been added to the Sales Information section.
[12/16/11] Motion Filed to Approve Interim Distributions and for Related Procedures. Documents have been added to the Pending Motions section.
[11/14/11] Documents have been added to the Receiver's Reports section.
[10/24/11] The Pending Motions section has been updated.
[10/21/11] The Pending Complaints section has been updated.
[10/14/11] The Pending Motions section has been updated.
[10/12/11] The Pending Motions section has been updated.
[09/02/11] On August 22, 2011, the District Court granted a judgment against Bruce Friedman for $37 million. However, other than Mr. Friedman’s house and some art work in my possession, there do not appear to be any other assets available to pay this judgment. The amount of equity available in Mr. Friedman’s house is uncertain and probably subject to litigation. At last report, Mr. Friedman remains in a French jail appealing an order extraditing him to the United States.” See Document.
[08/09/11] The Pending Motions has been updated.
[08/05/11] Documents have been added to the Receiver's Reports section. The Pending Complaints section has also been updated.
[07/27/11] The Pending Motions has been updated.
[07/15/11] Documents have been added to the Documents of Interest-Pt.3 section. The Pending Complaints and Pending Motions sections have also been updated.
[06/27/11] The Pending Motions and Sale Information sections have been updated.
[06/24/11] The Pending Motions and Sale Information sections have been updated.
[06/22/11] The Pending Motions and Sale Information sections have been updated.
[06/16/11] The Pending Motions and Sale Information sections have been updated.
[06/01/11] The Pending Motions section has been updated.
[05/06/11] The Pending Motions section has been updated.
[05/05/11] The Pending Motions section has been updated.
[04/29/11] Documents have been added to the Receiver's Reports section.
[03/31/11] Adverse Development in Receiver's Lawsuit Against Jackson Life Insurance Company.
On March 8, 2011, the United States District Court dismissed the Receiver's remaining claims against Jackson National Life Insurance Company. The Receiver continues to work to obtain the greatest possible recovery for creditors of Diversified Lending Group, Inc., and is currently considering all of his options, including appealing the District Court's decision to the Ninth Circuit Court of Appeals. The Receiver will post updates on this website as the case develops. The Receiver notes that investor claims against Jackson National are continuing in various jurisdictions, and believes that the District Court's ruling on the Receiver's claims has no effect on the separate investor actions.
[03/21/11] The Pending Motions section has been updated.
[03/11/11] The Pending Motions section has been updated.
[02/18/11] Documents have been added to the Documents of Interest-Pt.3 section.
[02/11/11] Documents have been added to the Sale Information section.
[01/25/11] The Pending Complaints section has been updated.
[01/24/11] Documents have been added to the Receiver's Reports section. The Pending Motions and Documents of Interest sections have also been updated.
[01/13/11] Documents have been added to the Pending Motions section.
[01/12/11] Documents have been added to the Documents of Interest-Pt.3 section. The Pending Motions section has also been updated.
[01/04/11] Documents have been added to the Receiver's Reports section. The Pending Complaints section has also been updated.
[12/20/10] Documents have been added to the Documents of Interest-Pt.3 section. The Pending Complaints and Pending Motions sections have also been updated.
[12/16/10] Documents have been added to the Documents of Interest-Pt.3 section. The Pending Motions section has also been updated.
[12/14/10] Documents have been added to the Pending Motions section.
[12/08/10] Documents have been added to the Pending Motions section.
[11/23/10] Documents have been added to the Documents of Interest-Pt.3 section. The Pending Complaints and Pending Motions sections have also been updated.
[11/11/10] Documents have been added to the Documents of Interest-Pt.2 section.
[11/04/10] Documents have been added to the Pending Motions and Documents of Interest-Pt.2 sections.
[10/27/10] The hearing scheduled for November 1, 2010 has been taken off calendar. The Receiver's Motion for Disallowance of Duplicate Claims, (B) Extending Last Date to File Claims to July 10, 2010 and (C) to Recommend a Procedure to Resolve Claims Disputes has been approved. See Order.
[10/22/10] Bruce Friedman was detained in France on September 13, 2010. Please see the attached link for more information as reported by the Los Angeles Times. See Article 1 and Article 2.
[10/14/10] For ease of reference, a Receiver's Report section has been added.
[10/12/10] Documents have been added to the Pending Motions and Documents of Interest-Pt.2 sections.
[10/12/10] Information has been added to the Income Tax Notice section.
[10/04/10] Documents have been added to the Pending Motions and Documents of Interest-Pt.2 sections.
[09/13/10] Documents have been added to the Pending Motions section.
[09/01/10] Documents have been added to the Pending Motions and Documents of Interest-Pt.2 sections.
[08/17/10] Documents have been added to the Pending Motions section.
[08/13/10] Documents have been updated and/or added to the following sections: Home, Documents of Interest-Pt. 2 and Pending Complaints.
[08/04/10] Documents have been added to the Sale Information section.
[07/16/10] Documents have been added to the Documents of Interest-Pt. 2 section.
[07/09/10] Documents have been added to the Pending Motions section.
[07/09/10] Documents have been added to the Documents of Interest-Pt. 2 section.
[06/18/10] Documents have been added to the Pending Motions section.
[06/02/10] Documents have been added to the Documents of Interest-Pt. 2 section.
[04/16/10] Receiver's Third Report: On March 26, 2010, the Receiver filed his Third Report, which can be accessed at Document No. 185.
[02/10/10] Suit by Investors Against Jackson National Life Insurance Company: The Receiver was recently advised of the filing of a lawsuit in the U.S. District Court for the Central District of California, Western Division, by several individuals purporting to act on behalf of all investors against Jackson National Life Insurance Company and potentially other defendants. The Receiver is not a party. The lawsuit describes itself, at page 1 thereof, as follows:
"I. NATURE OF THE ACTION
1. This is a Class Action is brought against Jackson National Life Insurance Company ("JACKSON NATIONAL") and DOES 1 through 10 which knowingly assisted Diversified Lending Group, Inc. ("DLG") and others in committing fraud, converting funds loaned to DLG and engaging in unfair business practices. This case is related to an individual action filed in the Central District of the U.S.D.C. for California, Martin L. Markowitz v. Diversified Lending Group, Inc., Jackson National Life Insurance Company, Case No. 2:09-CV-00483-FMC-RZx. This Class Action is brought by the named Plaintiffs with over $1,840,000 in combined damages on behalf of a class of similarly situated people located throughout the United States who each lost money entrusted to DLG, which was operated by Bruce Friedman ("Friedman"), and purportedly guaranteed and insured by Defendant JACKSON NATIONAL. After DLG's fraud was uncovered, DLG was forced into receivership on March 10, 2009."
The Receiver may also have and pursue claims against Jackson National Life Insurance Company on behalf of Diversified Lending Group, et al. and will advise if and when such an action is initiated. See Complaint without Exhibits.
[01/08/10] Motion to Sell Membership Units in 55 Edgemere Avenue, LLC, etc.: The Receiver sought approval of an agreement to sell his 50% interest in 55 Edgemere Avenue, LLC, which owned real property at that address in New York, and a small boat. The Receiver was to be paid $405,000. The Motion was approved on December 9, 2009 and the transaction has closed.
[12/14/09] Receiver's First Account, etc.: On August 27, 2009, the Receiver filed his First Account and Request for Authority to Pay Professional Fees and Expenses, which was initially set for hearing on September 28, 2009 at 10 a.m. and continued to November 16, 2009 at 10:00 a.m. In the Account, the Receiver reports as to his receipts and disbursements through July 31, 2009 and seeks authority to pay his attorneys and accountants their accrued fees and costs through July 31, 2009. A copy can be found in the Documents of Interest section as documents 91 through 91-38. On September 23, 2009, the SEC filed its non-opposition thereto. On November 3, 2009, the SEC filed a pleading recommending Court approval. It was approved by Order entered December 9, 2009. See Order.
[12/14/09] Application for Employment of Bryan-Gonzalez, counsel in Mexico: The Receiver obtained Court authority to employ a law firm in Mexico to help the Receiver evaluate and pursue his interest in property in Mexico securing a DLG loan. In addition, counsel in Mexico will assist the Receiver in assignment of an ownership interest from Bruce Friedman in a condominium in Cancun, Mexico, which was listed as one of Mr. Friedman's personal assets , and the sale of that property. It was approved by Order entered December 9, 2009. See Order.
[11/25/09] Motion to Approve Settlement with Kidfresh: The Receiver is seeking Court approval of his agreement with Kidfresh wherein in return for Diversified's investment of $3 million, the Receiver will be entitled to a 7.4% ownership interest in Kidfresh, a company engaged in the business of marketing and distributing nutritious, pre-packaged meals for children. The settlement with Kidfresh was approved by Order dated November 17, 2009. See Document No. 154.
[11/25/09] Motion to Approve Sale and Settlement with Frank Weisz: The Receiver is seeking Court approval of his agreement to sell and settle certain claims with a DLG investor, Frank Weisz. Frank Weisz is to pay the receivership estate a total of $81,000 and in return the Receiver will assign his rights to the amount of value in excess of Mr. Weisz's cap value in an insurance policy annuity with Jackson National Life Insurance Company. The sale and settlement was approved by Order dated November 17, 2009. See Document No. 155.
[11/25/09] Motion to Approve Settlement with RockDoc: The Receiver is seeking Court approval of his agreement with RockDoc, LLC, in order to fix the Receiver's 35% ownership interest in an entity which has as its sole asset a documentary film about a rock and roll photographer. The settlement was approved by Order dated November 18, 2009. See Document No. 153.
[11/25/09] Pending Litigation: Alleged Violation of Injunction by Kraig S. Ivie: On August 21, 2009, the Receiver was personally served with a summons and complaint filed in U.S. District Court for the Western District of Michigan by Kraig S. Ivie, a Diversified Lending Group, Inc., investor. The complaint, filed against Diversified and Jackson National Life Insurance Co. seeks over $2.2 million in damages for fraud, among other claims for relief. The Preliminary Injunction in the SEC case in Los Angeles bars any suits against Diversified. The Receiver requested that Mr. Ivie immediately dismiss Diversified as a defendant. Mr. Ivie declined to do so and as a result, the Receiver applied for, and obtained on October 6, 2009, an Order to Show Cause why Mr. Ivie and his lawyers are not in contempt of the Preliminary Injunction in the SEC case. On November 16, 2009, the Court held that Mr. Ivie and his counsel were not in contempt of a prior Order of the Court but that they were enjoined from prosecuting said action. See Order, Document No. 157.
10/14/09] Motion re Settlement ? Receiver and Distinctive Projects Company (Brown Field): On September 14, 2009, the Receiver filed his Motion to Approve Agreement Between Receiver and Distinctive Projects Company, Inc. (Brown Field) and Request for Judicial Notice. In the Motion, the Receiver sought permission to agree to the restructuring of that investment. A copy of the Motion can be found in the Documents of Interest section as document 100, and the Request for Judicial Notice as document 101. It was approved by Order entered October 13, 2009. See Order.
[09/14/09] Sale of Malibu Real Estate Closes: On August 3, 2009, the Court authorized sale of real property at 31610 Broad Beach, Malibu, California, for $5,700,000. After payment of taxes, liens and encumbrances, $3,032,635.01 was received net.
[08/31/09] Motion re Settlement ? Kovats, McConnell and Zugsmith, et al. : On August 28, 2009, the Receiver filed his Motion to Approve Settlement Agreement with Diane Dubois Kovats, Kevin McConnell and Susanne Zugsmith, et al., which was set for hearing on September 28, 2009 at 10 a.m. In the Motion, the Receiver sought authority to enter into the settlement agreement attached to the Motion resolving certain claims and disputes with each named individual. A copy can be found in the Documents of Interest section as document 96. On October 7, 2009, the Court entered an Order approving the transaction.
[08/17/09] Receiver's Second Report: On August 14, 2009, the Receiver filed his "Second Report; Declarations of David A. Gill and David W. Callaghan" to be considered by the Court on September 8, 2009 at 10:00 a.m. A copy can be found in the Documents of Interest section as documents 87 through 87-6. It summarizes what the Receiver had learned to August 14, 2009, including his view of the accuracy of financial statements previously issued by Diversified, his actions taken thus far and a proposed course of action. Attached to the Declaration of the Receiver is a list of all assets identified by him as of August 14, 2009. By Minute Order entered on September 8, 2009, the Court accepted the Report after hearing.
[08/12/09] Procedures re collateral held by Jackson National and American National Insurance Companies: On August 6, 2009, the Court approved the Receiver's Motion for Modification of Preliminary Injunction; (1) To Permit Release of Secured Funds from Jackson National Life Insurance Company and American National Insurance Company; (2) To Permit Release of Secured Funds from Other Institutions (See Document No. 86). Jackson National has advised that it intends to send a letter to assignees of Jackson contracts owned by DLG, as well as a copy of the Surrender Request Form and Instructions for completing that form. To the extent that collateral assignees wish to obtain the cash surrender value of an annuity assigned to them, then they will need to complete the documentation required by Jackson National. Any questions regarding Jackson National annuities owned by DLG should be directed to Cheryl Moore of Jackson National at (800) 565-9044. As to those claiming collateral held by American National Insurance Company, please contact Bruce Pavelka at (409) 763-4661 ext. 5159.
Important Note to Investors
The Receiver does not at this time have sufficient funds with which to make any distributions. However, he believes that there may ultimately be assets in the estate available for distribution at a later time after disposition of saleable assets, realization on investments and recoveries on litigation if initiated and successfully prosecuted. He does not know if, much less when or how much, will ultimately be available for investors and other creditors.
The Receiver has no monies with which to pay insurance premiums, home equity loans, mortgages, trust deeds or other debts of Investors, whether or not Diversified Lending Group, Applied Equities or any affiliate agreed to do so. If you have been involved in an insurance premium financing program, or if Diversified, Applied Equities or an affiliate is obligated to make a home equity loan, mortgage or trust deed payment on your behalf, be advised that it cannot do so. Please make arrangements to make appropriate payments in order to protect yourself lest you be irreparably damaged. If you are damaged by failure of Diversified or Applied to make those payments, you may be entitled to assert a claim in some amount, but your claim may be reduced or rejected if you have not acted to mitigate your damages by protecting yourself.
Claims Procedure
A Claim Procedure in this case has been approved and established by the Court. For additional information, please refer to the "Claim Instructions" link appearing at the top of this page.
Please bear in mind that the establishment of the Claim Procedure should not lead you to believe that there is any expectation that any distributions will be made to creditors/investors at a certain time or at all. The process has been created so that claimants will have time to establish their clams before documents get lost, people become unable to prepare them, and the like.
Prognosis
It is too early in this case to determine the totality of assets and rights which might be utilized to obtain recoveries for investors and other creditors. It is clear that no immediate distributions to investors are likely.
Affiliates
In addition to entities in which Diversified is a substantial investor or creditor, the following entities are wholly owned by the Defendants and subject to the Receivership. There may be other entities also affiliated and perhaps subject to the Receivership:
-
DLG International
-
MMHIM, Inc.
|