Taryn Phaneuf Aug. 14, 2016, 3:14pm

LOS ANGELES — Despite what have been interpreted as warning signs, Tony Russon testified last week that he continued to trust the owner of Diversified Lending Group during the years that the fund was taking on investors and financing premiums for insurance policies.

Russon continued his testimony Aug. 9 and Aug. 11, fielding questions from defense attorneys in the case. Russon, the registered principal and corporate manager of a MetLife subsidiary, also is named in the lawsuit against the insurance giant regarding claims that it failed to properly supervise agents who promoted DLG, a fraudulent real estate investment fund.

This is the first of many similar lawsuits to go to trial. The plaintiff, Christine Ramirez, claims she learned about DLG during a pitch for life insurance by a MetLife agent and the company’s credibility gave her confidence in her investment. She didn’t buy any insurance, but she invested nearly $280,000 in DLG, which guaranteed a 12 percent return.

Russon said, like other DLG investors, he received a letter in December 2008 from DLG owner Bruce Friedman, in which Friedman disclosed a prior felony conviction and a history of bankruptcy. Still, Russon, who had about $1.5 million invested in DLG, didn’t try to retrieve his money.

“At the time, he was still making his payments and I still trusted the fact that he was going to continue that, so I didn’t take it out,” he said.

In January 2009, he loaned Friedman another $375,000, which was never repaid.

Answering questions from Sidney Kanazawa, the attorney representing MetLife, Russon said he never personally told insurance agents working for him that DLG was a “solid” or “perfect” investment, nor did he guarantee its safety or earnings. Such language was used in marketing material for the fund.

Russon’s attorney, Theodore Peters, worked through a line of questioning seeking to clarify his client’s relationship with Friedman, which started in 1999. Friedman was a mortgage broker at the time and helped Russon secure permanent financing for a piece of property. Their relationship grew complicated when the financing was distributed from an escrow account into a trust account with Friedman’s mortgage company. Later, the trust account was $300,000 short, and Russon learned that Friedman had taken that amount to cover a “business reversal” he’d experienced.

In an attempt to pay back the debt, Friedman bounced several checks, which he never disclosed to agents. After agreeing to a repayment contract, Russon eventually received the sum of the original debt, plus a penalty and interest, totaling $750,000. The majority of the sum was repaid by issuing a DLG note, which Russon invested in the company and received high returns.

The plaintiff’s attorney also had questioned Russon about a number of insurance policies Friedman was issued in which Russon benefitted from the commission. One of the policies named Russon as the beneficiary. Russon testified that it was set up so he would be able to recover his money if Friedman died. Russon and his attorney excused this as a common practice. Another policy for $10 million was a “key man” policy, which is often set up to benefit a corporation after the death of a top executive.

Russon also testified that the original meeting with insurance agents at which DLG’s premium financing program was introduced differed from other meetings that involved approved vendors and products. Instead, this resembled meetings meant to inform agents of products that they could refer to clients, but couldn't sell. Because his agents wouldn’t be selling DLG notes, he believed he didn’t need DLG approval. All he had to do was make sure his agents knew their role in the process.

“I told them they couldn’t sell (DLG notes) and I told them they could not receive commissions from them,” he said.

The case is being heard in Los Angeles County Superior Court and began July 20. Webcast coverage is being provided by Courtroom View Network.

More News