Investment fund employee testifies that he didn't know DLG was a Ponzi scheme

By Taryn Phaneuf | Aug 16, 2016

LOS ANGELES – After Diversified Lending Group (DLG) became associated with MetLife and one of its subsidiaries in 2004, the number of investment accounts in the real estate fund grew from fewer than 20 to about 800, according to an employee of the company’s marketing arm.

Brian Gledhill took the stand July 28 at the civil trial against MetLife over a woman’s claims that she invested in DLG because she believed the insurance giant endorsed the program, which was introduced by the California subsidiary as a way to pay for MetLife insurance products. A year after the woman invested nearly $280,000, DLG was seized by the U.S. Securities and Exchange Commission and uncovered as a Ponzi scheme.

Gledhill worked for Applied Equities Inc. (AEI), which was owned by Bruce Friedman, the same man who owned and managed DLG. Diane Cano, president of AEI and Gledhill’s superior, testified earlier in the trial. Gledhill said he started working at AEI in 2002 and was responsible for putting together marketing material. He also prepared and sent out quarterly statements to DLG investors.

Sidney Kanazawa, an attorney representing MetLife, pressed Gledhill on his knowledge of DLG’s business.

“My understanding was they had income-producing real estate and they took investors to purchase that real estate,” Gledhill said.

That’s what investors were told as well. Earlier in the trial, one investor testified that Friedman was described as a “real estate genius” who bought properties at low cost, and then turned them around and sold them for a profit. However, the SEC alleged in a lawsuit that Friedman diverted substantial investor money to unrelated activities. Of the $216 million DLG took in, Friedman allegedly spent at least $17 million to purchase a home, cars, vacations, jewelry and clothing.

Gledhill said he didn’t know Friedman allegedly wasn’t investing the money appropriately until the SEC entered the picture in March 2009. Up until then, he put together statements for investors based on information Friedman gave him.

“You’d been doing all these statements, right? And you didn’t know this was a Ponzi scheme?” Kanazawa asked.

“I did not,” Gledhill said. In fact, his parents were among those who invested in the fund, and they lost about $500,000.

Gledhill also testified that AEI first became connected with MetLife and New England Financial – the subsidiary managed by Tony Russon, who is also named in the suit – in early 2004. Gledhill said he was trained in MetLife software as part of a proposed long-term care insurance program called Visiting Angels, which involved AEI, MetLife and a franchised long-term care facility.

Later that same year, he prepared a presentation that would be used at a seminar to promote the program at which Cano and Cindy Eisenhower, a corporate MetLife employee, both spoke. Eisenhower talked about long-term care insurance and Cano presented DLG premium financing as a way to pay for it. 

Visiting Angels never really got off the ground, but in December 2004, the investment fund’s premium financing program was pitched to Russon’s insurance agents.

Gledhill said he knew of investors who purchased insurance using this premium financing program. DLG “guaranteed” returns of 9 percent or 12 percent, which could be used to pay premiums on insurance. The process of paying those premiums was handled directly by AEI.

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

Want to get notified whenever we write about MetLife ?

Sign-up Next time we write about MetLife, we'll email you a link to the story. You may edit your settings or unsubscribe at any time.

Organizations in this Story


More News

The Record Network