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Written by 3:10 pm Blog, Securities Fraud Articles

Possible Securities Fraud Involving DLG and Lighthouse Capital

The White Law Group is investigating a securities fraud claim involving a recommendation made by Lighthouse Capital Corporation to invest in Diversified Lending Group (DLG). In the case we are investigating, Lighthouse Capital allegedly represented that the DLG investment provided a guaranteed rate of return. Unfortunately, unbeknownst to the investors, it appears that Lighthouse Capital failed to perform reasonable due diligence in recommending the investment to these investors and that the investors’ entire investment may be lost. To compound matters, the investors financial advisor, Glenn Duggins, also recommended that the retired investors take out a mortgage on their house and invest the proceeds.

DLG has already been named in a SEC complaint. The complaint alleges that Los Angeles based Diversified Lending Group Inc. (DLG) and Applied Equities Inc. (AEI)—raised at least $216 million from hundreds of investors nationwide, many of whom are senior citizens, by promising guaranteed high returns through real estate-related investments. Instead, Friedman diverted substantial investor money to ventures unrelated to real estate, and also misappropriated at least $17 million to support his lavish lifestyle, including purchases of a luxury home, cars, vacations, jewelry and designer clothing for himself.

The SEC’s complaint, filed in federal district court in Los Angeles, 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% in real estate property and 20% to 30% in mortgage lending. Once investors invested in the notes, Friedman and his companies continued to misrepresent how their money was being used. They assured investors that DLG’s investments were profitable, that their money was safe, and that returns of either 9% or 12% were guaranteed.

Neither DLG nor AEI were ever registered with the SEC. The Commission’s complaint alleges that Friedman, DLG, and AEI violated the antifraud provisions of the federal securities laws, and in addition to the emergency and interim relief that has been obtained, the SEC seeks a final judgment permanently enjoining the defendants from violating the antifraud provisions and ordering them to pay disgorgement of ill-gotten gains and financial penalties.

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.

It does not appear that the Receiver has sufficient funds with which to make any distributions to investors that invested in DLG or AEI. The Receiver also does not appear to have money 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.

In addition to investigating claims against Lighthouse Capital, The White Law Group is also exploring whether other FINRA broker-dealers were soliciting investments in DLG. These firms may also have liability to investors for failure to perform due diligence on the DLG investment prior to offering it for sale.

If you have any information that may assist The White Law Group in our investigation on behalf of these investors, please contact the firm’s Chicago office at 312-238-9650.

The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. With over 30 years of securities law experience, including experience working at FINRA (f/k/a the NASD) and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions.

For more information on The White Law Group, please visit the firm’s website at https://whitesecuritieslaw.com.

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