By Amy Silverman
By Olivia LaVecchia
By Monica Alonzo and Stephen Lemons
By Chris Parker
By Michael Lacey
By Weston Phippen
The investors made a killing when Paradise Valley Mall was built.
Overnight, Ben Friedman was a real estate guru. He quit practicing law and started selling land.
Friedman had a friend, Leonard Miller, an accountant with his own firm and a lot of wealthy clients. Friedman and Miller began making referrals back and forth.
By the early Eighties, Friedman was officing with Miller-Wagner and Co. "I talked to Len Miller, and he and I agreed that it would be a good idea if I moved in right next to them," recalls Friedman. "If he came across somebody who wanted to invest, he could just walk them in next door."
Len Miller and his partner, Carlos Wagner, were there for the inception of many a deal and followed those deals all the way to the piles of cash at the end, according to Friedman, who orchestrated the transactions.
"We would have a meeting and talk about the piece of property [in question]," Friedman says. "We'd talk about the sizzle of the property and how salable it was to investors. . . . How far away are existing developments? Where are sewer lines, where are the water lines? And we'd talk about these things and then decide, 'Okay, for what price can the property be acquired and then what will the property bear, what do we think the market value of the property really is to the syndication and how much can all of us really make out of it?'"
Friedman bought the property using a fictitious name. He would then assemble a limited partnership of investors. Friedman, as the general partner, would negotiate the sale of the property to the partnership. In effect, he was bartering to buy the property from himself--and making a healthy profit.
An example, from the 73-count indictment against Friedman:
Using the name of his dead mother-in-law, Mary Kotik, Friedman bought land for $150,125. He then created a limited partnership called Saddleback Properties, which included a number of doctors. As the general partner, Friedman bought the land supposedly owned by Mary Kotik (but really owned by Friedman himself) for $480,000.
Friedman says he didn't pocket the entire profit. His check registers show substantial payments to Miller-Wagner and Co.
According to documents filed in criminal court by Friedman's attorney, Michael Black, Miller-Wagner got a 10 percent cut for bringing in customers between 1977 and 1980.
By 1981, Miller-Wagner was demanding a 15 percent cut.
By 1982, the accountants had established Carlen Partnership "and requested that all checks be written to Carlen so that Miller and Wagner would not have to share their profits with their other partners at the accounting firm," Black wrote in the court papers.
Black further alleges: "After 1984, Miller-Wagner also insisted that Friedman buy property for them or make other 'non-traceable' payment arrangements for their 15 percent. It is estimated that Friedman paid Miller-Wagner the following monies as finders fees: $342,661.89 in 1986; $528,997.39 in 1987; $393,518.41 in 1988; and $82,522.48 in 1989. Management fees [Miller-Wagner's], fees for office space and fees for business expenses were paid for out of Miller-Wagner's 15 percent. Miller-Wagner was always aware of the exact amount of markup on each property and that straw parties were used to effectuate the sales. While Miller-Wagner did not provide all investors for every limited partnership, they did provide the majority of investors for most of the limited partnerships. Moreover, Miller-Wagner prepared all but six of the limited partnerships' tax returns through 1992."
Then the real estate market crashed, so Friedman went back to practicing law and Miller-Wagner and Co. focused on its accounting business.
And everything went along just fine--albeit more frugally--until 1994, when Ben Friedman was indicted on the 73 land-deal counts as well as the unrelated bribery charges.
In 1996, a jury found Friedman guilty of bribery and sentenced him to probation and community service.
The bribery conviction stemmed from a 1988 zoning case, in which Friedman gave City of Phoenix Deer Valley Planning Committee member Elaine Lefevre $29,000 in exchange for her agreement to not oppose a zoning application.
Lefevre was also found guilty and sentenced to probation.
But the bribery case exposed Friedman's records and led prosecutors to the larger fraud case. A year later, Friedman came to an agreement with prosecutors, and offered his guilty plea to three of the 73 additional charges--two fraud charges and one charge of falsifying income tax records.
Because Friedman is already on probation, it's highly unlikely he will escape prison time. His last shot, he figured, was to cut a deal with prosecutors by offering up two prominent local accountants, Len Miller and Carlos Wagner.
Don Conrad, the prosecutor on the case (he brought it over to the AG recently, when he made the switch from the Maricopa County Attorney's Office), refuses to comment until after the sentencing, now scheduled for July 7.
Attorney General spokeswoman Karie Dozer spoke briefly about Friedman's offer.
"We're looking at a guy whose credibility is questionable," Dozer says of Friedman. "He's already been convicted of this crime--he's just awaiting sentencing--so it's really not a 'strike a deal' type of situation. And frankly, we did look at what he provided. What he provided was a bunch of copies of checks and check registers. That's it. It was his word and some checks, which does not add up to enough reason to look into somebody else."