Through the years, Ben Friedman's victims included local furniture tycoon Murray Goodman and even Jerry Colangelo, but he usually targeted the pension plans of small medical practices.
Starting in the late Seventies and continuing on through the Eighties, Friedman bought cheap land using fake names--once he used his dead mother-in-law's name--then sold that land at inflated costs to investors whom he'd pooled into partnerships. He pocketed the difference.
Friedman had a legal obligation to tell the members of the partnership that he owned the property in question, and that he would profit from the sale.
He didn't. That's fraud, a Class 2 felony under Arizona law.
Last year Friedman, 55, pleaded guilty to three of 73 felony counts of securities and tax fraud. In the next two months, he'll likely be sentenced to prison time.
Authorities estimate that during a 10-year period, Friedman bilked his investors out of more than $2.5 million and the State of Arizona out of more than $5 million in unpaid taxes.
An unrelated case--allegations in 1989 that Friedman had bribed a public official for a measly $29,000--led to the search warrant that dumped an 18-foot-tall stack of Ben Friedman's financial records on the desk of Maricopa County Attorney Rick Romley.
Romley instigated a five-year investigation that led the state Department of Revenue to conclude in a letter to the court, "This is the largest tax prosecution involving personal income taxes the department has ever undertaken. All of the Arizona personal income tax cases prosecuted to date would not equal what Mr. Friedman evaded."
Friedman was the only one indicted, but he insists he didn't act alone. Two of his alleged partners in crime were Leonard Miller and Carlos Wagner, owners of one of the largest accounting firms in town.
To hear Friedman tell it--and he has, in deposition and on the record to New Times--the owners of Miller-Wagner and Co. knew the details of Friedman's wheeling and dealing, provided him office space, offered up victims--er, clients--and shared in the profits.
Friedman has the check stubs from payments he made to Miller and Wagner in exchange, he says, for referrals of investors. Also bolstering his claim is Miller-Wagner and Co.'s recently settling its part in a class action lawsuit filed by a number of Friedman's victims who alleged the accountants participated in the act to defraud them. The settlement, rumored to be in the millions, is sealed.
Along with the sealed settlement comes a confidentiality agreement; that means none of Friedman's victims is talking.
Dr. Avi Ben-Ora, a now-retired radiologist who's a plaintiff in the civil suit, says, "A lot of people got caught in a deal where we thought we were dealing with an honest guy and it turned out to be not so honest. The relationship that Friedman and Miller-Wagner had was not something I was aware of until the lawsuit was filed. . . . I really wouldn't want to say anything that would be defamatory. Obviously I'm unhappy with the results" of the investment.
Miller-Wagner's and Friedman's victims may not have much to say, but Roger Brown does. Brown, a CPA, was hired by the court to review financial documents and figure out how much restitution Friedman should make. Most of Friedman's victims have already been paid by Miller-Wagner and Co., Brown argued in court documents. No need to pay them twice. The prosecution agreed, and the final details are being worked out.
In the course of examining the voluminous documents subpoenaed by Romley's office, reviewing the civil case and talking to Friedman, Brown realized that apparently no one had taken a look at Miller-Wagner and Co.'s involvement in Friedman's scheme.
"They just missed it. They missed the Miller-Wagner connection," Brown says of the prosecutors and Department of Revenue.
Friedman's allegations raise questions about criminal and civil wrongdoing and possible violations of the state board of accountancy's rules, on the part of Leonard Miller and Carlos Wagner.
This is the first the public's learned of any alleged wrongdoing on the part of Miller-Wagner and Co.
The 20-year-old firm won a prestigious award in 1986 from an industry newspaper, Accounting Today, for "demonstrating an extraordinary commitment to quality, initiative and customer satisfaction."
Leonard Miller is a leader of the Phoenix Jewish community. Carlos Wagner sits on the board of a local bank.
Miller-Wagner and Co. has admitted no liability as part of the settlement of the civil suit. It has not been indicted of any crime. Neither Miller nor Wagner responded to calls and a written request from New Times.