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The Overall Cost of a Renewable Energy System
Written by Chris Meeks

When Christine Ramirez signed over that first check in April 2008, she had no idea that the decision would eventually upend her life.

A broker offered a tempting deal. If she invested in a real estate fund called the Diversified Lending Group, which was managed by someone named Bruce Friedman, she would be eligible for a “guaranteed” return of 12 percent. She could use the proceeds to pay the premium on a new MetLife life insurance policy.

Ms. Ramirez chose not to buy the insurance policy, but she did invest in Mr. Friedman’s fund, a total of $279,769 including her personal savings, a retirement account and proceeds from a line of credit on her home in Simi Valley, Calif.

D.L.G. came crashing down months later, when the Securities and Exchange Commission sued Mr. Friedman, accusing him of misappropriating millions of dollars in investor funds. According to court documents, he operated a Ponzi scheme that defrauded hundreds of investors, including a sitting congressman, of more than $200 million. The money was gone.

“I think I cried every day for a year,” said Ms. Ramirez, 75. “It wasn’t that I didn’t do my homework. I was told it was approved by MetLife and that it was guaranteed.”

Now, Ms. Ramirez and some others who lost their money are suing MetLife, claiming that the insurer ignored or failed to notice signs that agents and brokers were peddling Mr. Friedman’s financing program to retirees and others. Litigation has been winding its way through the courts for years, and MetLife is fighting back.

But last month, a Los Angeles Superior Court judge cleared Ms. Ramirez’s case to move to trial in July. Her lawyers represent 98 people in seven cases, and hers is the first of this group to move forward. She is being given preference because she is battling late-stage breast cancer.

MetLife has settled some cases with its own customers who were duped by the D.L.G. offer, but the current batch of lawsuits involves people who did not buy its insurance. Ms. Ramirez was never a customer of MetLife. Instead, these people only put their money in the D.L.G. investment that was pitched to them by sales people, some who were affiliated with MetLife and some who were independent contractors approved to sell its products. As such, the legal fight raises questions about how far a large company’s liability should extend.

“Big companies, like MetLife, are run by people, and when they fall below the standard of care or engage in improper conduct, our clients, who are also real people, get hurt – and that’s what happened here,” said Richard E. Donahoo, founder of Donahoo & Associates, one of the lawyers representing Ms. Ramirez.

MetLife has argued in court documents that it “had no relationship with D.L.G.” and that it “did not sell, or materially assist in the sale” of the D.L.G. financing program. Neither was it legally obligated to supervise the broker who made the sale to Ms. Ramirez, MetLife said, because he was a contractor and licensed through another, unaffiliated broker-dealer, even though he was authorized to sell MetLife insurance products. The company has added that it did not “take or receive anything from” Ms. Ramirez, and so it is not liable for any damages. A MetLife spokesman, Christopher Stern, said the company does not comment on continuing litigation.

Mr. Friedman was selling promissory notes that claimed to back real estate investments. Promissory notes are similar to bonds and not uncommon products for insurance agents to sell. But regulators have warned about the potential for fraud and abuse. Agents presented the notes as “premium financing” for MetLife insurance products, the lawsuits say; in other words, the investment return would be able to fund the premium payments on a life insurance policy. MetLife does not generally allow premium financing, something these agents admitted in depositions.

Tony Russon, at the time a managing partner at a MetLife insurance subsidiary and a registered principal for a related broker-dealer, introduced Mr. Friedman and his fund to the agents in about 2004, the lawsuit says. The agents were also given D.L.G. “welcome packets” to use in making sales that discussed the “guaranteed” returns promised to Ms. Ramirez and others. Mr. Russon is named in the lawsuit, along with MetLife and the subsidiaries.

D.L.G. came crashing down months later, when the Securities and Exchange Commission sued Mr. Friedman, accusing him of misappropriating millions of dollars in investor funds. According to court documents, he operated a Ponzi scheme that defrauded hundreds of investors, including a sitting congressman, of more than $200 million. The money was gone.

Mr. Friedman was selling promissory notes that claimed to back real estate investments. Promissory notes are similar to bonds and not uncommon products for insurance agents to sell. But regulators have warned about the potential for fraud and abuse. Agents presented the notes as “premium financing” for MetLife insurance products, the lawsuits say; in other words, the investment return would be able to fund the premium payments on a life insurance policy. MetLife does not generally allow premium financing, something these agents admitted in depositions.

“Big companies, like MetLife, are run by people, and when they fall below the standard of care or engage in improper conduct, our clients, who are also real people, get hurt – and that’s what happened here,” said Richard E. Donahoo, founder of Donahoo & Associates, one of the lawyers representing Ms. Ramirez.

But last month, a Los Angeles Superior Court judge cleared Ms. Ramirez’s case to move to trial in July. Her lawyers represent 98 people in seven cases, and hers is the first of this group to move forward. She is being given preference because she is battling late-stage breast cancer.