Fraud case hurts museum

Investment fraud allegations against a Sherman Oaks businessman may have been a fatal blow to a struggling San Fernando Valley children’s museum to which Bruce F. Friedman pledged $10 million last year.

Absent an unexpected “angel” donation, the Children’s Museum of Los Angeles plans to file for liquidation under Chapter 7 of federal bankruptcy laws and cease operations, director Cecilia Aguilera Glassman said Thursday.

Construction of a 57,000-square-foot building for the museum in the Hansen Dam Recreation Area was completed in 2007. But the facility has sat empty since then because museum officials were not able to raise the funds needed to buy exhibits and cover operating costs.

Some devastating news came last month, when the Securities and Exchange Commission filed a lawsuit accusing Friedman of diverting more than $17 million from investors in his Sherman Oaks company, Diversified Lending Group, and persuaded a judge to freeze all the company’s assets.

Friedman’s charity, the Friedman Charitable Foundation, pledged $10 million to the children’s museum in 2007, making it the museum’s largest donor. But the museum received “less than half” of the pledge and has not determined whether it can keep the money, Glassman said.

Without the $10-million gift, the museum would be about $22 million short of the $58.5 million it needs to open, Glassman said.

The museum’s board of governors, which includes state Sen. Alex Padilla (D-Pacoima) and former Assemblymen Mike Roos and Richard Katz, voted March 27 to declare bankruptcy.

Museum officials have been in discussions with a court-appointed receiver managing Friedman’s assets to determine whether the museum needs to return the money it has received from Friedman. Meanwhile, the FBI and U.S. attorney’s office have opened a criminal investigation into Friedman’s operations.

The museum had not received a single donation since the SEC’s action against Friedman was disclosed. It lost about $100,000 in the last month when concerned donors rescinded their pledges, Glassman said.

“The only thing that could change the course is if there were one or more angel donors who would step in and see the value of the project,” Glassman said. “Otherwise, we’ll probably not see a children’s museum in Los Angeles.”

The children’s museum operated for about 20 years downtown before closing in 2000 amid plans for the San Fernando Valley facility.

The city of Los Angeles, which paid for much of the building’s construction costs, may end up owning the modern, angular building, said City Councilman Richard Alarcon.

“Some of the ideas are a charter school or some kind of educational program. We’ll be reaching out to some folks to see if that’s a possibility,” Alarcon said.

The SEC, in its lawsuit against Friedman, contended he diverted millions from investors to his charity and himself, spending the stolen money on luxuries that included a $6.5-million Malibu home, expensive cars, designer jewelry and clothing.

In addition to its donation to the museum, the Friedman foundation had pledged $5 million to the Dodgers Dream Foundation to help build youth baseball fields throughout Southern California.

Dodgers officials said Friedman never paid any of the money and is no longer part of the project.

--

stuart.pfeifer@latimes.com