Five years ago, Jeffrey Friedman lived modestly in a suburban Blatimore apartment, making ends meet on his salary as a middle-level hospital administrator and his wife's pay as an elementary school teacher.

Suddenly, in 1973, his life style started changing. While holding the same job, he bought a new luxury home, an Ocean City condominium and two Mercedes Benz cars, gambled heavily in Las Vegas and London and assembled an expensive art collection.

Today, Friedman's lavish existence ended in a Baltimore County courtroom where he admitted that he embezzled $556,000 from his employer, the University of Maryland Hospitals, through an elaborate five-year scheme that ended in 1976.

A 32-page statement of facts he signed as he pleaded guilty to one count of embezzlement revealed a complex scheme involving the transferring of hospital funds and grants into 30 different bank accounts, laundering the funds through his own companies, charging the hospital for items he then converted to his own use and establishing lines of credit for the university that he used for himself.

With the fruits of his theft, Friedman, 35, bought a lavish ranch-style house in August, 1973, in Baltimore County's affluent Stevenson area complete with a two-way fireplace, gourmet kitchen and sauna, according to court documents and informed sources, and he furnished it over the years with $50,000 worth of furniture and an impressive collection of oil paintings, bronze sculptures, terra cotta wall plaques and watercolors appraised at more than $83.000.

While continuing to earn an annual hospital salary in the low $20,000, he bought an Ocean City condominium for $42,000, two Mercedes for $34,000, diamond rings and bracelets, and an expensive wardrobe, court sources revealed.

Friedman had access to millions of dollars of hospital money because of his position as an administrator of university's and its community pediatrics center. He was responsible for purchasing and administration of funds for those departments.

In addition, Friedman controlled funds collected by pediatricians and neurologists who had outside practices at the hospital to supplement their incomes. Part of those funds goes to the doctors while the rest pays their expenses and goes to the hospital.

Without the hospital's approval, the statement said. Friedman established dozens of bank accounts from October, 1972, to July, 1976, under a variety of fictitious names. he named himself as the person authorized to make deposits and withdrawals.

In June, 1973, he set up a company called Medical Management Consultants, Inc., to launder some of the ill gained money, the document said.

Taking hundreds of thousands of dollars earned by the physician groups and the hospital departments he oversaw, Friedman made deposits in the bank accounts and later withdrew the money in cash, travelers checks and cashiers checks for his use, the statement said.

In one of numerous schemes involving private business lenders, Friedman got approval from university's business office to advance $450 to a Pikesville optician for the purported purchase of 30 sets of eye glasses for the hospital's community pediatrics center.

After the request was approved. Friedman and a family member used up the credit for numerous pairs of glasses. When he exhausted the credit, he paid the optician $423 more with a check from one of his physician group accounts for glasses bought by other relatives.

He cashed $25,000 in state funds for the hospital's child abuse program, took 20 television sets and other electronic equipment bought for the hospital and used $7,000 of university credits with an office furniture store and $39,500 worth of credits with a visual arts firm, according to the statement.

Friedman pleaded guilty as part of a plea bargaining arrangement with Maryland's attorney general, who, in turn, recommended the sentence of 18 months in prison.

Friedman was released today on a $25,000 personal pledge of his parents, with whom he is now living in Pikesville. He will be sentenced - facing a maximum of 15 years - after a presentencing report is completed.

"This is not a time for philosophizing," the swarthy, stockily built Friedman told a reporter after he entered his guilty plea and signed a "statement of fact" detailing his five years of crime. He was fired by the hospital in 1976.

Friedman's scheme ended in July, 1976, after suspicious hospital officials requested an investigation. The state expects to recover the amount embezzled by selling items seized from Friedman and making use of a bond covering him.