William Murray California CPA Charged with $13 Million Fraud – Former CPA and Business Ethics Speaker Chuck Gallagher comments…

Every choice has a consequence.  I know…as a former CPA charged and convicted of fraud…I understand so well the effect of the choice we make.

Assistant United States Attorney Matthew D. Segal alleges that William Murray used false pretenses and representations to steal $13,357,133 from clients of his tax return preparation business, Murray & Young.  Mr. Murray is well known in the Sacramento area. He had frequently provided tax tips on a local television channel and served on the board of a charitable foundation.

Murray told more than 50 clients that he would pay taxes or make investments on their behalf and that therefore they should write checks to accounts that he controlled.

The information further alleges that Murray actually used the money to finance an extravagant lifestyle: he remodeled his house, funded a limousine business, and purchased things such as luxury automobiles, hand-woven rugs, art, sports memorabilia, wines, and jewelry.

The information also states that Murray used $3,507,502 in client funds to pay other clients’ tax obligations or to purport to return other clients’ investments.

The maximum statutory penalty for a violation of the mail fraud statute is 20 years in prison and a fine equal to the greatest of $250,000, twice the gain, or twice the loss caused by the offense. The actual sentence, however, will be determined at the discretion of the court after consideration of any applicable statutory sentencing factors and the Federal Sentencing Guidelines, which take into account a number of variables.

The charges are only allegations and the defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt.

WHERE FROM HERE?

Speaking from person experience, if Mr. Murray is guilty…he would be best advised to surrender his license, plead guilty and make every effort to make restitution.  Facing time in prison is less than pleasant, but survivable.  Perhaps, he, like I, can find the experience in prison one of learning and make a different set of choices following his release.

I recall the best advice I was ever given.  A man once said to me soon after my crime came to light: “Son, you’ve made a terrible mistake, but YOU ARE NOT A MISTAKE.  The Choices you make today will define your life in the future and the legacy you leave for your two sons…  MAKE THOSE CHOICES WISELY!”

Comments are welcome.

Reverend Raleigh Trammell – Southern Christian Leadership Conference Dayton head – home raided by FBI on Embezzlement concerns!

Early this month, national officials of the Southern Christian Leadership Conference requested criminal investigations by authorities in Georgia and Alabama, alleging embezzlement from the civil rights organization by Dayton’s Rev. Raleigh Trammell, the national board chairman, and SCLC Treasurer Spiver Gordon.

Today, Agents with the Federal Bureau of Investigation seized a computer and several boxes from the home of Reverend Raleigh Trammell, according to Dayton police.

Agents searched the Dayton offices of the SCLC looking for any information or evidence that could like Trammell to the alleged misuse of the group’s funds. They also raided the home of Trammell’s daughter Angela Goodwine, taking boxes and a computer from her house as well.

Trammell declined comment after the agents left his home. However, neighbor John Wilkins said: “After all of the accusations, I’m not surprised (by the searches). I feel sorry for the family that they have to go through this. Mrs. Trammell is a very nice person and I feel sorry that she has to go through this — she and her husband both.”

According to reports, the group’s treasurer, Spiver Gordon of Alabama, is also under investigation for involvement in the case.

U.S. Justice Department spokesman Fred Alverson said the searches are in relation to an investigation in to SCLC financial activities. No criminal charges have been filed.

“I don’t have any reaction to that nonsense,” said Trammell, chairman of the board of SCLC’s Dayton chapter. “I have nothing to do with the finances of the organization.”

He said the SCLC finance committee is investigating the allegations.

“I’m sure when they make their report it will clearly exonerate me. Until then I’m just prepared to say it’s a bunch of hogwash,” said Trammell, who also is executive director of the Interdenominational Ministerial Alliance in Dayton.

Trammell and Gordon are accused of unauthorized expenditure of SCLC funds in excess of $560,000 since 2006, according to a Jan. 29 letter to Fulton County District Attorney Paul Howard. The letter was written by Dexter M. Wimbish, who is on temporary paid leave as SCLC general counsel.

“The embezzlement includes the use of a board account with Citizens Trust Bank (in Georgia) whereby personal expenses have been paid as well as loans to Raleigh Trammell,” Wimbish wrote in the letter.

“As these persons have been reinstated, there is a fear they will continue to mismanage funds and destroy or alter records to cover up their theft and conversion.”

According to an internal review of the SCLC national board account obtained by the Dayton Daily News in a report issued earlier this month, SCLC officials questioned payments of more than $27,000 to Trammell and the Dayton SCLC chapter he leads between 2006 and 2009, including two wire transfers to a Trammell-controlled National City Bank account.

“I’ve never been paid any $27,000,” Trammell said.

In a Jan. 19 interview he denied the allegations and said “I have absolutely no knowledge” of transfers of SCLC funds to his control and “I don’t believe any such bank accounts exist.”

In a phone interview, Gordon said he only signed checks from the national SCLC account after the expenditures were approved with vouchers signed by other officials, including Trammell.

“Some of the allegations that are being made are just ridiculous,” Gordon said.

In presenting the documents in Alabama, Rocker said he was joined by Wimbish and Ron Woods, who is on temporary leave as SCLC executive director.

The two were placed on leave by the Fulton County judge who on Jan. 20 granted a temporary restraining order restoring Trammell and Gordon to their jobs until the SCLC board could meet. Trammell and Gordon had agreed last year to step aside while the SCLC investigated complaints of financial impropriety against them.

Three SCLC board members, including Rev. Wilburt Shanklin of Dayton, sought the restraining order after the investigation was publicly announced in December. Shanklin is president of the IMA and a member of Dayton Mayor Gary Leitzell’s Leadership Council.

The Dayton SCLC and IMA in 2009 received at least $304,952 in taxpayer funding for local programs, including money from the Montgomery County’s human services levy; county job and family services money funneled through the Dayton Urban League and federal funding for food and emergency shelter, a program administered by the United Way of Greater Dayton.

Every choice has a consequence.  Keep in mind people are innocent until proven guilty.  However, where there is smoke there is fire…so if guilt is established there will likely follow a prison sentence.

COMMENTS ARE WELCOME.

BizRadio, David Wallace, Daniel Frishberg, Ron Crider and the loan that fell through(?): Investors is that the “sound of your money growing or going”?

The dots still don’t completely connect.  And what seems painfully missing is any transparency related to BizRadio and it’s CEO Daniel Frishberg.  If there is nothing to be concerned with, then it stands to reason that an ethical business person would take the high road and openly dispell any creditor or investor concerns.  Yet, that doesn’t seem to be happening.  So, let me start by asking this…if it were your business and you were capturing (relatively) negative media coverage from the Houston Chronicle, etc. and you had investors who were expressing concerns – what would you do?

LET LOOK AT THE PROGRESSION OF ACTIVITY:

Back in December a screen shot of the BizRadio website reflected that Ron Crider and Rehan Siddiqi were both connected with the station.  See screenshot below:

Ron Crider was listed as President of Broadcast Operations.

Rehan Siddiqi was listed as Vice President of Marketing

And, old news, by this point, Albert Kaleta had entered into his agreement with the SEC (without admitting guilt) that he was to have no contact with any investment advisor.  See SEC news release here and especially here.

WHAT NOW?  THAT THE INVESTOR FINDER (Kaleta – at least that’s what he’s been referred to) IS OUT OF THE PICTURE?

Ron Crider – ostensibly with the approval of Daniel Frishberg, maneuvers to sell 1110 AM to Rehan Siddiqi and move BizRadio to 1180 AM.  So far still not new NEWS.

The announcement is made January 2nd, 2010 by Ron Crider…see email announcement below:

But in a court proceeding just weeks ago Frishberg is reported to have made the claim that Crider was nothing more than a salesperson.  Hum???

Now, if Frishberg did not recognize Ron Crider as CEO then why would he allow an announcement to be sent via email indicating Ron in that position?  Am I missing something?  I can assure you, if I had a “salesperson” sending an email and copying me on it – and that person was claiming to be CEO…first I’d fire them and then make it clear who was in charge and what was to happen.  That, however, didn’t seem to take place till financing fell through and BizRadio and Frishberg were forced back to 1110 AM.

CRIDER’S POSITION:

According to Ron Crider’s blog – see here.

I am not the one who lost over 3 Million dollars a year for the past two years at Biz Radio, since I didn’t get here until October 2009.

I am not the one who authorized the purchase of KTEK 1110 AM Alvin/Houston for 7.7 Million dollars. There is no one in the industry that would have paid that much for a critical hours, daytimer at 2,500 watts with no cash flow whatsoever. Now, let’s see who is trying to protect the investors?

In last week’s station licensing dispute, Kaleta was identified as president of at least some of the BizRadio-affiliated companies. Asia Vision’s Rehan Siddiqi produced a receipt signed by Kaleta as BizRadio’s president, though BizRadio CEO Daniel Frishberg said Kaleta never signed such a document.  Now let’s see, who could have signed that document? It couldn’t have been me since I was in Dallas at that time. Could it be Dan is not telling the truth?

Until February 2, 2010 I was firmly in Dan Frishberg’s corner. Tuesday February 2 Dan Frishberg perjured himself blatantly in so many ways. The operative word here is “Perjury”. He told the Harris County Court I was just a salesperson, working at no salary for Biz Radio.  Dan said I was not the co-CEO after he introduced me to 3 Investors meetings to over 200 people as the co-CEO, and further saying I had no authority to do the deals I did here in Houston for Biz Radio. How is it possible to believe that I, at almost 69 years of age old would move to Houston to work for nothing with no authority and be a salesman. I put my own business on hold to work with Dan and build something together. Just how stupid does Dan think his investors are?

Wow…Crider seems a bit testy.  I have heard from investors who are confused about this whole issue.  At first they felt that Crider was the “white knight” – a person who could salvage their investment in BizRadio and return it to a profitable operation.  Then, with Crider’s public comments on his website (blog), there is a feeling that he is insuring the destruction of the station.  As a disinterested third party…I don’t truly know Crider’s motives, but I have to admit, that if I were listed as President of Broadcast Operations in December, signed an email as CEO in January and then became the scourge (just a salesman) in February, I would likely be a bit ticked.

SO WHAT PROMPTED THE IMMEDIATE SWITCH?

It seems that short term financing was being arranged in order to effect the lease/purchase of 1110 AM to Siddiqi.  As best I can tell there were a lot of moving targets.  Kinda reminds me of the old Ed Sullivan shows where they had folks whose talent it was to keep plates spinning on poles…  A lot of spinning plates were  twirling.

As reported on in an earlier blog…David Wallace (acting on behalf of creditors) was involved in helping with the $1.5 million financing package.  That, however, seemed to fall through on or around the 1st of February (don’t hold me to a specific date as I have not been able to verify a date).  The subordination agreement however is provided below in PDF format.  As you can see…at this time all parties were involved – Frishberg, Wallace and Crider.

BizRadio Agreement

MEANWHILE BACK IN HOUSTON…

Siddiqi seems to be the one who has been dealt with unfairly.  Agreeing to lease with an option to purchase 1110 AM – Siddiqi began broadcasting in January with a number of listeners sending him joyful well wishes.  Then…as soon as it began – Frishberg (finding himself off of 1180 AM due to failure to pay or provide a $150,00 letter of credit) kicks Siddiqi off the air and accuses Crider and Siddiqi of manipulating him into selling the station for (approximately) 50% of what he paid for it just two years earlier.

Now as Forest Gump said, “I’m not a smart man,” but someone who reportedly is a brilliant investment advisor (Bernie Madoff was called that as well keep in mind), should know that many investments have taken quite a dive considering we are in a severe economic recession.   But, I don’t value radio stations so I am certainly not an expert.  I do know that stations across the US are almost begging for advertisers or those with shows who are willing to PAY to PLAY.  So my guess is (and I’ve talked with hosts of Nationally Syndicated shows) that values for stations have dropped…and dramatically.

WHERE FROM HERE?

Well, that’s a dandy question.  Frishberg, instead of being transparent, is being invisible.  It would appear that he’s hoping this hailstorm will pass…perhaps it will all blow over.  Crider seems to be a bit caustic in his website (blog) comments accusing Frishberg of Perjury.  The investors seemed to have hope that Crider could salvage the station, but that seems to be in question (at least by some)…and probably to Frishberg’s delight.  And last…SIDDIQI is out $180,000 and a station.  His business is likely in ruin, reputation tarnished, and the best he could hope for today is to get his investment back and hope that his audience will support him when he returns to the air (sometime).

Lastly, the question has been raised as to why I’ve written these blogs?  As a business ethics speaker and author, I know first hand that EVERY CHOICE HAS A CONSEQUENCE.  I have made terrible choices and experienced the consequences…and they weren’t pleasant.  Likewise, I’ve made better choices and the outcome was outstanding.  So today, I write this blog to help connect the dots..  Choices and Consequences.

I would love to see a bright outcome for all…but at this moment, it seems that so many of the players are positioned for wins or losses.  Unfortunate!  And, I’m still left wondering if there isn’t more to this than meets the eye.  Stay tuned…

Sometimes it just doesn’t pay to play… Snowballs that is… Charles Gill and Ryan Knight now know that…

Two students at James Madison University were arrested and charged with felonies for throwing snowballs at a city snow plow and an unmarked police cruiser.  Charles Gill and Ryan Knight, both 21, were nabbed by cops in Harrisonburg, VA.  According to police, the pair first targeted a city plow last Saturday afternoon.  Now…playing in the snow is one thing, but I suspect these two didn’t expect what happened next.

The driver responded by calling cops to report the frosty fusillade. When police responded to the scene in a bid to identify the assailants, their unmarked vehicle also came under an icy assault.  Gill and Knight, a guard on JMU’s basketball team, were then apprehended and booked into jail for throwing missiles at occupied vehicles, a felony.

Charles Joseph Gill and Ryan William Knight, both 21, each face one to five years in prison and a maximum $2,500 fine, if convicted.

The BizRadio Saga – Albert Kaleta, Daniel Frisberg and David Wallace…this is the stuff bad movies are made of…

Is it that the ego is too big for the right thing to be done or it is that this is just a bad movie – only no one is shooting film?  The longer this saga continues the more I’m sensing that there is “tarnish on the microphone” – Mr. Frishberg.

LET’S REVIEW:

Albert Kaleta and Daniel Frishberg are (well “were” in the case of Kaleta) investment advisors, both having investor funds that were apparently under their direction.  Kaleta was the subject of an SEC suit in which Kaleta surrendered (I suppose you’d call it that) his license (in other words he is not supposed to be active in investing funds for others) and agreed not to involve himself with any other investment advisor(s).

The Order bars Kaleta from association with any investment adviser. Kaleta consented to the issuance of the Order without admitting or denying any of the findings in the Order, except as to the entry of the injunction, which he admitted.

So far so good…  Now it seems that Frishberg got to keep his investment license and, therefore, the ability to continue his investment activities (for which I’m told he’s pretty good at).  However, he and BizRadio were sued by the SEC.

The Commission also sued two other entities, Business Radio Network, L.P. d/b/a BizRadio (BizRadio) and Daniel Frishberg Financial Services, Inc. (d/b/a DFFS Capital Management, Inc.) (DFFS) as Relief Defendants solely for the purposes of equitable relief.

Now…a new party to me enters the picture.  Apparently, David Wallace, former mayor of Sugarland, Texas and his investment partner Mr. Bajjali have been active in several successful real estate investment funds.  David Wallace is the Chief Executive Officer and Secretary of General Partner and Chairman of the Investment Committee for Wallace Bajjali Development Partners.  Also, David wrote the book -  “One Nation Under Blog.”  Wallace has an impressive track record.

However, my sources tell me that in one of their last investments (primarily real estate), Wallace placed a portion of the private investment with BizRadio (you know where the microphone is tarnishing these days).  Without verification, I am told that the Wallace Bajjali investment in BizRadio was some $5 million.  I am further told that Albert Kaleta was instrumental in bringing private investors to the table for the Wallace Bajjali investment offering.  In fact, I am told that the subscription agreement that some (I don’t know how many) of the investors signed were signed in Albert Kaleta’s office.

There must be some truth that Wallace Bajjali invested funds with BizRadio otherwise why would they have a UCC Filing with a lien on the company?  See below:

NOW IS THAT A PROBLEM? In an of itself – NO.  Albert Kaleta was reported to be a great investment closer.  Reportedly, Wallace would put the deal together (in many cases public-private partnerships) and Kaleta (with his extensive investor network) would bring investors to the table.  Seemed to work for all concerned…till the SEC got involved.

SO HERE ARE SOME QUESTIONS:

• If Kaleta was, in fact, (can’t confirm at this time) an active supplier of investors for Wallace Bajjali – does Kaleta’s prohibition from associating with investment advisors have a negative effect on finding future investors that Wallace Bajjali might need for upcoming projects?
• What impact does the Wallace Bajjali investment in BizRadio have on their reputation with current investors or future investors, if any?
• Is Daniel Frishberg’s insistence that Ron Crider was some “rogue radio guy” going to stand up to scrutiny when all the truth comes to light?  (I don’t know but it sure seems that Ron Crider had Frishberg’s blessings till his deal with 1180 AM went south).
• Since Wallace Bajjali clearly has an interest in BizRadio…do they have the clout to take control of the operation and protect their investment?
• Is it true that BizRadio and Daniel Frishberg are behind in their payments to their San Antonio station owner and behind in their payments to Salem Communications (the company they bought 1110 AM from)?  What impact does this have on BizRadio’s ability to continue as a going concern?
• If so, what impact does that have on the value of the BizRadio business on a move forward basis?
• One judge ruled in favor of Siddiqi giving him a Temporary Restraining Order thereby keeping him on the air.  Then (for some reason) another judge got the case and ruled in favor of Frisberg.  Why two judges?  Coincidence there was a change of judges or politics at play (judge shopping)?  Perhaps there is a simple explanation…  Thanks to Sarah Duckers (see the comment below) there is a simple explanation.  Thank you Sarah for your input!
• Lastly, while it is reported that Daniel Frishberg produces consistent returns for his investors (funds he controls for others), is there evidence that Daniel Frishberg is an effective businessman when it comes to the operation of a radio station for profit.  (I submit, just because I can fly an airplane, does not make me qualifies to design the doggone thing.  Just a thought.)

I suspect that David Wallace is wondering what the hell happened?  Likely, knowing the astute businessman he is, David is figuring out how to protect his investors from what appears to be the Daniel Frishberg ego implosion.  The remaining question is…when will reason and sense prevail?  Perhaps, if logical action is taken quickly, the microphone can be repolished and everyone go back to doing what they do best.

LET’S HOPE FOR INVESTORS SAKE…Frishberg doesn’t take everyone down with BizRadio.

COMMENTS ARE WELCOME…

Jennifer Fox of Rapid City, SD – Guilty and sentenced to 8 Years in prison! Come on – what were you thinking?

And to think I was just in Rapid City on business…now I read this…

A Rapid City woman accused of stealing more than 150,000 dollars from the Hill City Volunteer Fire Department and Ambulance Service pleaded guilty in Seventh Circuit Court.

NOW REALLY…did you think you’d get by with this?  I know from personal experience – EVERY CHOICE HAS A CONSEQUENCE…and taking money that is not yours will eventually come to light (regardless of the amount)…and the outcome is never good.

As part of a plea agreement Jennifer Fox pleaded guilty to grand theft by embezzlement with a charge of aggravated grand theft being dropped. When asked what she did in court, Fox said only that she took money that she shouldn’t have in an amount over one-thousand dollars. Fox faces up to ten years in prison.

Oops…as of this writing Jennifer Fox was was sentenced to 8 years in prison with three years suspended.

8 YEARS…for $150,000.  And she was ordered to pay restitution in the amount of $159,729. The embezzlement reportedly occurred between January 2005 and February 2008.

8 years of your life is not worth the short term gain you might receive from ill gotten embezzled funds…not to mention the emotional toll that this takes on family and friends.  I sincerely hope that Jennifer finds herself while incarcerated and returns to society to make a difference.

Cuomo sues Lewis of Bank of America… Did Lewis act unethically or is Cuomo grandstanding?

Reported on in Bloomberg…(see the full article here).

The former Chief Executive Officer of Bank of America, Kenneth Lewis was sued by New York Attorney General Andrew Cuomo for supposedly defrauding investors and the government when buying Merrill Lynch & Co.  Recently, the bank agreed to pay $150 million to settle a related lawsuit by U.S. regulators which is being considered by U.S. District Court Judge Jed Rakoff.  Last year, Rakoff called the SEC’s initial settlement neither fair nor reasonable and questioned why the bank’s executives and lawyers weren’t sued. The agency said it lacked evidence to bring claims against specific individuals.

Cuomo also sued the bank’s former chief financial officer Joe Price and the bank itself for not disclosing about $16 billion in losses Merrill had incurred before it was bought by Bank of America in an effort to get the merger approved.  Afterward, Lewis demanded government bailout funds, Cuomo said.

“We believe the bank management understated the Merrill Lynch losses to shareholders, then they overstated their ability to terminate their agreement to secure $20 billion of TARP money, and that is just a fraud,” Cuomo said yesterday during a telephone press conference. “Bank of America and its officials defrauded the government and the taxpayers at a very difficult time.”

Interestingly enough, Cuomo is pursuing individuals at the bank while the SEC has declined to do so. The suit is being filed under the Martin Act, a New York securities law that permits both civil and criminal penalties.

Cuomo said he coordinated efforts with the SEC. “Our case will bring individuals to justice and will make a point to people that this is a very serious matter,” he said yesterday. “When you settle a case the way the SEC is settling today, the upside is you implement immediate regulatory reforms.”

Last month, the SEC expanded its claims against the bank, accusing it of failing to disclose Merrill Lynch’s mounting losses before holding a shareholder vote on the acquisition.

The proposed fine would be distributed back to harmed shareholders, the SEC said yesterday.

The SEC settlement “addresses the judge’s concerns of penalizing shareholders so it’s likely to pass muster,” said Peter Henning, a law professor at Wayne State University in Detroit. “At the same time, it’s hard to show any monetary damage to shareholders at this point because the Merrill deal has turned out to be a good acquisition for the bank.”

The conduct of Brian Moynihan, the bank’s current chief executive, is not under investigation, said David Markowitz, Cuomo’s special deputy attorney general for investor protection. Moynihan, who became general counsel in the middle of events, was candid with Cuomo’s office in the probe, Markowitz said.

According to the complaint, Lewis and his lieutenants Moynihan and Price calculated that if they threatened “to get out of the deal, the federal government would counter with more taxpayer funds out of a concern for the greater economy.”

The U.S. injected $45 billion into Bank of America through the purchase of preferred shares, including $20 billion approved after the acquisition in January 2009 to keep the deal from collapsing. The bank redeemed the shares in December.

“We find it regrettable and are disappointed that the NYAG has chosen to file these charges, which we believe are totally without merit,” the bank said in a statement. “In fact, the SEC had access to the same evidence as the NYAG and concluded that there was no basis to enter either a charge of fraud or to charge individuals. The company and these executives will vigorously defend ourselves.”

Lawyers for Lewis and Price denied wrongdoing. “The allegation that Mr. Price deliberately caused Bank of America to withhold from shareholders information they were entitled to know is utterly false,” said William H. Jeffress Jr. and Julia E. Guttman of Baker Botts LLP in Washington, in a statement.

SOME QUESTIONS TO CONSIDER:

Is the decision to sue Mr. Lewis and other Bank of America Executives by Mr. Cuomo a political move that has more to do with advancing political aspirations than bringing justice?  Or, is Mr. Cuomo the only person to have the fortitude to bring justice to an unethical action by BofA executives?

“The decision by Mr. Cuomo to sue Bank of America, Mr. Lewis and other executives in connection with BofA’s acquisition of Merrill Lynch is a badly misguided decision without support in the facts or the law,” said Mary Jo White of Debevoise & Plimpton LLP in New York, who represents Lewis. “There is not a shred of objective evidence to support the allegations by the Attorney General.”

Bank of America agreed to buy Merrill on Sept. 15, 2008, after just 25 hours of due diligence, according to the suit. When the board of directors met that day to approve the transaction, they thought they were going to buy Lehman Brothers Holdings Inc., the suit says.

WOW…is that true?  If so, and it is proven, then one would have to wonder about not only Mr. Lewis actions, but the actions of the Board of Directors. Who makes a decision like this with only 25 hours of due diligence?

Cuomo said Bank of America scheduled a shareholder vote to approve its plan to buy Merrill on Dec. 5, 2008. By that date, Merrill incurred losses of more than $16 billion, Cuomo said. Bank of America’s management, including Lewis and Price, knew of the losses and knew that more were coming, Cuomo said.

After the merger was approved, Lewis told federal regulators the bank couldn’t complete the deal without a taxpayer bailout because of accelerated losses from Merrill, Cuomo said. However, between the time the shareholders approved the deal and the time Lewis sought the bailout, Merrill’s losses only increased by $1.4 billion, Cuomo said.

Greed, Hubris

“The conduct of Bank of America, through its top management, was motivated by self-interest, greed, hubris, and a palpable sense that the normal rules of fair play did not apply to them,” Cuomo said in the lawsuit. “Bank of America’s management thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth.”

But wait…is Bank of America the only culprit in this grand scheme?  We (the taxpayers) lost substantially more with AIG, so where is Mr. Cuomo when it comes to that grand deception?  I respect the grandstanding claiming “greed and hubris” but I’m not sure why the BofA – Merrill merger is being focused on when there seems to be much bigger fish to fry.  Any help here?

The suit claims Bank of America received more than $20 billion in taxpayer aid as a result of their misleading efforts. Cuomo’s statement said the bank can’t explain why they didn’t disclose the losses to shareholders though the merger “would have threatened the bank’s very existence if there had been no taxpayer bailout.”

Cuomo also claims management failed to disclose to shareholders it was allowing Merrill to pay $3.57 billion in bonuses. Nor did the bank’s management tell the bank’s lawyers about the extent of Merrill’s losses before the shareholder vote.

Here’s what appears to be the sad truth…  Lewis will be defended by attorney’s for Bank of America.  BofA received bailout money.  Merrill is now part of BofA.  And, even if found guilty, more than likely any fines assessed will be paid from BofA’s insurance.  Perhaps…this is all posturing for something else.  Bank of America likely was wrong, but I’m not sure that Attorney General Cuomo is truly motivated by bringing justice…

But then again…I could be wrong.  YOUR THOUGHTS?

This is confusing! Kaleta barred by SEC from investment firms yet still connnected with BizRadio and Frishberg

I can’t quite get my hands around this whole mess, but something just doesn’t seem to connect.  I have found, based on experience, that when something doesn’t smell right…normally there’s a problem.  We might not be able to identify it at the outset, but all the pieces of the puzzle don’t completely connect here.

RELATED TO ALBERT FASE KALETA – The SEC issued the following:

SEC News Digest

Issue 2010-21
February 2, 2010

ENFORCEMENT PROCEEDINGS

In the Matter of Albert Fase Kaleta

On Feb. 2, 2010, The Commission issued an Order Instituting Administrative Proceedings Pursuant to Section 203(f) of the Investment Advisers Act of 1940, Making Findings and Imposing Remedial Sanctions (Order) against Albert Fase Kaleta. The Order finds that on Dec. 2, 2009, a final judgment was entered by consent against Kaleta, permanently enjoining him from future violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1) and (2) of the Investment Advisers Act of 1940, in the civil action titled SEC v. Albert Kaleta, et al., Civil Action Number 4:09-cv-03674, in the United States District Court for the Southern District of Texas. The Order further finds that the Commission’s complaint in the federal court case alleged that, in connection with the sale of promissory notes made by KCM, Kaleta falsely stated to investors that the note proceeds would be used to make short-term loans to small businesses; that KCM would only lend to creditworthy individuals or entities whose models Kaleta had fully researched and understood; that Kaleta would perform due diligence to ensure that borrowers had the ability to repay their loans; that KCM would charge 12-14% annual interest on the loans, and would profit from the spread between that amount and the 10% promised investors. Instead, Kaleta misused and misappropriated investor funds. Kaleta paid himself, his family members, and his affiliated companies which were not creditworthy.

Based on the above, the Order bars Kaleta from association with any investment adviser. Kaleta consented to the issuance of the Order without admitting or denying any of the findings in the Order, except as to the entry of the injunction, which he admitted. (Rel. IA-2983; File No. 3-13773)

MAYBE I’M MISSING SOMETHING…but the last part of this order states that Kaleta is barred from association with any investment adviser…  O.K., so if I’m wrong, I stand to be corrected, but Daniel Frishberg is an investment adviser – isn’t he?  Regardless, the SEC stated the following on November 13, 2009:

The Commission also sued two other entities, Business Radio Network, L.P. d/b/a BizRadio (BizRadio) and Daniel Frishberg Financial Services, Inc. (d/b/a DFFS Capital Management, Inc.) (DFFS) as Relief Defendants solely for the purposes of equitable relief.

Now one would assume that if the SEC bars Kaleta from association with any investment adviser, and that BizRadio and Daniel Frishberg Financial Services, Inc. were sued for equitable relief, that Kaleta and Frisberg should have become disassociated with each other.  After all, the SEC linked Kaleta’s “investments” to BizRadio and Frishberg.

But…then there’s the Memo that states with some joy that BizRadio is now being heard on 1180 AM a more powerful station… see below:

Now, there’s nothing wrong with moving stations, especially if the signal is better and reach more effective.  But how did they get the contract with 1180 AM?  Seems that Kaleta signed the check for the initial agreement (or so I’ve been told) which is on the BizRadio check.  See below:

But how can that be…?  Daniel Frishberg is the CEO of BizRadio.  BizRadio and Daniel Frishberg Financial Services, Inc. were parties to the SEC Albert Kaleta mess and sued for purposes of equitable relief and yet…ALBERT KALETA signed a BizRadio check for the January payment for BizRadio to be on 1180 AM…?

Oh, and then Entravision exercised their option to kick BizRadio off the air for failing to provide a payment of $150,000 which left BizRadio high and dry.  It was then, and appears to be only then, that Daniel Frishberg disengaged from an agreement with Rehan Siddiqi for his lease of 1110 AM for which Siddiqi had paid BizRadio – Frishberg, et al… $180,000.  While I can’t state this as fact, it appears that Siddiqi (who used to work with Frishberg at BizRadio) is out his funds…and as I stated at the beginning…something just doesn’t smell right.

SO HERE’S THE QUESTION…

If the SEC bars Kaleta from association with any investment advisor and Frishberg’s BizRadio was sued by the SEC for equitable relief, then why would Kaleta be signing a BizRadio check for an agreement that seems to have gone south – in a big way?

Is Kaleta in violation of the SEC’s terms?

Did Kaleta sign the check show above or is he claiming it a forgery?

Why did BizRadio seemingly gladly switch to 1180 AM in January 2010 without any issue on Frishberg’s part that he was being taken advantage of?

And, when BizRadio was kicked off 1180 AM for failure to meet the financial terms, was that the event that caused Frishberg to cut bait and leave Siddiqi high and dry – having lost some $180,000?

CAN SOMEONE PLEASE PROVIDE SOME ANSWERS?  COMMENTS ARE WELCOME…

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The Ponzi scheme’s alive and well…Peter Jerald Frommer faces up to 233 years in prison if convicted!

A man who allegedly defrauded investors out of $12 million dollars from his onetime base of Malibu was taken into custody by federal authorities the U.S. Attorney’s Office announced.

Peter Jerald Frommer, 34, surrendered to FBI agents Friday morning after a federal grand jury on Thursday indicted him on 17 counts, including mail fraud, wire fraud, money laundering and failing to file federal income tax returns for three years.

Frommer is suspected of convincing investors that he would take their money, buy and flip-for-profit distressed property from companies going out of business, and quickly return the cash plus unusually high interest (as much as 15 percent).

But alas, federal authorities say, the suspect would just pocket the money and use new investments to pay off those who wanted their cash back. Frommer called his company Cap Exchange or Cap X, and he ran the operation from 2004 to 2006, feds say.

“Frommer allegedly misappropriated this money to maintain his lavish personal lifestyle and to make Ponzi payments to victims, while falsifying Cap X account statements to lull victims into believing that their money was safe and earning high returns,” stated U.S. Attorney’s Office spokesman Thom Mrozek.

More than 50 victims were stung, according to the U.S. Attorney’s Office. He faces as many as 233 years behind bars if convicted.

COMMENTS ARE WELCOME

BizRadio, Frishberg and Crider – What a tangled web we weave…

Today Daniel Frishberg issued the following email related to BizRadio.  I am showing it in its entirety in blue.  Comments follow in black…

BizRadio Returns: What a story!

Dear Friend,

I’m proud and happy to announce that BizRadio will be back on the air Monday at noon. The truth is, we should never have been off, but a clever legal maneuver by an opposing group got them a temporary order, and we were forced, against our will, to put them on instead of OUR content, on OUR radio station – but only for a couple of days. Once the court got a look at the facts, it cancelled that order and the final result – WE ARE BACK!

NOTE: See the attached…how can Frishberg claim that he didn’t know…come on…  A month passes and Frishberg is just now figuring that something is wrong.  Something here doesn’t add up.

Now back to Frishberg’s email announcement:

In the meantime, there will be rumors and other claims, especially from those who oppose our interests. Now that the court has ruled, their only tactic is a propaganda campaign, which people have already told us is underway. If you have any doubt about the facts after reading my letter, read the news article at the end of this letter, about the same perpetrator, involved in a case almost identical to this one.

We will continue to live our lives and do the best we can, but we do want to make the effort to make sure the real facts get out to everyone interested in BizRadio, whether as investors or just supporters and fans.

I just spent all day in court, in Houston, on Friday, Feb 5, defending the interests of BizRadio, its investors and its supporters. Anyone who wants to read another wild and fascinating story should read the transcript of that court action, which is available to the public. I will make sure there is a link to the court transcript on our website as soon as possible.
Briefly, I will summarize our position, which was supported by the court, so far. Our position, as we told it to the court is as follows:

An unauthorized but related party, Ron Crider, the same person in the Colorado newspaper story below, held himself out, falsely, to be the Chief Executive of BizRadio, and to be authorized to make deals and contracts for the sale of major assets. Our records show that he was not even an employee of our company, never received a paycheck from our company. Though a merger with his company was discussed and considered, it was never consummated.

NOTE:  As part of my inquiry into this strange set of affairs I asked Ron Crider in an email exchage the following:

Why did you take a job with Frishberg without compensation?  That seems highly unusual… Because we were and still are partners in BIZ Radio Colorado 50/50 and I was planning on doing a joint Venture with Biz Radio and my Satellite Network GABradionetwork.com

If, in fact, this is true, then why does Frishberg seem to be willing to roll Crider in front of the bus now, when he was willing to have Crider represent him as his CEO in the January news release when all seemed well?

It now appears that there was no real intention to merge, but that this was all part of a carefully crafted plan to wrongfully take a valuable asset, our Houston radio station, for far less than its real value, harming our company and its investors. This is even more onerous now, because BizRadio has more debt than it should, and it is very important that we use our equity in such assets to reduce the company’s debt and make our lenders whole. That is what BizRadio is determined to do and we went to court Friday, to protect our ability to do this.

The conditions of the unauthorized deal are set out in the court document, but in affect this group tied up the radio station in an impossibly bad deal, forcing the company to sell the asset for a fraction of its value to another group outside BizRadio which would profit mightily at the expense of BizRadio, its investors and its creditors. This is, as I’m sure you will note, almost exactly what they same perpetrator did in the Colorado news story below.

I personally believe they expected me to go along with this scheme, because it would result in substantial ill-gotten gains, but I was not willing to collaborate in this scheme. By the way, not only was the scheme harmful to BizRadio, but I don’t believe BizRadio could even legally have gone along with the deal. There is a concept called “Fraudulent Conveyance” which means when you owe people lots of money, you are not allowed to siphon off the assets to some other entity for your own benefit, and screw your legitimate creditors. I am not a lawyer, but I have been advised by our lawyers that participating in this scheme would have been not only immoral, but illegal. Immoral was enough for me, anyway.

For those of you who are interested in contracts and such, I’ll repeat for you the analysis of the contract that I gave to the judge on Friday.
The contract, which was kept hidden and created and signed only by an unauthorized party provided for the following absurd provisions:

• A 5 year contract to broadcast on our station at $50,000 per month, and with NO INFLATION PROTECTION AT ALL. 5 year contracts are never granted because of the potentially volatile situation. We have only engaged in 1 year, with an option to renew. Always there is a clause that provides for escalation due to inflation.
• They put in a clause that specifically says that the lease cannot be broken even if we sell the station to someone else.  THE RESULT OF THIS IS THAT WE COULD NOT SELL THE STATION TO ANYONE BUT THEM!
• They put in the contract an option to purchase the station for $3.5 million. NOTE THAT WE BOUGHT THE STATION TWO YEARS AGO FOR MORE THAN $7 MILLION.
• The judge seemed to be persuaded by the fact that if the station earns $600,000 per year in rent, it must be worth at least $6 or $7 million.
• That’s not all. The contract also provided for the purchase option to be good for a year, and to take the entire rent payment off the purchase price. Thus at the end of the year, you would be forced to sell our $7 million station for $2.8 million.

It was not disclosed until recently, that the purchaser did not have the means to make such a purchase, and was relying on financing from Crider, who recently failed to live up to financing commitments to BizRadio this month. IT WAS NEVER DISCLOSED THAT CRIDER WHO WAS SUPPOSED TO BE REPRESENTING BIZRADIO WAS INVOLVED ON THE PURCHASER SIDE AS WELL. WHAT A CONFLICT OF INTEREST – UNDISCLOSED!

I explained to the court that the only possible outcome would be that the optioner, who had no means with which to buy the station, would be able to run around and find someone to buy the station at $4 or $5 million, and pocket the difference, at the expense of BizRadio, its investors and its creditors.

Personally, I believe that this is why the perpetrators thought I would go along with this scheme- because there was lots of money in it if they got away with it. They were wrong. It is only my opinion, but I believe people like that can’t imagine anyone who believes you come out better in the long run by playing it straight.

This is a long story. The positive outcome is that BizRadio has been able to continue to live. The radio station can be used for the benefit of our investors and creditors, and could be enough to reduce our debt to near zero.

NOTE:  Is it really mathematically sound to assume that the life of BizRadio will, in fact, produce profits sufficient to retire its substantial debt, pay off investors and produce a realistic profit?  Or is this just more hype to encourage investors to keep the flow of funding coming?  Otherwise, based on what I’ve seen thus far, BizRadio has financial problems with it’s continued operation.  Maybe, I’m wrong, but it seems that BizRadio failed to provide the security deposit and therefore had no choice (if they wanted to stay on the air in Houston), but to back out of the deal with Siddiqi.  See below:

We know there will be all kinds of rumors, but we want you to know the truth.

As promised, I am also including exerpts from a newspaper article describing another case where the same guy did almost the identical thing. I would characterize it as a scam, but you can make your own judgement on it.

I guess in a difficult economy, there are all kinds of people desperately doing all kinds of things. You can be certain that we will continue to play it straight with you and with everyone.
Happily, BizRadio will be back on the air on Monday at noon.

We are making a special offer to jumpstart our return. We will be offering spots on BizRadio for $50 per one minute commercial  — far below the market rate. If you are a businessman or know a businessman who can benefit from this, please take advantage of this giant sale. It will not last forever, and we will allow the immediate supporters to keep that below market rate for an extended period of time, in appreciation of your support.

We have always been there for you, and will be there now, but right now we could use your help.

Thanks again for the love and support..

Sincerely,

Daniel Frishberg

P.S. For more information, please read the following news story from 1994

TALK ISN’T CHEAP
A JURY AWARDS BIG DOLLARS TO ERSTWHILE KNUS OWNER PAUL STEBBINS.
By Michael Rider, Denver Westword News, April 13, 1994
“My dream was to own and operate KNUS,” he says, “but I might have to make a business decision to sell it. And if I get my money, I will walk away and live to see another day.
The case is strewn with claims and counterclaims revolving around a host of financial and legal sticking points (“Technical Difficulties,” September 22, 1993). Exactly how much money Martishang and his company, Alameda Enterprises, will have to pay Stebbins–whose Mile High Broadcasting was issued the broadcast license to operate KNUS but has had nothing to do with running it for nearly a year–is not yet known. But it could be as much as $1.8 million. Jefferson County judge Ruthanne Polidori will rule by April 28 on the question of who owns KNUS.
Bill Meiers , a mechanical engineer who served as jury foreman, admits that it was a dramatic moment, but says it did not affect the jury’s deliberations. “The decision was based 100 percent on the evidence,” he says. “It wasn’t based on whether Mr. Stebbins was blind and emotional. If he’d been able to see and hadn’t broken down, I’m sure the verdict would have been the same.”
That decision against Martishang included $200,000 in punitive damages for outrageous conduct and $250,000 for fraud. When asked to respond to the jury’s verdict, Martishang refers all questions to his attorney, Glen Keller , whom he says “is good at telling you people to go to hell.” Keller declines to comment, saying it’s because Judge Polidori has not yetmade a final determination about KNUS ownership.
If Polidori decides that Alameda is the rightful owner, the jury has directed Martishang to pay Stebbins over $1.8 million; when money Stebbins has been told to pay Martishang in connection with additional findings is subtracted, the total amount of damages comes to approximately $1.68 million. If Mile High is named KNUS’s owner, Martishang still must pay Stebbins $1.05 million, while Stebbins would owe Martishang nearly $800,000, leaving Stebbins with approximately $250,000 in addition to the station itself.
These awards come a little more than three years after Stebbins, a Chicago-born radio engineer who’s been blind since he was only days old, purchased KNUS from Boulder entrepreneur David Corman . Stebbins paid $460,000 in cash and signed a note with Corman for $500,000 to complete the transaction. By mid-1992, though, KNUS was losing a great deal of money, and Stebbins was unable to turn the situation around. Desperate, he hired Ron Crider , a colorful Floridian who claims to have served as a communications consultant to former Nicaraguan dictator Anastasio Somoza , to act as general manager. In short order Crider arranged with Martishang, a wealthy real estate developer, to move KNUS into one of Martishang’s buildings, at 5800 West Alameda. According to Stebbins, Crider subsequently started spending money at so prodigious a pace that Stebbins feared he would go bankrupt. Former staffer Owen Beaver adds that Martishang denounced KNUS employees as “nothing but fags, queers and perverts,” and once demonstrated his control over the station by throwing a switch that threw it off the air.
In the midst of this turmoil, Stebbins missed a payment on his $500,000 note; Stebbins says Crider used money earmarked for this purpose to pay staff salaries. Later, Stebbins learned that Martishang had purchased the note from Corman and was threatening to foreclose on it unless Stebbins sold KNUS to him. Stebbins eventually agreed, accepting a letter of intent from Martishang to purchase the station for $1.665 million.

This deal was never formalized, however, and when Stebbins determined in June 1993 that Crider was secretly working with Martishang to seize control of KNUS without meeting the obligations set forth in the letter of intent, he gave Crider his walking papers. Stebbins’s attempt to hire a replacement was thwarted when Martishang filed suit, requesting the appointment of a receiver to run the station until the sale was completed (this request was soon granted). The suit also sought to foreclose on the station’s collateral as security for the $500,000 note.

WHAT A TANGLED WEB WE WEAVE…

COMMENTS ARE WELCOME