Sujata “Sue” Sachdeva pleads Guilty and agrees to $34 million in Restitution!

From SIFY News:

A former Indian-American executive faces up to 20 years in jail after pleading guilty to stealing $34 million from stereo headphone manufacturer Koss Corporation for her ‘irrational and excessive buying sprees’.

Sujata Sachdeva, 46, a former vice president of finance at Koss Corporation, pleaded guilty to all the six counts of wire fraud, for which she was charged early this year, before a Milwaukee court in Wisconsin Tuesday.

US District Judge Lynn Adelman accepted her guilty plea to all six counts of felony fraud in connection with the federal government’s $34 million embezzlement case against her and set a sentencing date of Oct 22.

Each charge against Sachdeva carries a maximum penalty of 20 years in prison and a fine of $250,000. Each charge also carries a mandatory special assessment of $100 and a maximum term of supervised release to follow any term of confinement of up to five years.

She has also agreed to pay an estimated $34 million in restitution to Koss under a plea deal that calls for at least five years in prison, although prosecutors may recommend a much longer sentence.

Sachdeva has been free on a $50,000 signature bond since she was charged in December.

The government plans to auction more than 22,000 items of luxury clothing, shoes, jewellery, furs and art objects that Sachdeva bought with the stolen money. Koss will receive the proceeds of the auction. No date has been set for the online auction, which needs the approval of the court.

After the hearing, her attorney Michael F. Hart stood beside Sachdeva on the steps of the federal courthouse and read her statement, according to Milwaukee Sentinel Journal.

In it, Sachdeva, 46, said she most regrets the pain and public embarrassment she caused her husband and two young children. Ramesh Sachdeva, a paediatrician who is an executive with Children’s Hospital of Wisconsin, was in court Tuesday with his wife.

‘Ms. Sachdeva engaged in irrational and excessive buying sprees that escalated over time,’ the statement says. ‘When the bills piled up, she took money from her employer to pay for her purchases.’

‘A large portion of the funds were used to pay for items that Sue Sachdeva never possessed, clothes she never wore and items she never picked up.’

WHERE FROM HERE?

Well…this was a smart move on Sachdeva’s part.  Not only would her sentence have been worse if she had tried (like so many) to go to a jury trial, but the emotional stress would have been much more straining that it already is.  Likely, her prison sentence will be longer than the 5 years she is expecting, but shorter than the potential time she could face.

On the other hand, making $34 million in restitution…well I don’t see that happening, but?

YOUR COMMENTS ARE WELCOME!

BizRadio, Daniel Frishberg and Al Kaleta – the SEC saga continues with Receiver comments…

On July 22, 2010 the SEC Receiver posted the following update on KCM Receiver web site.  From what I’ve been told many who have been following this story either haven’t read the posting or are not connected to the fact that such a site exists… so the posting is reprinted below in it’s entirety.  Likewise, the web site url is show here – http://kcmreceivership.com/index.html

July 22, 2010

At the inception of the receivership, demands were made for repayment of all outstanding loans made by KCM to borrowers from proceeds of KCM’s note offerings to members of the public. To date, certain of the notes have been repaid in the following amounts:

Daniel Frishberg (personal)  $122,069.00
David Wallace (personal)  $ 92,348.00
Costa Bajjali (personal)  $ 45,550.00

In a series of poorly documented transactions, $300,000 in KCM funds was transferred to Masterpiece Investments in the form of a loan to Masterpiece, payment for a number of Masterpiece sculptures and payment for shares of common stock in Masterpiece. In settlement, Masterpiece has agreed to repay KCM the amount of $100,000 payable in installments over a six-month period of which, to date, $20,000 has been collected. In addition, as part of the settlement with Masterpiece, the shares of Masterpiece stock were cancelled and Masterpiece has agreed to re-sell the ten pieces of Masterpiece sculptures within the possession of the Receivership Estate in its gallery in Naples, Florida. Masterpiece will market those sculptures at no charge to the Estate and all proceeds from sale of the sculptures will be paid into the Receivership Estate. To date, no sales have been concluded.

Protechnik Inc. and its principal, Brian De Armas, have declined to make payment on their outstanding indebtedness to KCM in the amount of $160,937.50. Accordingly, on April 13, 2010 the Receiver initiated a civil action in the United States District Court (Thomas L. Taylor III, solely in his capacity as court-appointed Receiver for Kaleta Capital Management, Inc. v. Protechnik, Inc. and Brian De Armas, No. 4:10-cv-1189) against them. The Receiver will seek payment in full of the principal, along with interest, costs of suit and attorneys fees. Protechnik has filed an Answer, and the lawsuit has been consolidated with the main action before Judge Nancy Atlas.

Following demand for payment of all indebtedness to KCM, extensive settlement negotiations were conducted between the Receiver and Daniel Frishberg Financial Services, Inc. (“DFFS”) and Businessradio Network LP and affiliates (“BizRadio”). Loans to those entities represent the majority of the funds which were loaned from proceeds of the KCM note offerings. Negotiations did not prove fruitful with respect to those entities or their principals (other than as noted above). Accordingly on May 4, 2010 the Receiver moved the Court to include the DFFS and the BizRadio entities in the Receivership Estate. The Motion to extend the Receivership was based upon extensive commingling and conflation of KCM proceeds and assets with those entities. Following discovery and an initial hearing before the Court, the parties entered into an agreement pursuant to which those entities were voluntarily placed within the Receivership. The US District Court granted the Motion on Jun 17, 2010 and accordingly those entities are now within the Receivership Estate.

Extensive negotiations have also been conducted between the Receiver and Wallace Bajjali affiliated entities with respect to borrowings from KCM by those entities and their principals. To date, repayment arrangements have not been successfully concluded other than as noted above with respect to personal notes of Bajjali and Wallace. The indebtedness of the Wallace Bajjali entities to KCM, however, has been acknowledged albeit with no agreement concluded as to a repayment schedule.

Based upon the recent inclusion of BizRadio in the Receivership Estate, negotiations have now been commenced with respect to potential liability of the Wallace Bajjali entities and their principals with respect to investments by members of the public in BizRadio directly, and in other related investment vehicles. To date no agreements have been reached with respect to these matters.

Prior to the expansion of the Receivership to include the BizRadio entities, BizRadio had entered into an agreement with respect to the sale of its KTEK radio station license to Salem Communications Corporation. The Receiver is engaged in ongoing discussions with Salem concerning its purchase of the radio station under the changed circumstances implicated by the Receivership. Also prior to the inclusion of BizRadio in the Receivership Estate, litigation had been commenced by another potential purchaser of the station. In that litigation the Plaintiff asserted that it held the right to acquire the station in a prior transaction — which assertion was contested by BizRadio management. That litigation, pending in Harris County District Court is stayed as to BizRadio because of the present Receivership. The Receiver has also been approached by that potential purchaser with respect to an offer to purchase the radio station license.

Several BizRadio investors have inquired with respect to the status of 2009 tax information. The Receiver is attempting to ascertain the status of tax information processing but of this date we are unable to project when information will be processed and made available

What will investors, creditor and other get when the Receiver is finished?  That’s the $64,000 question or multi-million dollar question as the case may be.  While I have no inside track on the outcome, it seems clear that based on the convoluted quagmire of a tangled financial mess Frishberg and Kaleta made…it seems unlikely that substantial losses will be averted.  In other words…I’m thinking that if you invested, loaned, etc. you won’t get much money back.

I’m told that the economic downturn has had a major negative impact on David Wallace’s investments and, of course, we know that BizRadio is broke.  The only hope for a reasonable return is that Salem, Siddiqi or someone else will step up and pay a pretty penny for that small station 1110 a.m. and that the Receiver will be successful in getting his hands on the income generated from DFFS or Dan Frishberg’s RIA.  My guess, however, is that the investors have taken there money elsewhere – I would.

Hopefully we will hear soon about what position the SEC will take toward Frishberg.  I don’t think he will walk away with just a hand slap.  After all he used the media (radio) to promote his fraud and my guess is – like the folks I reported on just yesterday – a prison sentence might be the most just outcome.  Well…see.

YOUR COMMENTS ARE WELCOME!

Trevor Cook and Pat Kiley – Using Radio to promote the Scam – Does this remind you of BizRadio, Daniel Frishberg and Al Kaleta?

There are three component parts to a well run Ponzi scheme and in every case the victims fall prey and into the PIT.   PROMISE, ILLUSION and TRUST!

Over the past several months I’ve been reporting on BizRadio out of Houston and the scheme or scam (as I and many others see it) run, in part, by Daniel Frishberg and Al Kaleta.  Then just yesterday I clicked on a lengthy new report about another massive Ponzi scheme (makes BizRadio look like chump change) effected by Trevor Cook (who entered into a plea agreement) and Pat Kiley (Radio Host) who is reportedly the target of a criminal investigation.

The report was fascinating in that it – yet once again – clearly showed the three components of how victims become victimized.  First, before I explain – here’s the link to the CNN Money report.

http://money.cnn.com/video/news/2010/07/15/cook_kiley_long_pkg.cnnmoney/

So how did this mess come to be?  Three things:  PROMISE, ILLUSION and TRUST!

Step One:  Cook made the promise that this was a risk free investment.  As is often said, he (Cook) had a fool proof system.  Folks there is NO FOOL PROOF SYSTEM.

Step Two:  Cook created what looked (0perative word “LOOKED”) to be a high tech system that supported his claims.  He created the ILLUSION.  And, as part of that, he had (what appears to be) in his back pocket – Pat Kiley (Religious Radio Guru) whose mouth supported the Illusion that this was all real.  After all, it wasn’t just Cook who made his claim – he had a (my term here) co-conspirator to help with the Illusion.  Now whether Kiley was “in on the deal” or just too dumb to do due diligence on what he was promoting on the radio is for the legal system to decide, but either way – Kiley was instrumental in creating the Illusion.

Step Three:  Kiley’s brand – via his nationally syndicated radio show – created a large part of the TRUST needed to spread the message and seal the Ponzi scheme deal.  Not that this all fell on Kiley’s shoulders, Cook, too, played a large part in the Trust component by creating false statements giving investors an inaccurate view of their investment returns.

PROMISE, ILLUSION and TRUST.  These three are the foundations of how fraud becomes and creates victims.

See the SEC News Release on Trevor Cook – http://www.sec.gov/news/press/2010/2010-12.htm

See also SEC News on Pat Kiley – http://www.sec.gov/litigation/litreleases/2009/lr21313.htm

So…how does this relate to the story I’ve been following with BizRadio?  Seems that there are interesting correlations.  First, Al Kaleta was the one who seemingly was the point man for the money.  Perhaps it was best to say that Al Kaleta was the “promise keeper.”  Daniel Frishberg was the “radio personality” who had the name recognition to support the Illusion and create Trust.  Together, Frishberg and Kaleta, seemingly convinced many investors to (like in the case of Trevor Cook and Pat Kiley) put millions into venture(s) that turned out to be no more than a massive illusion designed to promote the personal gains of Daniel Frishberg and Al Kaleta.

Where from here?  Well, in the case of Cook – he’s entered into a plea deal for no more than 25 years in prison in exchange for his help in finding the money.  Good luck with that, as it appears that much of it has disappeared – gone as quickly as his illusion dissipated.  Kiley – well, that’s a function of where the criminal investigation goes.  Did he know and conspire or was he just that stupid?

In the other case of Al Kaleta and Daniel Frishberg – that is yet to be decided – other than an SEC Receiver has been appointed to take possession of what funds can be found so that investors can be made whole as much as possible.  More to come!

Meanwhile…YOUR COMMENTS ARE WELCOME!

Wesley Snipes fighting to avoid Prison!

Convicted by obvious choices and now facing prison, Wesley Snipes – through his attorneys – are attempting one last legal maneuver.  But first, here’s a prior link that identifies Snipes actions and choices related to his tax issues.

http://chuckgallagher.wordpress.com/2008/04/15/wesley-snipes-this-is-taxing-my-brain-what-did-he-do-exactly/

According to the Associated Press:

Attorneys for Wesley Snipes say they want to question jurors who convicted the actor of tax-related charges to determine whether any had made up their minds about his guilt before trial.

The motion filed Friday in Florida federal court says that an unnamed juror sent Snipes’ attorney Daniel Meachum an e-mail claiming that three other jurors had presumed Snipe’s guilt.

The motion says that would violate Snipes’ constitutional right to a fair trial.

Snipes was convicted in 2008 of three misdemeanor counts of willful failure to file his income tax returns. The 47-year-old is free on an appeals bond. However, federal prosecutors in Florida have asked a judge to revoke the bond and order Snipes to begin serving a three-year sentence.

I’ve asked myself as I write this – if I were a juror would I have a preconceived notion of guilt or innocence?  Yes.  How could I not considering that Snipes didn’t file returns.  The other issues…well that’s debatable, but failure to file.  That’s irrefutable.  Next!

Wesley Snipes – Prosecutor says Go to Prison Now!

Free on bond pending his appeal…now the Prosecutor wants Wesley Snipes (who LOST that appeal) in the “big house” and NOW!

Last Friday July 16, officials in an Atlanta, Georgia appeals court upheld a judge’s decision to put Snipes behind bars for three years on federal tax charges.

No date for the Blade star’s surrender was discussed and the correctional facility where Snipes, who has been free on bail pending the outcome of the appeal, would serve his time hasn’t been revealed. Yesterday – Wednesday, July 21, prosecutors filed a motion opposing Snipes’ bail, stating, “There is no good reason to delay his surrender”.

The star’s attorney, Daniel Meachum, insists he will respond to the filed documents soon. A jury originally convicted Snipes on three misdemeanor counts of willful failure to file his income tax returns in 2008.

REALITY CHECK

Regardless of whether you feel that Snipes was treated fairly or not, he is going to prison.  And, from personal experience (I’ve been there – although not proud of it), I can say he won’t have fun.  But, I can’t see what the rush is all about.  As a matter of personal example, I was sentenced to a prison sentence in June of 1995 and ordered to report in October of 2005.  Snipes is not a flight risk, so the only reason for a rush is the Prosecutors impatience.

So…let me say to the Prosecutor – YOU WON…Give it a rest…let the system work.  Snipes will be incarcerated soon enough.  Don’t be greedy!

To everyone else…this BS about the tax system not being legal.  Bad argument and you will lose as well.  Prison sucks…so pay your taxes and enjoy life…cause life outside of prison is better than life in prison!

YOUR COMMENTS ARE WELCOME.

BizRadio or Business 1110 (whatever it’s now know as) set to be sold…

It’s not new – most all who were following the story of Dan Frishberg “The Money Man” and BizRadio knew that the station was to be sold… the question however is now – TO WHOM?

My most recent blog entry on BizRadio centered around a recently filed lawsuit against Salem Communications, Daniel Frishberg, Elisea Frishberg and a host of other entities and folks related to the contract for purchase between Salem Communications and Daniel Frishberg for BizRadio.  The entry can be see here:  http://chuckgallagher.wordpress.com/2010/07/13/bizradio-to-salem-communications-business-1110-frishbergs-fraud-follies/

Now…I see that application has been filed with the FCC for the transfer of the station from BizRadio Houston Licensee, LLC to Thomas Taylor SEC Receiver.  The application can be seen here:  https://licensing.fcc.gov/cgi-bin/ws.exe/prod/cdbs/forms/prod/cdbsmenu.hts?context=25&appn=101390286&formid=316&fac_num=10827

THE IMPLICATION:

As previously reported, the assets of BizRadio are under the direction and control of Mr. Taylor (SEC Receiver) and as such this filing is appropriate as it clarifies the transfer of asset under the courts direction to the person authorized to act as it’s agent and effect the transfer of the station.  Perhaps simply stated – this action is a formality.

THE OUTCOME:

Well…eventually the station will be sold.  As many of you know, Salem made the following offer to Daniel Frishberg and which Daniel Frishberg accepted.

Salem Offer…

(1) Payment of $800,000 to Frishberg (this payment would be made at closing and that has not taken place – hence Daniel Frishberg has received no funds from this offer to date – to the best of my knowledge)

(2) Forgiveness of $1,260,000 of debt to Salem from their initial sale to Frishberg (in other words he had not yet paid them for his purchase in the first place).  Again, it appears that something blocks Salem from “foreclosing” and just taking the station back.  What?  I don’t know, but I keep asking…

(3) An agreement of $1,640,000 in air time for Frishberg to keep his program on the air.   Through this legal mess Dan has continued to broadcast his show on this station, so it could easily be assumed that he is drawing down on this free air time according to the original contract.

The BIG QUESTION is who will own the station and for what price?  On March 2, 2010 Rehan Siddiqi made an offer to exercise his option to purchase for $3.5 million cash.  Several days later Salem executed the agreement with Dan Frishberg to purchase the station for much less in cash and other terms listed above.  Then enter the Courts with Tom Taylor as Receiver whose role is to protect those who have “invested” or have a vested interest in BizRadio.  Mr. Taylor’s responsibility is liquidate the assets and provide the best outcome for those who have been harmed.

So…Mr. Taylor could (with Court approval):  (1) accept the Salem offer as is; (2) renegotiate the offer with Salem (perhaps by increasing the cash and removing the “free airtime”); (3) see if the Siddiqi offer is still valid which provides substantially more cash; or (4) open it to public bid and let the highest bidder win.  Either way…I suspect that the folks whom Mr. Taylor is charged with protecting will find that the sale will provide a greater benefit than the original agreement between Salem and Frishberg.

The only fly in the ointment – so to speak – is that the broadcast towers owned by the station (BizRadio) are physically located on real estate owned by Salem.  That – single fact – complicats the value to an outside buyer as Salem could demand an unreasonable rent requirement for the use of the land…  Bummer!

Likewise, the Siddiqi lawsuit against Frishberg and (more importantly) Salem claims tortuous interference which does not go away with the sale of the station by the SEC Receiver.  Perhaps, (and I’m not an attorney) but should Siddiqi reactivate his offer and that offer be accepted, it would minimize the damages claimed?

A QUESTION OF COMPATABILITY:

What I really don’t get is why Salem would want this (relatively insignificant) station?  Salem is known as a Christian Broadcaster and an organization of high moral standards…so why would they want to buy this back and get in bed with Daniel Frishberg.  By his actions, it would appear that Frishberg is almost the anthesis of what Salem stands for.   So free airtime as part of the purchase offer?  Go figure?

THE WEB OF FUNDS:

Now not being a radio guy…you follow me on this (an I’m REALLY open to comments and help here)…

1. BizRadio still owns the station (seemingly currently under purchase contract with Salem)
2. BizRadio or Business 1110 is still on the air and currently selling airtime to other programs (other than Dan Frishberg “The Money Man”)
3. QUESTION: Who is getting the money for the airtime: (1) The SEC Receiver; (2) Salem Communications; or (3) Daniel Frishberg?
4. QUESTION: Is Salem leasing the station from Daniel Frishberg currently?  If so for how much and who is receiving those funds? I would appear until the transfer to the SEC Receiver that Daniel Frishberg (BizRadio Houston Licensee, LLC) was – is still the owner.  In fact, the transfer documents would validate my assumption.
5. Industry sources tell me that the station should be worth (leased air time) approximately $50,000 per month…so since approximately 5 months have passed who got the $250,000?
6. Again, I am told that the weekend airtime was brokered for some agreed upon price – who is receiving the broker revenue?

WHERE FROM HERE?

Steve Miller’s song says – “Time keeps on ticking…ticking…ticking into the future” well in this case it is a bit of a ticking time bomb that I sense is soon set to explode!  Outcome prediction: (1) the station will be sold (and likely not for the original Salem agreement unless that’s the only offer on the table); (2) Daniel Frishberg will lose his license as part of an SEC finding and civil action; and (3) eventually both Al Kaleta and Daniel Frishberg will find themselves the subject of criminal indictment (although I don’t think that will be in 2010).  But…time will tell…!

YOUR COMMENTS WELCOME!

As predicted – Wesley Snipes faces PRISON! Court rejects appeal…

Every choice has a consequence and Wesley’s choices have landed him in prison.  Do I think the sentence is a bit harsh?  Yes.  But, Snipes did more – much more – than just fail to file returns.  Rather, Snipes elected through his choices to challenge the federal tax system.  HE LOST!

There is a message here.  Whether you believe in the system or not, if you challenge the system and don’t play by the rules – YOU WILL GO TO PRISON.  I know…I was there partially for a tax crime.

For more background on this story see these entries:

http://chuckgallagher.wordpress.com/2010/06/02/screwed-by-kenneth-starr-wesley-snipes-might-find-an-unexpected-benefit-from-his-loss-no-prison-time/

http://chuckgallagher.wordpress.com/2010/03/15/wesley-snipes-not-worried-about-prison-me-thinks-he-should-be/

http://chuckgallagher.wordpress.com/2010/01/18/nicolas-cage-vs-wesley-snipes-both-ran-afoul-of-the-irs-different-approaches-different-results/

http://chuckgallagher.wordpress.com/2010/01/11/tough-guy-wesley-snipes-fighting-to-say-out-of-prison-doubt-hell-win-that-battle/

Candidly it would have been a miracle for the courts to have come back with any other verdict.  A recent story on CNN is quoted as saying:

Federal prosecutors said Snipes for nearly a decade escaped paying more than $15 million in income tax returns by sending money to overseas accounts, though they acknowledged in court that the amount was in dispute.

Before the sentencing in 2008, the actor asked the court to show mercy and offered three checks totaling $5 million as a gesture of good will.

Federal prosecutors diverted the checks to the U.S. Treasury, which accepted the payment — but it wasn’t enough.

“It’s essentially a down payment, but a fraction of what he owes,” Assistant U.S. Attorney Scotland Morris said at the time.

WHAT’S NEXT?

Snipes, now that the appeals courts has ruled, will be given a report date and location.  Likely, he will be sentenced to a minimum security prison and will soon find out that – even at a minimum security place – prison is still prison.  For those who call it “Club Fed” I would challenge you to try it.  Frankly, it sucks.

Snipes will be a celebrity behind prison walls, but soon will be treated like anyone else.  He is, after all, an actor.  His “tough guy” image is just an image and he will quickly learn that there are others who would easily take advantage of him.  Best advice…stay to himself and learn humility.

When location and time in announced…it will be reported.  Meanwhile, YOUR COMMENTS ARE WELCOME.

BizRadio to Salem Communications Business 1110 – Frishberg’s Fraud Follies?

Have you even awakened in the morning with breath so nasty that you had to brush your teeth before talking to anyone?  I mean “nasty breath” that would turn your dog against you?  Well…if I were a betting man, I would say that Salem Communications (purchaser of BizRadio 1110 am from Dan Frishberg) either has stinky breath today or is smelling it from their “good buddy” Dan Frishberg.

This story just keeps getting better.  I will say (for those who think I am jubilant about what’s happened to Dan) – I’m not!  In fact, frankly for Dan and his family it is sad.  Sad that Dan is so caught up in himself that he is digging a hole so deep that few could ever recover.  But…let’s look at what has happened so that those of you who are following can judge for yourself – whether you think Dan Frishberg is more focused on his well being than being ethical about his transactions and protecting the many who invested their savings only to find it lost.

UPDATE:

On July 12, 2010 Rehan Siddiqi and Asia Vision, Inc. brought suit against Dan Frishberg, Al Kaleta, Elisea Frishberg, Salem Communications, BizRadio and a host of related companies and individuals for tortuous interference, fraud, conspiracy, perjury, theft and a host of other claims. Now…I am not judge nor do I have any connection with the outcome of this claim by Siddiqi.  However, the case illuminates and illustrates patterns of behavior that I would judge to be unethical and probably fraudulent.  So…let’s look at what we do know and you be the judge.

BACKGROUND:

Sure seems like a long time ago, but in late 2009 Rehan Siddiqi (Asia Vision, Inc.) entered into an agreement with Dan Frishberg to lease – purchase – 1110 AM.  Siddiqi paid Frishberg a deposit and the lease in advance for six months – the sum – $180,000.  The agreement provided that Siddiqi would have the option to purchase the station for $3.5 million.  The agreement can be clicked on here.  Frishberg – Siddiqi – Biz Radio Purchase Agreement

No only was there the purchase agreement but the simple terms were listed on the agreement at the end of December 2009.  See here: BizRadio lease purchase agreement

Now why would Frishberg agree to sell his station to Siddiqi?  On the surface it seems clear: (1) Frishberg needed the money!; (2) Kaleta, Frishberg’s financial source of funding (from now some real unhappy investors) was busted by the SEC and Dan was broke; (3) if Dan could move to a more powerful station for just the cost of monthly lease…he might survive; and (4) Siddiqi was willing to provide a quick influx of cash that Frishberg desperately needed.  Understand now?

The announcement of this transaction is reflected here in an email announcement.  BizRadio Station Change Talk about spin…

Then it all falls to pieces.  Apparently Frishberg – seemingly happy with his new station – can’t pay or provide a letter of credit to continue and thereby is facing the loss of his show – the same show that is a feeder to his investment business – the business that feeds he and his family.  So what does he do?  What any self-respecting unethical person would do (sorry, but at times I have to share my feelings) – he screwed Rehan Siddiqi.  He kept Rehan’s money and kicked him off the station that he, just a month before, leased with an agreement to purchase.  See statement from Ron Crider.  Ron Crider Statement

Outcome…Rehan Siddiqi brings suit against Daniel Frishberg and BizRadio for $18 million and YES this is old news but it sets the stage for the rest of the story…

NEXT STEPS:

On March 2, 2010 Rehan Siddiqi filed notice with agent for Salem Broadcasting of his intention to exercise his option under the lease purchase agreement.  His exercise would have Siddiqi paying $3.5 million for 1110 AM.  The proceeds would have been a cash sale and represented a substantial inflow of cash to BizRadio and their respective investors – cash that would have been much needed to those who have lost literally millions.  See offer here.  Siddiqi Purchase Exercise

But according to the lawsuit there are several interesting twists!

INTERESTING TWIST ONE:

BusinessRadio Houston, LLC forfeited its charter to exist, operate and do business as of October 30, 2009.  WHAT?  That’s right…Dan Frishberg continued to operate and do business as if he had the protection of his LLC, but it appears that it lapsed and he was flying blind or “unprotected” if you will.  The BIG QUESTION this raises is – is Dan Frishberg now personally liable for the actions of BusinessRadio Houston, LLC – an entity that seemingly conducted business through at least part of March 2010?

Somehow I see more lawsuits being filed and perhaps the concept of “piercing the corporate veil” is effectively won.  This will be interesting to watch.

INTERESTING TWIST TWO:

Keep in mind the date of the Siddiqi offering – March 2, 2010.

Frishberg (perhaps realizing that his old corporation was nonexistent) filed to do business as BusinessRadio Houston Licensee, LLC on March 4, 2010.

O.K. so Siddiqi makes the offer on March 2nd and two days later Frishberg forms a new company in order to sell what his old company (remember the one that ceased to exist back in October 2009) could not sell.  Hum?

Now…I’m curious as to legally what happens to the license if the entity that holds it ceases to exist?  Who owns the station?  Who has access to the assets?  Who is liable for the actions of the station when the corporate enterprise or LLC fails or dies?  This is getting more twisted as each day passes.

THE SALE:

Oh my…now it gets interesting.  It is fairly common knowledge among those connected with Dan Frishberg and BizRadio that Salem and Dan were discussing the transfer of the station back to Salem back in February of 2010 even though Siddiqi had a purchase option agreement signed by Frishberg at the end of 2009.  So on March 5th – three days after Siddiqi exercised his purchase option for $3.5 million the station was sold FOR SUBSTANTIALLY LESS THAN THAT from Frishberg back to Salem.  Here’s the purchase agreement.  Salem Purchase Agreement

Terms:

(1) Payment of $800,000 to Frishberg

(2) Forgiveness of $1,260,000 of debt to Salem from their initial sale to Frishberg (in other words he had not yet paid them for his purchase in the first place).  Now why they didn’t foreclose and take it back I still, to this day, don’t know.  And…forgiveness of debt creates a taxable event, so I wonder what position the IRS will take on this or if Dan will ignore this and expose himself to tax fraud?

(3) An agreement of $1,640,000 in air time for Frishberg to keep his program on the air – again it would appear that this is a taxable transaction, but that’s Dan’s issue?

A MATTER OF ETHICS:

Let me get this straight…Dan Frishberg who said BizRadio was a loss leader: (a) sold his RIA or DFFS to Bill Heath (ostensibly to protect the quarterly income it generated) instead of having that income inure to the benefit of the BizRadio shareholders; (b) turned down a $3.5 million offer (again that would have benefited those who trusted Dan by investing in BizRadio); and (c) he structured a deal that clearly benefited him – so he could continue his show and remain the master of illusion.  Now is that in any way ETHICAL?

THE REST OF THE STORY (Thus Far):

Well…it appears that the SEC is taking a different look at this whole agreement between Salem and Frishberg (perhaps as a result of this new suit and the information it uncovers).  It looks like Siddiqi wasn’t just filing a lawsuit for the joy of creating a legal nightmare.  Rather, Siddiqi seems to have a legitimate claim.  Several things seem for sure:

1. The SEC (according to my sources) seem to feel that Frishberg might have fraudulently conveyed the station for purposes of hiding assets and personal gain.  Keep in mind the SEC has no criminal authority, but the use of “fraudulently” might infer that others who do have criminal authority are waiting in the wings for Dan “The Money Man”.
2. The SEC Receiver would appear to be interested in seeing if Siddiqi (or perhaps other parties) are interested in the station for a sum greater than $800,000 which (obviously) would give the SEC a greater pool of funds from which some form of “restitution” shall we say can be made.
3. Salem is a substantial entity and while BizRadio is defunct – Salem’s pockets are deep – and one might assume that if Salem somehow “conspired” as the lawsuit alleges the outcome might be beneficial for those who invested in BizRadio.
4. Likewise, if it is deemed that Salem “tortuously” interfered with Siddiqi’s agreement with Frishberg – again the pocket book might be open either to damages or a settlement – either of which changes the landscape of what seemed somewhat hopeless to date.

WHERE FROM HERE?

Dandy question!  The twist and turns seem, in the matter of BizRadio, to always bring a new challenge and varied and different outcomes.  But, if I were a betting man (and I am not) I would suggest that the following would be logical outcomes:

1. The SEC Receiver will make dog gone sure that he gets his money for the defrauded shareholders of BizRadio…so the station will be sold for more than $800,000 (I think) and the SEC Receiver will get those funds.
2. Salem Communication will clearly want to make this go away.  The publicity (and I understand that several media outlets are considering stories) will do no good for Salem.  In fact, I have had multiple inquiries asking why Salem wanted to get into bed with Frishberg considering all the baggage he brings with him?  Damn good question!
3. Siddiqi will either end up with the station for some amount (likely less than $3.5 million) as it’s value and brand has diminished with all the negative publicity surrounding it or he will end up with a settlement for Frishberg and Salem’s interactions in deference to Siddiqi’s agreement.
4. Frishberg continues to dig his hole deeper and, yet once again, has shown the SEC that he cares little for those who invested in his vision and cares mostly for Dan Frishberg.  The outcome – I predicted and continue to hold to the belief – the SEC will bust Frishberg and strip him of any investment license he might currently have.  That’s likely the most they can do.
5. I believe the law enforcement community (at the Federal level) will indict Dan Frishberg and, perhaps, Al Kaleta for wire fraud, conspiracy and other crimes – especially if there is sufficient notoriety with this case.  Could be wrong here, but it’s hard to believe that the justice department will just let this one slide – especially since Frishberg has stayed on the air and continued the charade.

Stay tuned…there’s plenty more to come including an interview with Rehan Siddiqi.  IF you wish to read the Siddiqi lawsuit a copy is here.  Siddiqi Lawsuit July 2010

As always – YOUR COMMENTS WELCOME!