Dan Frishberg “The Money Man” Charged by the SEC with Fraudulent Conduct! BizRadio’s Scam Artist Exposed…

To be honest, as I pen this latest blog entry, there is no joy.  Yet, it is not a surprise either.  Dan Frishberg, despite his puffery and position – claiming to the “the Money Man” has finally been charged by the SEC for his role in defrauding numerous investors out of millions.  Today many now know that what has been claimed about Dan is true.  He has not acted in the best interest of his clients and as a result – one of the outcomes is that Dan “The Money Man” Frishberg is barred from association with any investment adviser or certain other registered entities.

The SEC News Release reads as follows in its entirety:

Washington, D.C., March 25, 2011 — The Securities and Exchange Commission today charged Houston-area businessman Daniel Frishberg with fraudulent conduct in connection with promissory note offerings made to clients of his investment advisory firm.

The SEC alleges that Frishberg’s firm Daniel Frishberg Financial Services (DFFS) advised clients to invest in notes issued by Business Radio Networks (BizRadio), a media company founded by Frishberg where he hosts his own show under the nickname “The MoneyMan.” Frishberg failed to tell his clients about BizRadio’s poor financial condition or his significant conflicts of interest with the note offerings that helped fund his salary at BizRadio.

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Additional Materials

• SEC Complaint
• Litigation Release No. 21901

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Frishberg agreed to settle the SEC’s charges by paying a $65,000 penalty that will be distributed to harmed investors. He will be barred from future association with any investment adviser.

“Contrary to his obligations as an investment adviser, Frishberg approved risky investment recommendations to his clients without ensuring that the risks and conflicts were properly disclosed,” said Rose Romero, Director of the SEC’s Fort Worth Regional Office. “Frishberg personally benefitted from the questionable investments that were recommended to his clients.”

According to the SEC’s complaint filed in federal district court in Houston, at least $11 million in promissory notes were issued by BizRadio and Kaleta Capital Management (KCM), which is owned by Frishberg’s associate Albert Fase Kaleta. Frishberg and Kaleta jointly controlled BizRadio.

The SEC charged Kaleta and his firm with fraud in 2009, and the court appointed a receiver to marshal the assets of KCM and relief defendants BizRadio and DFFS.

The SEC alleges that Frishberg authorized Kaleta to recommend the notes to DFFS clients, and clients were not provided with critical disclosures. Investors were not told of BizRadio’s poor financial condition and the likely inability of KCM and BizRadio to repay the notes. Nor were investors informed about Frishberg’s significant conflicts of interest in the note offerings because the proceeds funded his salary as a BizRadio talk show host.

The SEC alleges that Frishberg chose Kaleta to recommend the BizRadio notes even though he was aware of complaints about Kaleta’s lack of truthfulness in sales presentations regarding other investments.

The SEC’s complaint alleges that Frishberg violated Section 206(2) of the Investment Advisers Act of 1940 and aided and abetted violations of Sections 206(1) and 206(2) of the Advisers Act.

Without admitting or denying the SEC’s allegations, Frishberg consented to the entry of a permanent injunction against these violations and to pay a $65,000 penalty. Frishberg consented to the establishment of a fair fund for the distribution of his penalty to harmed investors, and agreed to be barred from association with any investment adviser or certain other registered entities.

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For more information about this enforcement action, contact:

Rose Romero
Regional Director, SEC’s Fort Worth Regional Office
(817) 978-3821

Stephen J. Korotash
Associate Regional Director, SEC’s Fort Worth Regional Office
(817) 978-6490

WHAT DOES THIS MEAN?

Well for starters…those who lost a whole bunch of money and thought they might get it back…well think again.  Dan’s $65,000 penalty is a small price to pay for the $11 million fraud.  To be clear, I have not had any inside information, but I suspect that Dan’s out of money otherwise I suspect the SEC would have exacted a larger fine as part of their role is to protect the public.  Oh well…

CRIMINAL INDICTMENT ON THE HORIZON?

Rose Romero, Director of the SEC’s Fort Worth Regional Office stated, “Frishberg personally benefited from the questionable investments that were recommended to his clients.”  So does this mean that he could be the target of a criminal indictment?

So we are all clear, the SEC has NO CRIMINAL enforcement authority – only civil.  Therefore the actions of the SEC are likely the best they could get under the circumstances.  Effectively they squeezed blood out of the turnip and barred Dan from any role as an investment advisor.  Now regarding criminal…well, as I’m told the statue of limitations is longer for any criminal issues, so I suspect that the US Attorney, FBI or others may still be looking into this case and (my opinion here) it might hinge on what Dan does next.  For example, if Dan were to “man up” and quit his radio show where he is still huffing and puffing about his wisdom…he might avoid more consequences.  On the other hand…should he stay on the radio and continue his advice (although who would want to listen)…then there might be more interest in criminal charges.

My guess is that if there are enough folks who have been harmed by the talented Mr. Frishberg who complain to the US Attorney or FBI, perhaps law enforcement will find the wisdom and logic to continue to investigate Dan Frishberg and extract consequences more fitting with his crime (that he did not admit).

PUBLICITY

One thing that Dan Frishberg liked is publicity…in fact, it seemed he craved it.  Well, he’s getting what he liked as he’s being reported on in the Wall Street Journal and other major news outlets.  Wonder, and I’ve got to ask, if Maria Bartiromo is going to interview Dan “The Money Man” again…or if she has finally figured out that is was all smoke and mirrors?

WANT YOUR VOICE HEARD?

If you feel that your voice needs to be heard here are two US Attorney’s that could be contacted – one in the Southern District of Texas (Houston Area) and one in the Northern (Dallas).  I suspect the Houston US Attorney is the one who would have the most interest, but since the SEC in Fort Worth brought the charges…I’m providing both.

José Angel Moreno, US Attorney Houston
P.O. Box 61129
Houston, TX 77208
(713)567-9000

James T. Jacks, US Attorney Dallas
1100 Commerce Street, Third Floor
Dallas, TX 75242-1699
(214)659-8600

SHARE YOUR VOICE -

WHAT DO YOU THINK ABOUT THIS SEC OUTCOME?

Major Ponzi Scheme Indictment handed down for Tim Durham of Fair Finance and National Lampoon fame. Choices and Consequences…

According to an indictment handed down on March 15, 2011 – Tim Durham, James F. Cochran and Rick D. Snow – all have been charged in what is reported as the largest fraud case in the state of Indiana.  The 23 page Grand Jury indictment alleges that Durham, business partner James F. Cochran and former Fair Chief Financial Officer Rick D. Snow devised and executed a scheme to defraud investors in the Akron, Ohio-based  Fair Finance.  The actual indictment can be seen here:  durham_indictment

The alleged fraud is over $200,000,000 and that, if proven, equals a long time in prison.

All three men are facing felony charges of 10 counts of wire fraud, one count of securities fraud and one count of conspiracy to commit wire fraud and securities fraud.  Each faces a maximum of five years in prison for the conspiracy count, 20 years in prison for each wire fraud count and 20 years in prison for the securities fraud count. In addition, each could be fined $250,000 for each count upon which they are convicted.

Separate civil securities charges were filed by the SEC against the men in federal court.

The indictment alleges that between February 2005 and November 2009, Durham and Cochran directed Fair to loan money to themselves and other insiders “which caused a steady and substantial deterioration in Fair’s financial condition.” The three men then allegedly deceived and defrauded investors through misleading statements about the company’s finances.

Durham and Cochran also “used a significant portion of the proceeds of these loans to maintain their lifestyles and to pay for personal expenses,” which, according to the indictment include:  $250,000 in Fair money in 2007  wired to remodel his garage, another $150,000 the following year to use at a casino and Cochran wired $50,000, also in 2008, to pay country club fees.  This is the tip of the iceberg according to the formal indictment.

FROM A HIGH TO A LOW…

CNBC did a report on Tim Durham sometime back.  Take a look

How high one can fall when life is based on an illusion.  I know…I’ve been there.  For now, Tim and cohorts face an uphill battle.  Rarely does the US Attorney unseal an indictment unless the US Attorney feels that a win is inevitable.  Advice to Tim – cop a plea…otherwise a conviction will result in a far greater sentence than he’d get today.  Further, although I doubt he’d receive it…I think the three could gain some benefit in reading my new book – SECOND CHANCES.  Perhaps one day – just not this day – they will find that they could use their intellect in a well placed endeavor that will help instead of hurt people.

WHAT ARE YOUR THOUGHTS?

When Ethics and Achievement Based Evaluations aren’t in Alignment or Why follow Ethics when Cheating Pays Better?

Last week I was speaking at a conference and during a lunch break on of the attendees said, “Wow, business must be great for you with all this interest in ethics and all.”  I must admit I was humored by her comment, because on the surface it would appear that firms of all shapes and sizes would be interested in ethics and ethical behavior.  Reality is, however, many give lip service to the idea, but their expectations from employees pushes the “need” button and starts the potential for a pattern of unethical behavior.

The following represent excerpts from an article in USA Today regarding cheating on standardized tests.  Mind you, in not all cases were the students the ones cheating.  See the following excerpts:

In 2008, teacher assistant Johanna Munoz helped her Orlando-area fourth-graders on the state achievement test.

According to investigative documents obtained by USA TODAY, Munoz erased wrong answers and whispered corrections while she was helping non-native English speakers with difficult words. She snapped her fingers in a code students understood to mean they should correct an answer.

While the teacher was out of the room, Munoz warned the students “not to tell anyone, not even your parents, what I did.” If they told, she warned, they “would fail fourth grade.”

This is high-stakes testing. The standardized tests required by the federal No Child Left Behind law have become one of the most important — and controversial — ways to measure a student’s progress, a teacher’s competence, a school’s success and a state’s commitment to education. That can be a heavy load for an assessment built on paper booklets and bubble sheets.

At Groveland Elementary in Groveland, Fla., where Munoz taught, at least one child told a parent about getting answers to the test, and the school began to investigate. Munoz pulled students out of class and again warned them not to tell. But one by one, the students confessed.

“You could almost see the relief in their face(s) as they let go of this burden,” says Groveland Principal Dale Delpit. One fourth-grader who initially defended his beloved teacher later blurted, “I lied!” in front of his classmates, tears streaming down his face, records show.

Munoz resigned after the school district concluded that she cheated and recommended that the school board fire her. She denies giving her students any answers and says she was never alone with them in the classroom.

“I have no clue why the kids said I helped them. I think one said it, then they all did,” says Munoz, 28, who was proctoring the test for the first time. She is now a day care worker.

NO CHILD LEFT BEHIND…perhaps a law enacted with the best of intentions, but a law that might have at its core the seed for the application of unethical behavior for both students and teachers.  And, it appears that, from experience, when outcomes aren’t matched with ethical choices – when the actions aren’t in alignment with integrity – people are naturally set up for a potential ethical disaster.

SO IS CHEATING AND UNETHICAL BEHAVIOR WIDESPREAD?

The USA Today report goes on to say in part:

Teachers cheat sometimes and so do principals, according to academic studies. Why it happens and how often — and the seriousness of efforts to stop it — are open to debate. Punishment varies from state to state, too. In an investigation of standardized testing in six states and the District of Columbia, USA TODAY found that an infraction such as casually coaching one student can carry nearly the same punishment as deliberately changing answers for a whole class.

In an Arizona State University survey published last year, more than 50% of teachers and other educators admitted to some kind of cheating on Arizona’s state tests. The authors of the online survey of more than 3,000 educators defined cheating broadly — from accidentally leaving multiplication tables on classroom walls to changing answers.

USA TODAY examined hundreds of “misadministration” and “irregularity” reports from state Departments of Education in Florida, California and Arizona. Such reports, which cover everything from missing test booklets to a teacher’s whispering answers to pupils, do not come to conclusions about whether there was cheating. That determination is usually left up to the school district or the state after an investigation.

Florida has one of the most rigorous reporting systems in the country. Yet in 2009, the state had only 112 reports of “compromised tests,” and just 12 of those reports indicated an allegation of intentional cheating by educators. In a state with 341,000 teachers and staff, that’s a minuscule fraction.

THE THREE COMPONENTS OF UNETHICAL BEHAVIOR…

Whether it’s fraud (unethical behavior at it’s most serious) or behavior that is perhaps less severe, the three components are typically always there.  NEED, OPPORTUNITY and RATIONALIZATION.  If there is a need (good student results for example) an opportunity (teacher proctored tests) and rationalization (well, this is ridiculous we shouldn’t have to deal with these tests anyway – or – I’m a good teacher and I don’t think these tests should determine my pay increase or fate) – then there is a reasonable chance that a person who is by nature ethical might take the unethical road too often traveled…and every choice has a consequence.

Here’s another excerpt from the USA Today story:

Robert Hamann, a veteran social studies teacher, had been volunteering to help students at Scarlet Oaks Career Center in the Cincinnati area. So he already knew the senior taking the graduation-mandatory writing test.

Confused by the test instructions, the student asked for help. He told her to use the strategies they had discussed, and she began to string together a written answer. With each halting sentence, she looked to him for approval and he told her to write it down.

“In a moment of trying to help this kid, I kind of lost myself,” Hamann says of the 2005 incident. “This was what we had been doing in review. … This kid is in 12th grade trying to pass a ninth-grade test. This is her last shot. So, you’re explaining, explaining, explaining, and I think I gave her too much information.”

Hamann reported himself immediately. He got no breaks: His teaching license was suspended for three months; he now works as an administrator in another Cincinnati-area school.

“I didn’t think I was, at the time, violating any rules, but now … years later, it’s obvious I was,” he says.

Investigators acknowledge that without a confession like Hamann’s, some cheating is impossible to detect, because it often involves only a brief conversation between teacher and student.

It’s “a fairly simple operation. All one has to do is lean close and whisper,” says Christine DiDonna, coordinator and school counselor at Groveland Elementary in Florida. She has helped conduct several investigations, including the one involving Munoz, the former teacher.

To avoid expressly giving answers, some teachers have resorted to codes. At a California elementary school, the phrase “toilet paper” meant a student should subtract or “wipe away” a number in a math problem. In other states, a teacher would cross her arms if a student marked the wrong answer.

Kimberly Richter, a fifth-grade teacher at Schwab Elementary in Cincinnati, admitted to pointing at incorrect answers on the math test in 2008, but she said it was only to get the kids back on track. Many had quit paying attention 30 minutes into the two-hour-plus test. The school already was slated for closure, so better scores weren’t going to help.

“I knew it was wrong, but I didn’t think it would matter,” says Richter, who insists she never gave out correct answers. “I didn’t think it was going to blow up in my face like it did.”

Richter’s 25 students had to take a makeup test and her license was suspended for six months. She no longer teaches in Cincinnati Public Schools.

Upton reported from Florida for USA TODAY; Ryman from Phoenix for The Arizona Republic; Amos from Ohio for The Cincinnati Enquirer.

Contributing: Jack Gillum of USA TODAY in Washington, D.C.

WHAT MESSAGE DOES IT SEND?

Ethics…well that should be a high priority, yet, by our actions – results weigh higher than ethics when it comes to doing the right thing – at least enough of the time to  warrant more questions.  In a New York Times article the following examples were given about cheating and unethical behavior by adults in school settings.

¶At a charter school in Springfield, Mass., the principal told teachers to look over students’ shoulders and point out wrong answers as they took the 2009 state tests, according to a state investigation. The state revoked the charter for the school, Robert M. Hughes Academy, in May.

¶In Norfolk, Va., an independent panel detailed in March how a principal — whose job evaluations had faulted the poor test results of special education students — pressured teachers to use an overhead projector to show those students answers for state reading assessments, according to The Virginian-Pilot, citing a leaked copy of the report.

¶In Georgia, the state school board ordered investigations of 191 schools in February after an analysis of 2009 reading and math tests suggested that educators had erased students’ answers and penciled in correct responses. Computer scanners detected the erasures, and classrooms in which wrong-to-right erasures were far outside the statistical norm were flagged as suspicious.

The Georgia scandal is the most far-reaching in the country. It has already led to the referral of 11 teachers and administrators to a state agency with the power to revoke their licenses. More disciplinary referrals, including from a dozen Atlanta schools, are expected.

John Fremer, a specialist in data forensics who was hired by an independent panel to dig deeper into the Atlanta schools, and who investigated earlier scandals in Texas and elsewhere, said educator cheating was rising. “Every time you increase the stakes associated with any testing program, you get more cheating,” he said.

Perhaps it’s time we disconnect the three variables that open the door for cheating or unethical behavior.  If we can disconnect – need from opportunity from rationalization – then the outcome can’t by nature be unethical behavior or cheating.

WHAT ARE YOUR THOUGHTS?

Choices and Consequeces: Solona Islam quits job in battle to make ends meet – Pleads guilty to Prostitution.

Sometimes all is not as it seems.  Described as a teacher – prostitute, Solona Islam has found herself in a very public debate over the choices she made in order to meet her desperate need for money.  Every choice has a consequence and featured nationally in various media outlets is not what Ms. Islam expected – I’m quite sure.

According to news reports:

A high school teacher in Little Rock has resigned after school officials learned she pleaded guilty in November to a prostitution charge.

McClellan High School algebra teacher Solona Islam, who had been put on paid administrative leave, told Fox16.com she resigned because she didn’t want to have the school district involved in her personal matters.

The 27-year-old was arrested Oct. 29 on misdemeanor charges of prostitution and operating a business without a license but Police Sgt. Cassandra Davis said the school district was not notified because the charge was not a felony.

Islam said she was desperate for money and originally thought she was just going to work for a dating service. She pleaded guilty on Nov. 5 and was given a suspended 90-day sentence and a $640 fine.

School officials told the Arkansas Democrat-Gazette that they finally learned of the plea from a reporter and suspended Islam on Wednesday.

Islam, who was in the fifth year of her teacher career, told Fox16.com that she hopes this attention doesn’t affect her ability to find another job.

Choices and consequences!  As I read this story I began to recall those choices I made that, like Solona, began a road to recovery.  In my book – SECOND CHANCES – I stated:

I had rationalized my actions and certainly could correct any choice I made. I wasn’t a bad person, just a smart one, I thought. I knew how to beat the system. Feeling so invincible, I was soaring high; I believed that nothing could touch me. Little did I know.

I can’t personally speak for Solona Islam, but I can imagine that she lived this dual self never really expecting to get caught – thinking that she could walk away at any time.  But, often we find that lessons come at us when we least expect them and in ways we never consider.

While on Earth, we have a great opportunity for growth. Unfortunately, many of the lessons contained in experience are hidden from our conscious view within our subconscious mind. Because of the veil placed over humanity, most of us function with only a dim awareness of our purpose or mission. Life is our teacher, through which we receive many experiences. At some point, as we grow, the lessonsshow themselves. Then we can reflect on our experience and reap the consequences of our lessons.

I have come to understand that a situation that is less than joyful is there to teach us important lessons. We can learn from the lessons presented and gain insight and growth. That’s our choice. To progress and learn, however, it is helpful to express our conscious intent to do so. The reality is that unless we recognize the lesson, events may continue unfolding until the lessons intensify. We must remain open to the teachings and gifts we are receiving in order to grow and evolve.

As we grow in our spiritual journey, we can progress to the point that we step out of our bodies and become conscious observers. At that point, we begin to sense that we’re more in control of the situation than we imagined. By looking from the outside in, we can make a choice to respond in a way that serves our highest good. Self-awareness, in part, means that the veil has been partially lifted as we progress through our life lesson.

Perhaps before we quickly judge the humanness of Islam’s choices, we can for a moment look at the divinity of her life and know that deep beneath the choices shown are wonderful opportunities to learn and grow.

YOUR COMMENTS ARE WELCOME