Where did the money go? And, what attracted investors to invest?
According to the SEC, between December 2007 and August of 2009, Albert Kaleta and his investment firm, Kaleta Capital Management, sold $10 million in promissory notes, telling investors the money would be loaned to small businesses at 12 percent to 14 percent interest. Instead, the SEC said, it went to the money-losing radio network and an affilated investment advisory firm, Daniel Frishberg Financial Services, also known as DFFS Capital Management.
NOTE: Whenever you are promised an investment return that is better than most folks can normally get…you have a good chance of being scammed! This is the first rule of avoiding a Ponzi scheme and while this may not technically qualify as a Ponzi scheme…if it were allowed to continue, it would likely have morphed into one.
On Nov. 13, 2009, the Commission sued Albert Fase Kaleta and his company, Kaleta Capital Management, Inc. (KCM), in the United States District Court in Houston, Texas. The Commission alleges that Kaleta and KCM defrauded investors in the offer and sale of KCM-issued promissory notes in an offering that raised $10 million from approximately 50 investors. 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.
Kaleta and Dan Frishberg, who appears on BizRadio as “The Money Man,” were among the network’s founders. Kaleta also was part owner and chief compliance officer for DFFS. There is little doubt that Kaleta and/or Frishberg didn’t know what they were doing.
NOTE: When money that is “supposed” to go into ‘small businesses’ and instead is diverted…that would be a warning sign that a fraud is beginning. Now, realistically, the victims wouldn’t know as most fund diversions are kept from the public eye. In this case, it would seem that luck (if you can call it that) intervened through the worst recession we’ve experienced in years. More than likely the purported investment scam would have continued if the economy was robust.
The Commission alleges that Kaleta lied to investors about the intended uses of offering proceeds. Among other things, the Commission contends that Kaleta took approximately $1.5 million of the offering proceeds to pay personal expenses.
NOTE: Like most of the Ponzi schemes I’ve reported on…a common thread is the use of “investment funds” for personal expenses. Hint…this doesn’t look or smell like it was legitimate. Again, timing is everything. Madoff was fortunate in that his fraud spanned many years but, like most, imploded when the economy took a nosedive.
Without admitting or denying the complaint’s allegations, Kaleta and KCM have consented to permanent injunctions against future violations of the antifraud provisions, as well as an order appointing a receiver. The Court will determine the amount of disgorgement and civil penalty that will be assessed against Kaleta and KCM.
Named as “equitable relief defendants,” BizRadio and Daniel Frishberg Financial Services, also known as DFFS Capital Management share a responsibility to repay the money.
According to the Houston Chronicle – “In order to reverse what injustice has taken place here, so that the victims of this fraud can be made whole, what we’re seeking is that the relief defendants relinquish their possession of assets to which they have no rightful claim,” said Timothy McCole,the SEC attorney handling the case.
Frishberg said he and Kaleta are no longer partners. His firm and BizRadio will repay the debt under the terms of the promissory notes, he said.
“We’re eager to have them hurry up and appoint a receiver and get it going,” he said.
In a time when trust in financial professionals is at a low, I wonder what position Daniel Frishberg is taking here in early 2010 when it comes to the repayment of investors?
Are we finding transparency when it comes to the operation of BizRadio?
It seems that BizRadio often is jumping from station to station – especially in the Dallas, TX marketplace. Is that a result of financial stress on the station since the flow of (what would appear to be) misappropriated investor funds has dried up?
COMMENTS ARE WELCOME!
The following is on the BizRadio web site:
We are off the air for the first time since 2005, but at our headquarters, we are as busy as we have ever been. We are using this time to make some major improvements in our operations that will benefit our audience and our investors.
We will be back on the air very soon, and we will make an important announcement about the future of BizRadio in the next week.
For the latest update, please continue to check back here at BizRadio.com