Inside radio reports today that BizRadio has sold KETK (1110 AM) back to Salem in a drama that has been waged on multiple fronts. What might seem like a straight forward transaction is anything but straightforward. In fact, it would seem that now the drama just begins. Here’s the release found on INSIDE RADIO:
Salem will pay $2.06 million for the station, including $800,000 in cash and forgiveness of $1.26 million that remains on a promissory note signed by BizRadio two years ago when it bought KTEK for $1.5 million. Salem also agrees to give it a $1.64 million credit to be used to buy airtime from Salem stations. BizRadio founder Dan Frishberg didn’t respond to a request for comment.
In February, BizRadio went to court to block the proposed $3.5 million lease-to-buy sale of KTEK to Asia Vision owner Rehan Siddiqi that apparently had struck a deal with a BizRadio consultant who wasn’t authorized to sell the station. The “BizRadio” format is still heard on KTMR, San Antonio (1130) under a lease agreement with Siga Broadcasting.
So let’s explore the questions that this “expected” sale creates:
1. 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. QUESTION: Since BizRadio and DFFS Capital Management, Inc. were sued for equitable relief, and since a Receiver has been appointed to collect funds for scammed investors, does the “Receiver” have the ability and/or authority to attach the $800,000 in cash reported as part of the sale?
2. As reported yesterday in my blog (see here), certain unnamed investors feel that they were also scammed when they invested in the Laffer Frishberg Wallace Economic Opportunity Fund. While the fund reportedly required that no more than 20% of the capital be invested in any business, the investor reported that over 60% of the capital had been invested in the money losing operation of BizRadio. QUESTION: If the “Receiver” (from question #1 above), has the authority to attach the cash portion of this sale as a result of his work on behalf of the scammed Kaleta investors, does that leave the scammed Laffer Frishberg Wallace Economic Opportunity Fund investors in the COLD? I’m afraid, based on a conversation I had with a knowledgable party, the answer is YES! SCREWED! Sorry!!!
3. An $18 million lawsuit was filed against BizRadio and Daniel Frishberg related to the failed sale of 1110 AM to Rehan Siddiqi. Siddiqi offered to lease the station with a purchase option for $3.5 million. All seemed well as Frishberg et al took Siddiqi’s $180,000 advance payment and then kicked him off the air when they failed to provide the necessary financing – letter of credit – to their new station 1180 AM. OOPS…Frishberg finds that he’d be off the air unless Siddiqi is kicked out. Bye…Rehan says Frishberg and hence the lawsuit. QUESTION A: If Siddiqi was willing to purchase the station for $3.5 million – what would motivate Frishberg to sell it to Salem for substantially less? QUESTION B: Am I missing something, but Frishberg said that he had purchased the station for over $7 million, yet the news release states that he purchased it for $1.5 million? Sorry, but I’m lost on the math here and I have a Masters in Accounting… QUESTION C: Since there is an active lawsuit against BizRadio and Daniel Frishberg, why would Salem enter into the transaction now without concerning themselves with the outcome of the pending lawsuit? Seems as if they are thumbing their nose at Siddiqi and his attorney.
4. Salem agrees to give $1.64 million credit so that Frishberg can stay on the air…as what I don’t know – BizRadio, Business 1110, Business 1110AM? Confusing I know… QUESTION: Is this truly a credit that is expected to be repaid? Is Salem extending air time credit that they feel Frishberg or BizRadio or whomever will actually write a check to pay in the future? Yes…I know that is the same question asked in a different way…but – How could Frishberg pay Salem $1.64 million if they can’t pay their help, their power bill and it would appear that their source of revenue (investor funds) has dried up? Who would honestly invest their funds with Frishberg, Wallace, Laffer, etc. with the SEC breathing down their back (at least that’s my guess)?
5. Last, at least for this blog entry – the SEC stated that Kaleta defrauded investors and while Kaleta did not admit guilt (smart move on his part – although that does not preclude other federal agencies from looking into criminal charges), he is no longer in the investment business. Frishberg seemed to be dragged into the responsibility for repayment. QUESTION: With all that is and has surfaced, do you suppose that Frishberg is the subject of an investigation? Is so, wonder if the outcome will be similar to that of Kaleta? And, if so, what impact does that have on Daniel Frishberg’s continued broadcast on Salem’s newly acquired station?
My…my so many questions so few answers!
YOUR COMMENTS ARE WELCOME!