David A. Selter and Joanne M. Cassidy vs. Daniel Frishberg – Suit for Fraud and Breach of Fiduciary Duty – BizRadio in the news again!

Old news to some – new to others – but to me a pattern of behavior that became the undoing of BizRadio.  The two plaintiffs in this filing are, likely, not the only ones who feel they’ve been defrauded.  Of course, the outcome is up to a judge and/or jury so here I present the facts as I see them in the filing in the District Court of Harris County, Texas.

On March 9, 2010 David A. Selter and Joanne M. Cassidy filed a petition against Daniel Frishberg claiming the following:

  • In 2004, in Harris County, Plaintiffs Selter and Cassidy retained Daniel Frishberg for investment advice and for help in managing their finances.  Plaintiffs entrusted a significant sum of money to Defendant Frishberg and his firm, Frishberg, Jordan, Stewart and Kaleta, to be invested.  Based on Defendant’s advice and counsel, it was agreed that Plaintiffs would only invest in low risk investments.

According to the Civil Case information sheet the sum of money was greater than $100,000

  • In 2006, Defendant Frishberg recommended that Plaintiffs invest $100,000 in a start-up radio station, BizRadio, and become limited partners in the new business.  Defendant represented to Plaintiffs that the investment in BizRadio was low risk in keeping with his original advice.  Defendant controlled the general partner of BizRadio, Business Radio, Inc., and Defendant was actively seeking investors for the highly speculative venture – as Plaintiffs have now come to learn.  Plaintiffs have received absolutely no money as a result of their investment in BizRadio.

While I read the complaint – FOR FOLK WHO READ THIS – NO NEW VENTURE IS LOW RISK!  Sometimes, as a fraud prevention speaker and author I find myself amazed at how gullible folks are when they listen to someone like Frishberg say a new venture is “low risk”.  WAKE UP!

  • Also in 2006, on the recommendation of Defendant Frishberg, Plaintiffs invested $100,000 in W. C. Perry Properties, LP (“Perry”) a real estate investment firm.  At the time of the recommendation, Frishberg did not disclose to Plaintiffs that he was a member of Perry’s investment committee and was an investor in Perry himself.  After Perry went bankrupt in 2008, costing Plaintiffs their entire investment, Defendant Frishberg said he would help make it up to Plaintiffs by giving them some of his shares in Wallace Bajjoli Investment Fund (“Wallace”).  Plaintiffs later learned that Wallace had a 25% interest in BizRadio, the radio station controlled by Defendant.  Wallace is now worthless.  Despite repeated requests by Plaintiffs to refund their investments, Defendant has refused.

REALITY CHECK:  Was it against the law for Frishberg not to disclose his interest in Perry?  Honestly, that’s not for me to answer, but I’m open to an attorney’s response should one be forthcoming.  Secondly, it would appear that all lost in the Perry deal so – not to be flippant – but sometimes you win and sometimes you don’t.  But expecting to get money back on a losing deal is unrealistic.  That said, what is of interest is the purported promise to “make it up to them” by giving a percentage of Wallace.  If that took place is that an admission that something was a miss in the first place?

  • COUNT 1 –  BREACH OF FIDUCIARY DUTY:  Plaintiffs had a fiduciary relationship with the Defendant.  Plaintiffs had placed their confidence in Defendant Frishberg as their investment advisor and expected that he would act in good faith and in their best interest.
  • Defendant breached his fiduciary duty to Plaintiffs by acting in his own self interest and not in the best interest of Plaintiffs.  Defendant had a duty to refrain from self dealing.  The investments described above were not even in keeping with Defendant’s own initial financial advice to Plaintiffs to invest only in low risk investments.  Instead, Defendant advised Plaintiffs to invest a significant percentage of their entire investment portfolio in ventures not because they were sound investments and low risk in nature but because he could benefit personally by such investments.

I’M NOT THE JUDGE – but if I were I’d find Frishberg guilty.  Based on all that has been seen thus far it is hard not to see a pattern of self dealing behavior in Frishberg and Kaleta.  I just finished ( a day or so ago ) a new blog about Kenneth Starr (see blog entry here: https://chuckgallagher.wordpress.com/2010/05/31/kenneth-starr-financial-adviser-charged-in-ponzi-scheme-how-do-the-rich-and-famous-get-caught-in-the-ponzi-scheme-trap/) who was charged with money laundering, investment adviser fraud and wire fraud.   Now, candidly I don’t know what it takes to be convicted of “investment adviser fraud” but there is certainly mounting evidence that, either that (investment adviser fraud) or something similar has happened in the BizRadio debacle.

  • COUNT 2 – FRAUD – Defendant represented to Plaintiffs their investment in BizRadio would be low risk in nature in keeping with the original strategy Defendant outlined for Plaintiffs to only invest in low risk investments.
  • Defendant represention to Plaintiffs was material because they would not have invested in the radio station had they known it was a high risk investment and that there was a strong possibility they would lose all of the funds they invested.

HONESTLY, I think Dan Frishberg was so caught up in the ILLUSION of BizRadio that he had no concept that this would fail.  Hindsight is 20/20, but Dan had blinders on and had no perception that BizRadio would be anything but a sure win.  NOW…that is quite normal for a person so caught up in the ILLUSION part of a scam that they fail to comprehend reality.  That does not make him any less guilty, but rather is an attempt to paint a realistic picture of where his mind might have been.

  • Defendants representations to Plaintiffs were a false statement of fact or opinion, which Defendant knew Plaintiffs would justifiabily rely on because of Defendant’s special knowledge as a professional financial advisor and Defendant’s claimed knowledge of the radio business.
  • Defendant made the false representation recklessly, as a positive assertion, and without knowledge of its truth or, in the alternative, made the false representation knowingly.
  • Defendant had reason to expect Plaintiffs would act in reliance on the false representation because they had been relying on his financial advice and making their investments accordingly.
  • Plaintiffs relied on Defendant’s false representation when investing $100,000 in BizRadio.

HUM…well, I agree that the Plaintiffs were harmed (just like throngs of others) in this sinkhole called BizRadio.  What could have been a profitable enterprise was run in the ground by (what I will label as the) greed of Daniel Frishberg.  Could it have worked?  Yes!  Did it work?  Nope…and Selter and Cassidy are but two in a long line of injured parties.

  • COUNT 3 – FRAUD BY NONDISCLOSURE:  Defendant concealed material facts when he advised Plaintiffs they should invest in Perry.  Defendant never disclosed that he was on Perry’s investment committee and, in that position, was charged with raising money for Perry.
  • Defendant had a duty to disclose the information to Plaintiffs because Defendant had a fiduciary relationship with Plaintiffs as detailed above.
  • The information was material because it presented a conflict of interest on the part of the Defendant.  Defendant knew Plaintiffs were ignorant of the information and did not have an equal opportunity to discover the truth.  Defendant deliberately remained silent and did not disclose the information to Plaintiffs.  By deliberately remaining silent, Defendant intended for Plaintiffs to act without the information.

JUST AN OPINION – but this seems, of all claims, weakest to me.  So Frishberg was an investor.  It would seem that, had he disclosed that, it would have bolstered their reason for investing.  O.K. the investment went bad.  Everyone lost.  It happens.  But, is there a real claim here?

  • COUNT 4 – NEGLIGENT MISREPRESENTATION:  Defendant represented to Plaintiffs that their investment in BizRadio and in Perry would be low risk in nature in keeping with the original strategy Defendant outline for Plaintiffs to only invest in low risk investments.  Defendant made the representation in the course of a transaction in which Defendant had an interest.  Defendant made the representation for the guidance of Plaintiffs.  Defendant’s representation was a misstatement of fact or opinion.  Defendant did not use reasonable care in communicating the information.

NEGLIGENT OR NOT – Again, opinion, yes when it comes to the BizRadio investment, but Perry – well that is a bit “greyer” in my book.


The Defendants (why plural as Daniel Frishberg was the only Defendant) denies each and every allegation made by Plaintiff.


Well…I guess a response like that is expected.  But, it would seem that either the Plaintiffs are lying or they did in fact invest $200,000+ with Daniel Frishberg in BizRadio and Perry.  If that is true, then how can Frishberg deny that?  Was there a personal motivation to have folks invest in BizRadio?  Damn right there was – it would be hard for any jury to deny that with the evidence and pattern of behavior that took place over the second half of this past decade.  Most important though, from my perspective, is – is Daniel Frishberg guilty of “investment adviser fraud”?

If you were an investor in Perry or BizRadio do you have a similar story to tell.  Feel free to SHARE YOUR COMMENTS!

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