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.
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:
Regional Director, SEC’s Fort Worth Regional Office
Stephen J. Korotash
Associate Regional Director, SEC’s Fort Worth Regional Office
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).
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.
SHARE YOUR VOICE –
WHAT DO YOU THINK ABOUT THIS SEC OUTCOME?