Fraud – Donald Lapre – the Greatest Vitamin in the World – really, who would fall for that?

August 2, 2011

NEWS RELEASE

Indicted infomercial pitchman Donald Lapre, of Phoenix, who previously failed to appear at his arraignment on 41 counts for Conspiracy, Mail Fraud, Wire Fraud, Promotional Money Laundering and Transactional Money Laundering, will remain in custody pending trial. At a hearing in Phoenix today, U.S. Magistrate Judge Lawrence O. Anderson ordered that Lapre be detained as a flight risk.

In the course of the hearing, the prosecution noted that Lapre had received notice of his scheduled arraignment and failed to appear, and that while he had recently been residing in Maricopa County, the investigating agencies were unable to locate any record of his current address through checks related to a residence, motor vehicle, driver’s license, telephone, or private post office box. The indictment alleges that the 47-year-old Lapre oversaw and promoted a nationwide scheme to sell essentially worthless Internet-based businesses to over 220,000 victims through his company “The Greatest Vitamin in the World.”

According to the indictment, from April 2003 through October 2007, Lapre allegedly conspired with others to defraud thousands of victims all across the country by encouraging them to invest in an Internet-based business. The “business” primarily consisted of selling the Greatest Vitamin in the World (GVW) over the Internet and the opportunity to sell the opportunity to do the same thing to others. At the height of the scheme, Lapre had enlisted approximately 226,794 people to sell a limited number of products via individual websites. Along with selling tens of thousands of Internet-based businesses which were essentially worthless, Lapre fraudulently provided his investor/victims, known as “Independent Advertisers” (IAs), with false vitamin sales records. These records encouraged IAs to purchase additional advertising and services in the hope of obtaining commissions including $1,000 checks. Lapre also fraudulently sold bulk Internet traffic to IAs while claiming that it was targeted to individuals who were seeking to either buy vitamins or invest in similar businesses. GVW sales representatives regularly signed up victims as IAs even if they did not own a computer. During the course of the scheme, at least 220,000 victim/IAs were defrauded of approximately $51.8 million. During this same period, approximately $6.3 million in commissions were paid to approximately 5,000 victim/IAs.

Trial is currently set for October 4, 2011, before U.S. District Court Judge Susan R. Bolton in Phoenix. Convictions in this case for Conspiracy carry a maximum penalty of five years, a $250,000 fine or both; Mail Fraud and Wire Fraud carry a maximum penalty of 25 years, a $250,000 fine or both; Promotional Money Laundering carry a maximum penalty of 20 years, a $500,000 fine or both; and Transactional Money Laundering carry a maximum penalty of 10 years, a $250,000 fine or both. In determining an actual sentence, Judge Bolton will consult the U.S. Sentencing Guidelines, which provide appropriate sentencing ranges. The judge, however, is not bound by those guidelines in determining a sentence.

An indictment is simply the method by which a person is charged with criminal activity and raises no inference of guilt. An individual is presumed innocent until competent evidence is presented to a jury that establishes guilt beyond a reasonable doubt.

Potential victims of this scheme may submit a victim statement via the following website operated by the Postal Inspection Service: www.postalinspectorsurvey.com/vitamins. Potential victims of this scheme may also keep track the progress of the case by visiting the following link located on the U.S. Attorney for the District of Arizona’s website: http://www.justice.gov/usao/az/us_v_donald_lapre_gvw.html

HERE’S a cool article related to Donald Lapre:  http://www.quackwatch.org/11Ind/lapre.html

YOUR COMMENTS ARE WELCOME!


Jerry Holmes and R. Scott Pace face the Consequences of their Unethical and Illegal Actions. Prison, Probation and Restitution…

July 12, 2011

Every choice has a consequence.  What started out as a legitimate business turned into an opportunity to meet a need that coupled with individual rationalization became the fertilizer for fraud.  As a business ethics and fraud prevention speaker, I see this frequently…intelligent and well meaning businessmen (or women) meeting a perceived need illegally and likely rationalizing that “they’ll pay it back” thus justifying their soon to be discovered illegal actions and then being forced to face the very real consequences of them.

Here’s the US Attorney’s news release…

DEPARTMENT OF JUSTICE

United States Attorney’s Office
Western District of North Carolina

FOR IMMEDIATE RELEASE
WEDNESDAY, JUNE 8, 2011

CONTACT: Lia Bantavani
704.338.3140
FAX NUMBER: 704.227.0264

OWNERS OF SETTLEMENT COMPANY SENTENCED TO 33 MONTHS IN PRISON FOR EMBEZZLEMENT AND TAX EVASION CHARLOTTE, N.C. – The United States Attorney’s Office for the Western District of North Carolina announced that the owners of the Settlement Source, LLC, were each sentenced to prison terms for their role in embezzling money from the escrow account at the Settlement Source and for tax evasion.

U.S. District Judge Max O. Cogburn, Jr. sentenced Settlement Source owner and former chief executive, Jerry Holmes, 64, of Matthews, N.C., to serve 33 months in federal prison, to be followed by two years of supervised release. The defendant was also ordered to pay restitution in the amount of $1.9 million. Judge Cogburn also sentenced Settlement Source owner R. Scott Pace, 38, of Charlotte, to 33 months in federal prison, two years of supervised release, and ordered to pay restitution in the amount of $1.9 million.

The United States Attorney’s Office is joined in making today’s announcement by Chris Briese, Special Agent in Charge of the Federal Bureau of Investigation (FBI), Charlotte Division, and Jeannine A. Hammett, Special Agent in Charge of the Internal Revenue Service (IRS) – Criminal Investigation Division (CID). Holmes and Pace pled guilty to the charges in a criminal bill of information filed on May 19, 2010. According to the bill of information, in or about November 2005 Holmes and Pace discovered that they could embezzle client funds from the escrow account – at least initially – without any customer discovering the embezzlement and without any noticeable effect on operations. Over time, Holmes and Pace, assisted by another defendant not yet sentenced, embezzled substantial amounts of money for, among other things, real estate investments, a box suite for Carolina Panthers football games, personal loans, and a loan for Holmes’ daughter and son-in-law to purchase a house. When the scheme collapsed in or about July 2008, it caused losses to clients and insurers of approximately $2.4 million.

In pronouncing the sentences, Judge Cogburn stressed that the sentences were only as low as they were because the defendants self-reported the fraud, believing it was unknown to the government. Holmes and Pace will be allowed to self report to begin service of their prison terms once the Federal Bureau of Prisons has designated the facilities at which they will serve their respective sentences. All federal prison sentences are served without the possibility of parole.

The investigation was led by the FBI and IRS-CID. The prosecution for the government was handled by Assistant U.S. Attorney Kurt W. Meyers of the U.S. Attorney’s Office in Charlotte.

If you have information that might be helpful in this case in identifying the motives behind the actions taken by Holmes or Pace…please share.

YOUR COMMENTS ARE WELCOME!


John Wiley Price – Innocent till proven Guilty or a Crook whose been nabbed by the FBI? Is there a Sprint to Judgment by the Media?

July 4, 2011

So far no one has been accused of any crimes!  You couldn’t tell it however from the media hype which most certainly will have racial overtones in this Dallas story.  So…some may ask why deal with it here – is this an ethics issue?  Good question and yes, but not perhaps for the reasons you might think.  The question I have relate to the ethics of sensationalism when no one has been accused of anything…at least not yet.

Not one to shy away from controversy…John Wiley Price will take on a fight and tell it like he sees it.  Example…in the following video Price says, “All of you are white; go to hell.”  Guess there’s a bit of a discriminatory feeling on his part.

But Mr. Price’s ethnic inclinations and hateful words are not what is driving the media today.  According to a report by Brett Shipp, “…at least six federal agents made their way inside the Millenium 2000 Gallery, where they stayed most of the day searching for records, taking photographs and looking for evidence of a crime.”  Shipp’s entire report can be seen here.

His report goes on to say:

Over the past four years, Price has used his campaign funds to purchase $46,000 in gifts and services from Manning.

Among the gifts was a $2,150 Kwanzaa gift for indicted former Constable Jaime Cortes, a $1,200 gift for mega-church pastor Ricky Rush and $2,525 in gifts for an unnamed constituents.

Among the services were campaign vehicle repairs, one of which was for $300 and another for $700 and $1,800 for vehicle wrap art.

The FBI won’t say exactly what they are looking for in Manning’s store and there is no indication that such gifts were improper.

WHAT’S ALL THE FUSS ABOUT?

With all that said and no charges filed…what’s all the fuss about?  I mean from my vantage point it seems much ado about nothing.  But, the buzz of FBI officers looking is enough to create attention…just ask Patrick Williams the author of another story on Mr. Price.

Entitled: John Wiley Price: Give the Devil His Due – Williams states:

Expect a lot of quote-trolling, thumbsucking and rumor-mongering in the weeks ahead, as hungry reporters scramble for crumbs of hard information. Nature abhors vacuums, and the 24-hour blogosphere hates them too. And since FBI agents aren’t the chattiest bunch—the local field office has a Tumblr called “We’re Not Saying Shit”—it’s going to be speculation city for a while. Did Price’s collection of questionably attained vintage cars stir the feds? Was it KwanzaaFest, Price’s charity event? What about the inland port, that transport hub Price attempted to jack? WFAA reported that Price has bought a lot of real estate lately. Ah-ha! What sort of person buys cheap real estate in a down market?

QUESTION:  Is there a Sprint to Judgment by the media in this case much like the in the Strauss-Kahn case or is there truly a smoking gun behind the actions of the FBI?

YOUR COMMENTS ARE WELCOME!


Exemplary Ethical Business Practices – Kimberly-Clark Wins Business Ethics Award

May 26, 2011

Kimberly-Clark Corporation (NYSE: KMB) announced today that is has been selected as the winner of a 2011 Greater Dallas Business Ethics Award. The company was celebrated for its commitment to exemplary ethical business practices because its employees understand how important it is to behave ethically and comply with the law.

CONGRATULATIONS…as a business ethics speaker and author it is important to recognize those companies that commit their actions and resources to creating a positive ethical business environment.  As a part of that…this blog will gladly publicize award winners as an additional form of recognition.

Founded in 2000, the Greater Dallas Business Ethics Award recognizes public and private companies headquartered in the Dallas region that demonstrate a commitment to ethical business practices in their everyday operations, management philosophies, and in response to crises or challenges.

Of the 28 companies nominated for this year’s award, eight finalists were named, with three of those – Kimberly-Clark, Karlee and Purdy-McGuire – taking top honors. “These winners do the right thing for their company and the clients they serve. Their work reinforces the positive, ethical values of our local business community and beyond,” said program chair Gary Morris of Morris Capital Corporation.

When presenting Kimberly-Clark’s award, Morris noted that the 139-year-old company’s founding principles were grounded in honesty and integrity. In addition, he said judges were particularly impressed with Kimberly-Clark’s use of multiple tactics to help keep its ethics and compliance relatable.

“We are honored to be recognized for our ethical business practices,” said Thomas J. Falk, chairman and chief executive officer of Kimberly-Clark. “Kimberly-Clark operates with the same high standards of integrity today as it did when the company was founded in 1872. Our employees take pride in continuing our heritage of honesty, integrity, and ‘doing the right thing’ every day.”

In accepting the award, Thomas J. Mielke, Kimberly-Clark senior vice president of Law, Government Affairs & Chief Compliance Officer, thanked the Greater Dallas Ethics Award Committee for continuing to recognize the many great
companies who make ethics a priority. “Too often these days, we hear about individuals and companies who have set ‘bad’ examples rather than recognizing and celebrating those individuals and companies that rise above the current day’s challenges to do ‘good’ things in the ‘right’ ways,” Mielke said. “Kimberly-Clark thanks you for turning the spotlight on these types of companies and honoring them for presenting good examples that inspire others.”

The Greater Dallas Business Ethics Awards is supported by several business associations and academic centers, including the Dallas Chapter of the Society of Financial Service Professionals, Financial Planning Association of Dallas/Fort Worth, Edwin L. Cox School of Business at SMU, Cary M. Maguire Center for Ethics and Public Responsibility at SMU, the North Texas Ethics Association, and Success North Dallas.

Previous award winners include Atmos Energy, The Container Store, Daisy Brand, EDS, The Staubach Company, TXU and Trammell Crow Company.

Beyond the award to Kimberly-Clark…I would also like to recognize the Greater Dallas Business Ethics Association for their efforts in recognizing organizations who lead the pack when it comes to business ethics application.

About Greater Dallas Business Ethics Association
The Greater Dallas Business Ethics Association was founded in 2000 by local leaders with the Dallas Chapter of the Society of Financial Service Professionals. The GDBEA award honors Dallas-based companies that demonstrate a measurable commitment to ethical business practices in everyday operations, management philosophies and responses to crises or challenges. Recognizing local companies that exemplify ethical business practices is important in creating awareness and understanding of the everyday application of these practices and helps foster a more stable and vibrant business environment. The purpose of the GDBEA is to hold those businesses up as examples and provide guidance and support to companies that wish to improve their ability to operate ethically and ensure ethics are an integral part of their culture.


In troubled times why are Business Ethics searches down?

December 1, 2010

More times than not, my posts (as a business ethics speaker) relate to ethical choices or fraud prevention.  But for a brief break I stumbled across something that caught my attention and raised a question that is worth asking.  But, before we get to the question, let’s look at where we are today.

I suspect that most folks would say we (at least in this country) could benefit from a strong dose of ethical actions and choices.  We are in the midst of one of the most severe economic recessions.  Our political leaders don’t seem to have the will or desire to make the tough choices we need to make in order to provide for long term stability in our country for our future generations.  Baby Boomers (I’m one of them) are gratified by self indulgence and as the largest group of people in the nation are seemingly unwilling to change our consumption and expectations (for example the Baby Boom generation could give up 1/2 their Social Security) so that we could pay off the debt that we so willingly incurred.  (Ouch I can already hear responses to that one).  Our business leadership in so many ways is so focused on the next quarter and earnings per share that we fail to make decisions that would better serve the long term potential of the companies we lead.  And crime, well, I’ve been busy in this blog reporting on the many instances where folks (and yes I was one of them) found that illegal gains somehow could justify unethical behavior.

So…with all the above said, here’s an interesting fact.  When you go to google.com/trends and search business ethics something quite unique appears…since 2004 the search volume for “business ethics” has gone down.  In fact, it is fairly level during this economic recession – 2008 – 2010.

Here’s the link if you wish to see for yourself.  http://www.google.com/trends?q=business+ethics&ctab=0&geo=all&date=all&sort=0

My question is why?  It would seem with unethical behavior splattered all over the news, from the government with folks like Charlie Rangle, to government spending out of control, to fraudsters like Bernie Madoff, to claims of influence peddling and insider trading at national banking and hedge fund firms, that we need ethics now more than ever.  But, for some reason, searches for business ethics are down…and I’d like some reasonable explanation as to why!

Just for comparison…searches for “sex” are up over the same time period.  What gives here?

If you have an opinion or want to share your thoughts…post your comments – they are welcome here!  Who knows maybe there is some significant logical explanation.  I sure hope so…!


Ethics – The truth, Governor David A. Patterson and some Yankee’s tickets – This is no home run!

August 26, 2010

Funny thing about “truth” and “ethics” – the definition of both are in the eye of the beholder and neither are always black and white.  As a business ethics speaker, I find that I am called on frequently to define “business ethics” and when the presentation is over – all agree that you can’t define something that isn’t concrete.  That said, the news today is filled with stories about something that to some is not news worthy and too others is at the heart of trust – a solid component of ethical behavior.

The New York Times reports:

Gov. David A. Paterson misled investigators for the state ethics commission when he testified that he had intended to pay for free tickets he obtained to last year’s World Series, according to a report issued on Thursday by an independent counsel investigating the matter.

But the independent counsel, Judith S. Kaye, said it was up to the local district attorney in Albany, P. David Soares, to decide whether Mr. Paterson, a Democrat, should be prosecuted for perjury.

Now…as I read this story, I found myself confused.  What’s all the fuss about?  Then it became clear…it is not about the World Series or whether the Governor attended – taking his son and friends.  This story is about the truth!  This story is about whether Governor David A. Patterson has – as his moral compass – a foundation of ethical behavior when it comes to his actions and his words being congruent.  I do understand, as I had that very issue posed to me just yesterday.  Funny, but how two people perceive the truth can be very different.

The story goes on to state:

Aides to Mr. Paterson obtained five tickets to the first game of the 2009 World Series, which Mr. Paterson attended along with two aides, his son, Alex, and a friend of his son.

The tickets eventually came under the scrutiny of the state’s Commission on Public Integrity, which found that Mr. Paterson had never intended to pay for his own ticket and only paid for his son and son’s friend after the news media inquired about the matter.

The commission also concluded that Mr. Paterson had lied during his testimony about the tickets, a matter the commission referred last spring to Attorney General Andrew M. Cuomo, who in turn asked Ms. Kaye to investigate.

Now…as a business ethics speaker, it is my role to uphold the highest of ethical actions and interpretations.  But, let’s just call it like it is… with our lives effectively placed at the fingertips of technology, I wonder if this were 40 years ago, would anyone care?  And, if the answer to that is “No” – heck they wouldn’t have even known…  then why do we care today?  40 years ago – O.K. maybe 50 – the standards of society were vastly different.  JFK could have affairs and, at the time, no one was the wiser (other than his inner circle).  Now, everything is recorded and one false move and you’re toast in the media.

STOP…but I know, the issue isn’t the tickets, it is what he said about them.  He lied, so says the investigative panel.

At a minimum, portions of Mr. Paterson’s testimony “were inaccurate and misleading,” the report concluded, and “warrants consideration of possible criminal charges by the District Attorney, who will make the ultimate decision regarding whether or not charges should be brought.”

So, what was the ethical thing to do?

ANSWER ONE:  Don’t take the tickets unless the Governor could buy them just like “Joe Q Public” – Rank does not have it’s privilege.

ANSWER TWO:  Use your position as Governor to get the tickets (after all you are the Governor and rank does have it’s privilege), but pay the fair market price for them.

ANSWER THREE:  When asked about the purchase of the tickets (now here’s where it get’s dicey), tell the truth and state that you did not pay for them, but would recognizing that it looked bad to use “free” tickets to see the World Series

ANSWER FOUR:  When asked, bumble the question, state a half-truth and get your butt busted by all major media outlets.

CONCLUSION: Answer Four – is the worst of the options and shows that the Governor (as an elected politician of power) is human and subject to mistakes.  However, the unfortunate thing is – our standard of ethics and ethical behavior has swung so far to one side that we believe that privilege should provide no benefit.

Does that cause you to ponder the ethics of privilege?  One thing that stands out for me is – the truth will set you free.  Some folks don’t like the truth and others are afraid of it, but if Governor Patterson had told the truth, the outcome would likely be vastly different.

YOUR COMMENTS ARE WELCOME!


BizRadio to Salem Communications Business 1110 – Frishberg’s Fraud Follies?

July 13, 2010

Have you even awakened in the morning with breath so nasty that you had to brush your teeth before talking to anyone?  I mean “nasty breath” that would turn your dog against you?  Well…if I were a betting man, I would say that Salem Communications (purchaser of BizRadio 1110 am from Dan Frishberg) either has stinky breath today or is smelling it from their “good buddy” Dan Frishberg.

This story just keeps getting better.  I will say (for those who think I am jubilant about what’s happened to Dan) – I’m not!  In fact, frankly for Dan and his family it is sad.  Sad that Dan is so caught up in himself that he is digging a hole so deep that few could ever recover.  But…let’s look at what has happened so that those of you who are following can judge for yourself – whether you think Dan Frishberg is more focused on his well being than being ethical about his transactions and protecting the many who invested their savings only to find it lost.

UPDATE:

On July 12, 2010 Rehan Siddiqi and Asia Vision, Inc. brought suit against Dan Frishberg, Al Kaleta, Elisea Frishberg, Salem Communications, BizRadio and a host of related companies and individuals for tortuous interference, fraud, conspiracy, perjury, theft and a host of other claims. Now…I am not judge nor do I have any connection with the outcome of this claim by Siddiqi.  However, the case illuminates and illustrates patterns of behavior that I would judge to be unethical and probably fraudulent.  So…let’s look at what we do know and you be the judge.

BACKGROUND:

Sure seems like a long time ago, but in late 2009 Rehan Siddiqi (Asia Vision, Inc.) entered into an agreement with Dan Frishberg to lease – purchase – 1110 AM.  Siddiqi paid Frishberg a deposit and the lease in advance for six months – the sum – $180,000.  The agreement provided that Siddiqi would have the option to purchase the station for $3.5 million.  The agreement can be clicked on here.  Frishberg – Siddiqi – Biz Radio Purchase Agreement

No only was there the purchase agreement but the simple terms were listed on the agreement at the end of December 2009.  See here: BizRadio lease purchase agreement

Now why would Frishberg agree to sell his station to Siddiqi?  On the surface it seems clear: (1) Frishberg needed the money!; (2) Kaleta, Frishberg’s financial source of funding (from now some real unhappy investors) was busted by the SEC and Dan was broke; (3) if Dan could move to a more powerful station for just the cost of monthly lease…he might survive; and (4) Siddiqi was willing to provide a quick influx of cash that Frishberg desperately needed.  Understand now?

The announcement of this transaction is reflected here in an email announcement.  BizRadio Station Change Talk about spin…

Then it all falls to pieces.  Apparently Frishberg – seemingly happy with his new station – can’t pay or provide a letter of credit to continue and thereby is facing the loss of his show – the same show that is a feeder to his investment business – the business that feeds he and his family.  So what does he do?  What any self-respecting unethical person would do (sorry, but at times I have to share my feelings) – he screwed Rehan Siddiqi.  He kept Rehan’s money and kicked him off the station that he, just a month before, leased with an agreement to purchase.  See statement from Ron Crider.  Ron Crider Statement

Outcome…Rehan Siddiqi brings suit against Daniel Frishberg and BizRadio for $18 million and YES this is old news but it sets the stage for the rest of the story…

NEXT STEPS:

On March 2, 2010 Rehan Siddiqi filed notice with agent for Salem Broadcasting of his intention to exercise his option under the lease purchase agreement.  His exercise would have Siddiqi paying $3.5 million for 1110 AM.  The proceeds would have been a cash sale and represented a substantial inflow of cash to BizRadio and their respective investors – cash that would have been much needed to those who have lost literally millions.  See offer here.  Siddiqi Purchase Exercise

But according to the lawsuit there are several interesting twists!

INTERESTING TWIST ONE:

BusinessRadio Houston, LLC forfeited its charter to exist, operate and do business as of October 30, 2009.  WHAT?  That’s right…Dan Frishberg continued to operate and do business as if he had the protection of his LLC, but it appears that it lapsed and he was flying blind or “unprotected” if you will.  The BIG QUESTION this raises is – is Dan Frishberg now personally liable for the actions of BusinessRadio Houston, LLC – an entity that seemingly conducted business through at least part of March 2010?

Somehow I see more lawsuits being filed and perhaps the concept of “piercing the corporate veil” is effectively won.  This will be interesting to watch.

INTERESTING TWIST TWO:

Keep in mind the date of the Siddiqi offering – March 2, 2010.

Frishberg (perhaps realizing that his old corporation was nonexistent) filed to do business as BusinessRadio Houston Licensee, LLC on March 4, 2010.

O.K. so Siddiqi makes the offer on March 2nd and two days later Frishberg forms a new company in order to sell what his old company (remember the one that ceased to exist back in October 2009) could not sell.  Hum?

Now…I’m curious as to legally what happens to the license if the entity that holds it ceases to exist?  Who owns the station?  Who has access to the assets?  Who is liable for the actions of the station when the corporate enterprise or LLC fails or dies?  This is getting more twisted as each day passes.

THE SALE:

Oh my…now it gets interesting.  It is fairly common knowledge among those connected with Dan Frishberg and BizRadio that Salem and Dan were discussing the transfer of the station back to Salem back in February of 2010 even though Siddiqi had a purchase option agreement signed by Frishberg at the end of 2009.  So on March 5th – three days after Siddiqi exercised his purchase option for $3.5 million the station was sold FOR SUBSTANTIALLY LESS THAN THAT from Frishberg back to Salem.  Here’s the purchase agreement.  Salem Purchase Agreement

Terms:

(1) Payment of $800,000 to Frishberg

(2) Forgiveness of $1,260,000 of debt to Salem from their initial sale to Frishberg (in other words he had not yet paid them for his purchase in the first place).  Now why they didn’t foreclose and take it back I still, to this day, don’t know.  And…forgiveness of debt creates a taxable event, so I wonder what position the IRS will take on this or if Dan will ignore this and expose himself to tax fraud?

(3) An agreement of $1,640,000 in air time for Frishberg to keep his program on the air – again it would appear that this is a taxable transaction, but that’s Dan’s issue?

A MATTER OF ETHICS:

Let me get this straight…Dan Frishberg who said BizRadio was a loss leader: (a) sold his RIA or DFFS to Bill Heath (ostensibly to protect the quarterly income it generated) instead of having that income inure to the benefit of the BizRadio shareholders; (b) turned down a $3.5 million offer (again that would have benefited those who trusted Dan by investing in BizRadio); and (c) he structured a deal that clearly benefited him – so he could continue his show and remain the master of illusion.  Now is that in any way ETHICAL?

THE REST OF THE STORY (Thus Far):

Well…it appears that the SEC is taking a different look at this whole agreement between Salem and Frishberg (perhaps as a result of this new suit and the information it uncovers).  It looks like Siddiqi wasn’t just filing a lawsuit for the joy of creating a legal nightmare.  Rather, Siddiqi seems to have a legitimate claim.  Several things seem for sure:

  1. The SEC (according to my sources) seem to feel that Frishberg might have fraudulently conveyed the station for purposes of hiding assets and personal gain.  Keep in mind the SEC has no criminal authority, but the use of “fraudulently” might infer that others who do have criminal authority are waiting in the wings for Dan “The Money Man”.
  2. The SEC Receiver would appear to be interested in seeing if Siddiqi (or perhaps other parties) are interested in the station for a sum greater than $800,000 which (obviously) would give the SEC a greater pool of funds from which some form of “restitution” shall we say can be made.
  3. Salem is a substantial entity and while BizRadio is defunct – Salem’s pockets are deep – and one might assume that if Salem somehow “conspired” as the lawsuit alleges the outcome might be beneficial for those who invested in BizRadio.
  4. Likewise, if it is deemed that Salem “tortuously” interfered with Siddiqi’s agreement with Frishberg – again the pocket book might be open either to damages or a settlement – either of which changes the landscape of what seemed somewhat hopeless to date.

WHERE FROM HERE?

Dandy question!  The twist and turns seem, in the matter of BizRadio, to always bring a new challenge and varied and different outcomes.  But, if I were a betting man (and I am not) I would suggest that the following would be logical outcomes:

  1. The SEC Receiver will make dog gone sure that he gets his money for the defrauded shareholders of BizRadio…so the station will be sold for more than $800,000 (I think) and the SEC Receiver will get those funds.
  2. Salem Communication will clearly want to make this go away.  The publicity (and I understand that several media outlets are considering stories) will do no good for Salem.  In fact, I have had multiple inquiries asking why Salem wanted to get into bed with Frishberg considering all the baggage he brings with him?  Damn good question!
  3. Siddiqi will either end up with the station for some amount (likely less than $3.5 million) as it’s value and brand has diminished with all the negative publicity surrounding it or he will end up with a settlement for Frishberg and Salem’s interactions in deference to Siddiqi’s agreement.
  4. Frishberg continues to dig his hole deeper and, yet once again, has shown the SEC that he cares little for those who invested in his vision and cares mostly for Dan Frishberg.  The outcome – I predicted and continue to hold to the belief – the SEC will bust Frishberg and strip him of any investment license he might currently have.  That’s likely the most they can do.
  5. I believe the law enforcement community (at the Federal level) will indict Dan Frishberg and, perhaps, Al Kaleta for wire fraud, conspiracy and other crimes – especially if there is sufficient notoriety with this case.  Could be wrong here, but it’s hard to believe that the justice department will just let this one slide – especially since Frishberg has stayed on the air and continued the charade.

Stay tuned…there’s plenty more to come including an interview with Rehan Siddiqi.  IF you wish to read the Siddiqi lawsuit a copy is here.  Siddiqi Lawsuit July 2010

As always – YOUR COMMENTS WELCOME!