Rich Dad Poor Dad Ethics on the line – Robert T. Kiyosaki files for Bankruptcy. Choices Consequences and an Ethical Challenge!

October 18, 2012

Just a few days ago it was reported that Robert Kiyosaki of “Rich Dad, Poor Dad” fame filed for corporate bankruptcy through Rich Global LLC – one of his many companies.  Rich Global LLC filed for Chapter 7 bankruptcy protection on Aug. 20 in a Wyoming bankruptcy court.  The New York Post reported the following:

Robert Kiyosaki

After a long, lucrative career writing financial self-help books and giving seminars, “Rich Dad Poor Dad” author Robert Kiyosaki has filed for bankruptcy for one of his companies after losing a $24 million court judgment.

Kiyosaki’s Rich Global LLC filed for bankruptcy after being ordered to pay nearly $24 million to the Learning Annex and its founder and chairman, Bill Zanker.

US District Judge Shira A. Scheindlin in April ordered Rich Global to pay up $23,687,957.21 after a jury ruled Kiyosaki must give the Learning Annex a percentage of his profits after using their platform for speaking engagements, including a 2002 gig at Madison Square Garden.

The challenge here, at least for me, is not the bankruptcy filing – rather it’s the ethical implication related to the filing.  The short version is that there was an agreement with the Learning Annex to promote Kiyosaki and his brand for a percentage.  By all accounts they did their part.  The challenge is they claim that Kiyosaki didn’t do his.  In other words he didn’t pay up.  Again the New York Post states:

Zanker told us, “I took Kiyosaki’s brand and made it bigger. The deal was I would get a percentage, and he reneged. We had a signed letter of intent. The Learning Annex is the greatest promoter. We put his ‘Rich Dad’ brand on a stage. We truly prepared him for great fame and riches. But when it was time for him to pay up, he said ‘no.’ ” This has taken years in court. I won even more money than I asked for from the jury, then he declared corporate bankruptcy. Oprah believed in him, and Will Smith believed in him, but he didn’t keep his promise to us.”

Mike Sullivan, CEO of Kiyosaki’s Rich Dad Co., told us that Kiyosaki, said to be worth $80 million, was still doing very well thanks to investments in other companies: “The dealings we had with Learning Annex were with a company that hasn’t been in business for a number of years . . . I am not surprised Learning Annex is upset and angry, the money doesn’t exist in that company, and we can’t bring money out of the group.

The core question – If a jury in a court of law says that you failed to honor your contract with a service provider and they establish an award as punishment, compensation, or justice for the failure that they found existed, is it ethical to use the legal system to avoid the consequence?

“Robert and [wife] Kim are not paying out of personal assets. We have a few million dollars in this company, but not 16 or 20. I can’t do anything about a $20 million judgment . . . We got hit for what we think is a completely outlandish figure.”

Reportedly work some $80 million, it would seem that Kiyosaki’s ethical limit is defined by money.  But is that right?  Certainly many would argue that the legal system is designed to protect one from unfair or unjust circumstances much like what I suspect Kiyosaki feels he received.  Yet, others would argue that justice was served at the hand of the jury and that Kiyosaki has an ethical moral obligation to honor the award and pay up.

But what if we take this to a higher plain.  Is it possible that short of paying up based on the idea that it is moral, ethical and founded in integrity, that failure to do so will create the desired outcome anyway?  Is it possible that when one violates, what to some is simple ethics, that reality is karma takes over and delivers the outcome or consequence anyway?

It is not up to me to judge – rather I am interested in the ethical questions and what you think.  YOUR COMMENTS ARE WELCOME!

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BizRadio forced into involuntary bankruptcy? – The empire that Dan Frishberg built is collapsing!

April 4, 2010

Every choice has a consequence.  From some time now I’ve been reporting on BizRadio – a series that has taken twists and turns that I did not expect at the beginning.  The only thing that made sense – and still does today – is that the choices that Dan Frishberg, Elisea Frishberg, and Albert Kaleta made have taken a dramatic negative turn – and I might say much to the detriment of many investors, Ron Crider and Rehan Siddiqi.

Now come Florence Reiley, Kevin Deering and Stephen Cook requesting the US Bankruptcy Court in the Southern District of Texas to force BizRadio into a Chapter 7 bankruptcy.

The filing can be found here.  Likewise, a recent Houston Chronicle article on the same topic can be see here.

According to the Houston Chronicle article:

Meanwhile, BizRadio CEO Daniel Frishberg is battling with the receiver appointed in the SEC case. The SEC sued BizRadio co-founder Albert Kaleta and his investment firm, Kaleta Capital Management, claiming they mislead investors about the sale of $10 million in promissory notes. The receiver was appointed to recover money from investors, primarily from BizRadio and Frishberg’s own investment firm.

Even as he was squaring off with the receiver, Frishberg sold BizRadio’s Houston station, KTEK 1110 AM, to Salem Communications for $3.7 million, which includes the cancellation of a $1.26 million loan. BizRadio bought the station from Salem for $7.6 million just two years ago.

Now I’m not an attorney, but it doesn’t take a legal scholar to know that there are a long list of people who legitimately would lay claim to any monies that Frishberg receives from the sale (purported sale – I still don’t have that figured out completely) of BizRadio and/or it’s assets.

Let’s see…there are:

  • The investors who thus far have lost their money with no true prospect for recovery;
  • The SEC Receiver who is trying to attach assets;
  • Rehan Siddiqi who was duped for $180,000 and the BizRadio ship was sinking;
  • Salem Communications (who as best I can tell) was still owed for the purchase of the station from Frishberg (which is why I can’t piece together the pieces of how they would pay him for what it appears he owes them for)
  • Employees who, by the droves, have been let go – many of whom say they are owed back wages; and
  • (this is a guess), but knowing what happens when a business fails, I would guess that BizRadio owes back payroll taxes – as typically since they are due after the fact, they are the last thing to be paid.  (Keep in mind, this is speculation and not founded on credible inside information).

I am assuming that the folks who filed for BizRadio to go into bankruptcy were doing so in an effort to position themselves to gain bankruptcy assets.  Not a bad move.

ON ANOTHER NOTE…I’ve conducted several interviews that soon will become part of this series – so stay tuned.  Of course…YOUR COMMENTS ARE WELCOME!


Celebrity Medical Information for Sale – Could Bring Lawanda Jackson 10 Years in Prison

May 1, 2008

What do Britney Spears, Farrah Fawcett and Maria Shriver have in common? Any or all could have had their medical information leaked to the media.

A Los Angeles woman has been indicted for accessing the private medical records of celebrity patients at the UCLA Medical Center and selling information obtained from those files to a national media outlet.

Lawanda Jackson, 49, was indicted under seal on April 9. That indictment, which alleges one count of illegally obtaining individually identifiable health information for commercial advantage, was unsealed this morning.

Jackson, an administrative specialist at the UCLA Medical Center from 2006 until she was terminated on May 21, 2007, allegedly received at least $4,600 from the media outlet in exchange for providing the private medical information. The media outlet paid Jackson by writing checks to her husband, the indictment alleges.

Jackson, who faces a potential sentence of 10 years in prison if she is convicted of the charge, is expected to be arraigned on the felony count on June 9 in United States District Court in Los Angeles.

According to celebnews: “The hospital has a PIN number system that shows who is looking at medical records, but doesn’t have a system in place to stop people from looking at the records. While it would be great to be able to trust all of the hospital’s employees, someone like Lawanda Jackson might just sell the information if they need the money badly enough. The LA Times reports she was $37,300 in debt in 2001, when she filed for bankruptcy.”

“We are deeply troubled that a former employee may have illegally received payments from a news organization in exchange for providing personal medical information,” Dr. David T. Feinberg, the UCLA hospital system’s chief executive, said in a recent statement.

“Meanwhile, we continue to take steps to improve our staff training and information systems to further strengthen the confidentiality of patient records.”

According to cbc.ca: Jackson quit her job as an administrative specialist at UCLA last May 21 after learning she was to be fired.

UCLA also fired several other employees for peeking at psychiatric information about Britney Spears, 10 months after Jackson left the hospital.

An indictment contains allegations that a defendant has committed a crime. Every defendant is presumed innocent until and unless proven guilty beyond a reasonable doubt. Now, that said, as a business ethics speaker and writer about white collar crime, I would predict that Jackson will get prison time if convicted.

Every choice has a consequence. Every group I address as a speaker will be presented that simple comment. The facts are, your choices will either bring you negative consequences or positive results. It seems that Jackson’s choices were at best unethical and at worst will bring her a conviction and prison.

WHAT COMMENTS DO YOU HAVE ABOUT THIS INTRUSION INTO CELEB’S PRIVACY?

For now…Business Ethics Speaker – Chuck Gallagher – signing off…


Friedman’s Jewelers CEO Bradley Stinn – GUILTY – Accounting Fraud Scheme! Comments by White Collar Crime Speaker Chuck Gallagher

March 27, 2008

Pump up those sales! We’ve got to make the quarter! How often are those command heard and how tempting is it to make the wrong choices in order to please the investing public and Wall Street?

Following six weeks of trial – Bradley Stinn, age 47, – former CEO of Freidman’s, Inc. and Crescent Jewelers, found himself being convicted of securities fraud, mail fraud and conspiracy. Likewise, in addition to Stinn’s conviction, the former CFO, Victor Suglia and form Controller, John Mauro have entered guilty pleas into what was a massive accounting fraud.

friedmans-jewelers-store.jpg

So what happened? According to the US Attorney’s news release:

During the period of the conspiracy, Friedman’s was the third largest specialty retailer of fine jewelry in the United States, operating 686 stores in 20 states. The government’s proof at trial established that Friedman’s encouraged its sales personnel to increase sales by inducing customers to finance their jewelry purchases using the company’s installment credit program, which was used to finance more than half of Friedman’s $400 million in annual net sales. A major aspect of the fraud scheme was concealing that Friedman’s was increasingly unable to collect money owed by customers who bought jewelry on credit. Friedman’s collection problems stemmed from the company’s widespread failure to follow its own credit-granting guidelines – guidelines that STINN falsely told investors were strictly enforced. In fact, STINN and other senior executives encouraged routine violations of the guidelines to increase the company’s reported sales.

To cover up the collection problems, STINN caused Friedman’s quarterly reported credit statistics to understate the delinquency of its credit portfolio, and caused Friedman’s to report false earnings numbers. In some cases, the false earnings reported by Friedman’s met or exceeded the public estimates of professional stock analysts, and resulted in the artificial inflation of Friedman’s stock price.

Between November 2003 and May 2004, Friedman’s stock price lost more than half its value. On November 11, 2003, the stock closed at $11.99 per share. On May 6, 2004, the New York Stock Exchange halted trading in Friedman’s stock, at which time the stock was trading at $4.97 per share. On January 14, 2005, Friedman’s filed for Chapter 11 bankruptcy.

Stinn’s lawyer, David Shapiro, confirmed the verdict. “We’re obviously very disappointed,” Shapiro said. “We think it was against the weight of the evidence. We think that there were some significant appeal issues in the case, and we are going to pursue an appeal.”

Was the pressure of financial performance so great that you would jeopardize your freedom and life to hit the numbers?

Every choice has a consequence. As a white collar crime and business ethics speaker, I speak from first hand experience about the truth about consequences. Reality is – no one escapes the consequences of their choices. While Stinn may have looked good hitting the numbers for a time and avoided the consequences – he did not avoid the consequences all together. Prison is no fun and Stinn is facing 25 years for his conviction. Likely he will serve time and that will prove to be a dramatic change from his prior activities. You do reap what you sow.

If anyone reading has any background on Stinn – feel free to comment as I study the behaviors and backgrounds of those convicted of white collar crime.

White Collar Crime Speaker – Chuck Gallagher – signing off…