Is this a business enterprises going south or just a Texas flim flam? Read on cause something doesn’t pass the smell test…
Loren Steffy, with the Houston Chronicle wrote an article on his business blog (dated February 5, 2010) related to BizRadio being allowed to return to the air. Before, I read that article, I was alerted by another media contact that BizRadio, Daniel Frishberg and Albert Kaleta and his investment firm, Kaleta Capital Management, sold $10 million in promissory notes, telling investors the money would be loaned to small businesses at 12 percent to 14 percent interest. Instead, the SEC said, it went to the money-losing radio network and an affilated investment advisory firm, Daniel Frishberg Financial Services, also known as DFFS Capital Management.
Those articles caught my attention since I was twice contacted by BizRadio representatives, once in 2007 and then again in 2009, to have a show on business ethics on their station. Both times something just didn’t seem right. The first time I was invited to the BizRadio office in Dallas and told that my work was just the type of programming that fit the BizRadio format. Of course, they were not interested in “my work” for their programming content unless I was prepared to pay a tidy sum of money to be on the air. Pay to play as I call it. At the time they were on (what I recall and my memory might be inaccurate) 1360 AM in Dallas. Certainly the station was not one of the higher ranked stations when it came to aribtron ratings.
At the time it appeared that all they were interested in was me paying them money to bring my content to their station. NOT INTERESTED.
Then, in either late 2008 or early 2009, I was contacted by another representative for BizRadio – again in a pay to play enticement. When I asked for specific data regarding the stations signal, arbitron ratings, etc. mysteriously the interest in my show disappeared and no calls or emails were returned. Again, something smelled fishy…but I paid it no attention, after all, in 2009 radio stations all over the country were hurting for revenue.
THEN COMES THE SEC
Loren Steffy with the Houston Chronicle broke the following article:
I began to take notice. Interestingly enough, it didn’t take long to begin to piece together what appears to be an interesting business enterprise or business scam – right now I can’t for sure tell which…but scam seems to gaining the upper hand thus far.
According to my sources the following seems to hold validity when it comes to the major players: ALBERT KALETA; DANIEL FRISHBERG; RON CRIDER; and REHAN SIDDIQI
1. According to the Houston Chronicle article:
Albert Kaleta and his investment firm, Kaleta Capital Management, sold $10 million in promissory notes, telling investors the money would be loaned to small businesses at 12 percent to 14 percent interest. Instead, the SEC said, it went to the money-losing radio network and an affilated investment advisory firm, Daniel Frishberg Financial Services, also known as DFFS Capital Management.
Kaleta and Dan Frishberg, who appears on BizRadio as “The Money Man,” were among the network’s founders. Kaleta also was part owner and chief compliance officer for DFFS.
2. My sources tell me that Kaleta was a master at raising money. In many cases, I was told, that when an investor would invest with Kaleta, he would suggest to them that they also “loan” money to, what ultimately, was BizRadio and that those funds would pay a return of 11+%. Therefore, if an investor invested $1 million, he/she might also “loan” $100,000 for the express benefit of getting that high rate of return. However, I am also told that with BizRadio losing some $300,000 per month (I have not been able to confirm that number), the only way the investor interest could be paid was from more investment funds pouring in. THAT’S A PONZI SCHEME, just ask Bernie Madoff.
3. Kaleta signed an SEC consent order neither admitting nor denying wrongdoing and agreeing not to violate securities laws in the future. His firm also agreed to have a court-appointed receiver take over its operations. From what I am told, Kaleta also lost his Securities license as part of his agreement. (At the time of this writing I am trying to get confirmation from the SEC on the license revocation). It appears that Kaleta took one for the team.
4. The Chronicle article states: “Neither BizRadio, nor Frishberg’s firm was accused of wrongdoing, but they were named as “equitable relief defendants,” meaning they must repay the money.” At the time of the initial Chronicle article BizRadio was on the air…but that soon changed.
5. On or around October 2009, Ron Crider was brought on board to be BizRadio’s CEO (or so it seemed). Crider was not paid as an employee, but according to sources was introduced by Frishberg at BizRadio shareholder meeting(s) as BizRadios CEO or co-CEO. Likewise, Crider had business cards that indicated he was CEO for BizRadio. As Crider came on it would appear that the SEC was hot and heavy in their investigation and negotiations to shut down Kaleta – which had a clear effect on the operations of BizRadio. BizRadio’s web site listed Crider as President of Broadcast Operations (see below).
6. BizRadio apparently owned 1110 KTEK AM which was the subject of a possible lease/sale. Seems that BizRadio paid a tidy sum of money for the station, but found that it didn’t serve their needs as well as other potential stations with a better listener reach. As best I can tell, BizRadio seemed to switch stations often (why – I’m not sure, but it seems that it is either seeking a better signal, financial issues or both).
7. Crider, ostensibily acting as CEO, negotiated with Rehan Siddiqi to lease 1110 KTEK AM with an option to purchase for some $3.5 million. Note: my sources tell me that John Saunders was the broker who sold Daniel Frishberg 1110 KTEK for 7.7 million. Later, Saunders (so I’m told) offered Dan
2.5 Million Dollars for the station (which in today’s economy might be reasonalbe). Either way, the acceptance of the Siddiqi offer would appear to be reasonable if one were seeking a new station or cash or both.
8. The Chronicle article states: “Asia Vision had been airing its programming on 1110 AM, which is owned by a BizRadio affiliate. Siddiqi paid $180,000 to various BizRadio-related entities to lease the station for six months after BizRadio moved to 1180 AM.” Now, perhaps I’m lost but, if BizRadio accepted Siddiqi’s payment of $180,000 from allowed him to broadcast on 1110, then how can Frishberg say that the contract was invalid? Either Frishberg (as CEO) doesn’t have a handle on the operation of his business or Crider did have authority to execute the contract and Frishberg was willing to accept Siddiqi’s funds… Right now Crider testifying on behalf of Siddiqi seems to be at odds with Frishberg over the truth. But there’s more…
9. Seems that BizRadio lost their right to broadcast on 1180 AM. Why? Money! Sources tell me that Frishberg failed to provide a letter of credit to the folks at 1180 AM and failed the first of February to pay their $75,000 per month lease…hence they were (supposedly) kicked off. Likewise, I am told that BIZ
Radio had lost it’s Dallas affiliate as a direct result of the Houston Chronicle November 18 article. Senator Dan Patritck the owner of the Dallas station wanted to distance himself from Biz Radio, Dan Frishberg and Al Kalieta.
WHAT COMES NEXT?
- BizRadio is back on the air, but something still doesn’t smell right. Why did BizRadio broadcast on 1180 AM in January and accept Siddiqi’s money for 1110 AM and then completely reverse course?
- Why did Frishberg claim that Crider had no authority to execute an agreement with Siddiqi when in fact Crider was listed as President of Broadcast Operations for BizRadio?
- Frishberg states today in an email I received the following:
An unauthorized but related party, Ron Crider, the same person in the Colorado newspaper story below, held himself out, falsely, to be the Chief Executive of BizRadio, and to be authorized to make deals and contracts for the sale of major assets. Our records show that he was not even an employee of our company, never received a paycheck from our company. Though a merger with his company was discussed and considered, it was never consummated.
- What? How could Crider be unauthorized and yet listed as President of Broadcast Operations? Something doesn’t smell right!
- Frishberg futher states in his email:
It now appears that there was no real intention to merge, but that this was all part of a carefully crafted plan to wrongfully take a valuable asset, our Houston radio station, for far less than its real value, harming our company and its investors. This is even more onerous now, because BizRadio has more debt than it should, and it is very important that we use our equity in such assets to reduce the company’s debt and make our lenders whole. That is what BizRadio is determined to do and we went to court Friday, to protect our ability to do this.
- The truth is, at least, partially stated, BizRadio is apparently a money losing operation with too much debt. But, I suspect the reason the deal with Siddiqi went south is that Frishberg found himself off the air due to his precarious financial situation and debt repayment requirement from the SEC. I doubt, however, that Frishberg, in the current economy can sell 1110 AM for more than the offer from Siddiqi. If, however, Frishberg is correct in his statement, he will list the station for sale, liquidate it to the highest bidder and pay off the investors loans thereby complying with the expectation of the SEC.
- Frishberg goes on to say in his email:
They put in the contract an option to purchase the station for $3.5 million. NOTE THAT WE BOUGHT THE STATION TWO YEARS AGO FOR MORE THAN $7 MILLION.
- Dan…the fact that you paid more than $7 million for the station two years ago when the cash was flowing from (perhaps) unsuspecting investors or lenders does not mean that you paid a fair price and, two years ago, the economy was booming. Now, in the midst of the greatest economic recession we’ve seen since the great depression, most investors would easily conclude that the value of the station is worth well less than what you paid two years ago. Dan…you’re the self proclaimed “Money Man” – surely you know that many business assets have decreased in value…like AIG, GM, Chrysler – even Toyota.
- Finally, another part of Frishberg’s email states:
It was not disclosed until recently, that the purchaser did not have the means to make such a purchase, and was relying on financing from Crider, who recently failed to live up to financing commitments to BizRadio this month. IT WAS NEVER DISCLOSED THAT CRIDER WHO WAS SUPPOSED TO BE REPRESENTING BIZRADIO WAS INVOLVED ON THE PURCHASER SIDE AS WELL. WHAT A CONFLICT OF INTEREST – UNDISCLOSED!
- Now…this is most interesting to me. My sources tell me that Crider was involved with attempts at financing for the sale of the radio station. Crider, on behalf of BizRadio, (I am told) was negotiating for a $1+ million loan for BizRadio (apparently since the former loan/investment sources would be drying up) and that the sale to Siddiqi for $3.5 Million was the collateral for the loan. The lender (somehow related to Crider) decided at the last minute to back out which left BizRadio without the resources to continue on 1180 AM (a more powerful station). Now, Frishberg states above that he was unaware of Crider’s connection to the lender. Perhaps that is true, but it doesn’t change the fact that BizRadio’s precarious financial condition is the root cause of all that is currently taking place.
THERE’S MORE TO THIS STORY…
I suspect that when Frishberg points strongly a finger at Crider…he forgets that three fingers are pointing back at him. Are we watching the slow decline of a legitimate business or the implosion of a business scam?
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