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.
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.
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…
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.
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
(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:
- 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”.
- 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.
- 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.
- 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:
- 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.
- 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!
- 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.
- 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.
- 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!