Securities: Media company owner used financial firm to pump own stock, SEC says
The Securities and Exchange Commission has sued Houston-area businessman Daniel Frishberg alleging fraudulent conduct in connection with promissory note offerings made to clients of his investment advisory firm.
The SEC says that Frishberg, in association with Albert Fase Kaleta, formed a company called Business Radio Networks, aka BizRadio. On that radio station, Frisberg presented a programme called "The Money Man."
But Frisberg was also the owners of Daniel Frishberg Financial Services (DFFS), a registered investment adviser. In his capacity as investment adviser, he advised clients to invest in BizRadio - but instead of stock, they were offered promissory notes.
According to the SEC's complaint filed in federal district court in Houston, at least USD11 million in promissory notes were issued by BizRadio and Kaleta Capital Management (KCM), which is owned by Frishberg's associate Kaleta.
Kaleta and KCM were sued under allegations of fraud in 2009 and a receiver appointed to the assets of Kaleta and KCM. In that action, BizRadio and DFFS were named as third parties and their assets were, in effect, frozen.
The SEC alleges that Frishberg authorised 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.
Frishberg neither admits or denies the SEC's allegations. Even so, he has consented to pay a penalty of USD65,000 which will be distributed to the investors who lost money and agreed to be barred from associating with any investment adviser or certain other registered entities.
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