The SEC last month slapped a financial adviser and radio personality known as “The MoneyMan” with fraud charges after his firm encouraged clients to invest in promissory notes linked to a company with which he was associated
The SEC last month slapped a financial adviser and radio personality known as “The MoneyMan” with fraud charges after his firm encouraged clients to invest in promissory notes linked to a company with which he was associated.
Daniel Frishberg, chief executive and principal of Daniel Frishberg Financial Services Inc., allegedly gave one of the firm's representatives, Albert Kaleta, authorization to recommend that clients purchase promissory notes from Business Radio Networks LP, an affiliate of Mr. Frishberg's firm, according to the Securities and Exchange Commission's complaint.
Both Mr. Kaleta and Mr. Frishberg were officers of Business Radio Networks, also known as BizRadio, and collected salaries from the company, a fact that wasn't sufficiently disclosed to the promissory note investors, the SEC claimed.
Mr. Frishberg hosted his own radio show, The MoneyMan Report, through Houston-based BizRadio.
Between April 2008 and September 2009, the offering drummed up some $5.5 million in proceeds, but he failed to ensure that clients knew of BizRadio's poor financial condition, as well as the conflicts of interest, the SEC claimed.
PAST COMPLAINTS
Mr. Frishberg also allegedly selected Mr. Kaleta to recommend the notes despite complaints about Mr. Kaleta's honesty in sales presentations for other investments, the SEC alleged.
From 2007 through 2009, Mr. Kaleta sold at least $10 million in promissory notes issued by a company he owned called Kaleta Capital Management to clients of Mr. Frishberg's firm, according to the SEC.
Mr. Kaleta didn't provide the investors with any offering materials, the SEC alleged. Instead, he verbally explained to them that Kaleta Capital would use the proceeds to make short-term loans to small businesses, that the firm would perform due diligence on its borrowers and that it would charge 12% to 14% annual interest on the loans, according to the SEC.
However, Kaleta Capital also was in poor financial condition, making the promissory notes unsuitable, according to the SEC.
In 2009, the SEC entered a judgment against Mr. Kaleta and his firm, ordering them to pay disgorgement, plus interest and penalties, and appointed a receiver to take possession of Kaleta Capital. Similarly, Mr. Frishberg's firm and Business Radio have been placed under receivership.
Mr. Frishberg, who has been accused of fraud and of aiding and abetting Mr. Kaleta, has agreed to settle the SEC's charges with a $65,000 penalty and has been barred from associating with any investment adviser.
A call to Mr. Frishberg for comment wasn't immediately returned.
E-mail Darla Mercado at dmercado@investmentnews.com.
