In the following case the SEC alleges that three executives schemed to fleece elderly investors. Take a look at the details of this case in the case below excerpted from the SEC web site:
“Washington, D.C., March 16, 2011 – The Securities and Exchange Commission today charged three senior executives at Akron, Ohio-based Fair Finance Company with orchestrating a $230 million fraudulent scheme involving at least 5,200 investors – many of them elderly.
The SEC alleges that after purchasing Fair Finance Company, chief executive officer Timothy S. Durham, chairman James F. Cochran, and chief financial officer Rick D. Snow deceived investors while selling them interest-bearing certificates. Fair Finance had previously operated for decades as a privately-held consumer finance company. But under the guise of loans, Durham and Cochran schemed to divert investor proceeds to themselves and others as well as struggling and unprofitable entities that they controlled. Durham and Cochran further misused investor funds to buy classic cars and other luxury items to enhance their own lavish lifestyles.
In a parallel criminal proceeding, the U.S. Department of Justice today unsealed criminal charges against Durham, Cochran and Snow for the same alleged misconduct.
“These executives looted Fair Finance and exploited unsuspecting investors who trusted the company to prudently invest their funds as it had done for decades,” said Robert Khuzami, Director of the SEC’s Division of Enforcement. “To add insult to injury, they squandered the stolen funds on such extravagances as multiple homes, a private jet, a yacht and more than 40 classic and exotic cars.”
According to the SEC’s complaint filed in U.S. District Court for the Southern District of Indiana, Fair Finance historically raised funds by selling interest-bearing certificates to investors and using the proceeds to purchase and service discounted consumer finance contracts. Following the 2002 purchase, Durham and Cochran funneled millions of dollars to themselves and their related companies. By November 2009, Durham, Cochran and their related businesses owed Fair Finance more than $200 million, which accounted for approximately 90 percent of Fair Finance’s total loan portfolio.
The SEC alleges that Durham and Cochran knew that neither they nor their related companies had the earnings, collateral or other resources to ensure repayment on the purported loans. As CFO, Snow knew or was reckless in not knowing that neither Durham and Cochran nor their entities could repay the funds they took from Fair Finance. Nonetheless, they continued to raise hundreds of millions of dollars from investors by using false and misleading financial statements and other information contained in the offering circulars to deceive investors about Fair Finance’s true financial condition. Ultimately, Durham, Cochran and their related companies never repaid these loans, and they used new investor proceeds to repay earlier investors in the nature of a Ponzi scheme.
Durham and Cochran also distributed large amounts of money to family members and friends, and misused investor funds to afford mortgages for multiple homes, a $3 million private jet, a $6 million yacht, and classic and exotic cars worth more than $7 million. They also diverted investor money to cover hundreds of thousands of dollars in gambling and travel expenses, credit card bills, and country club dues, and to pay for elaborate parties and other forms of entertainment.
According to the SEC’s complaint, Durham has residences in Los Angeles and Fortville, Ind.; Cochran resides in McCordsville, Ind.; and Snow lives in Fishers, Ind. Durham currently is the CEO at National Lampoon, and Snow currently is the CFO.
The SEC’s complaint charges Durham, Cochran and Snow with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, penalties and officer and director bars against each of the defendants.
The SEC acknowledges and appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Indiana, the U.S. Department of Justice, Fraud Section, the Federal Bureau of Investigation and the Ohio Division of Securities.”
If you have ever wondered how some people can spend seemingly unlimited amounts of money on personal entertainment well, if the above allegations are true then that question has been answered.
This is a photo of the National Register of Historic Places listing with reference number 7000063
Friday, April 1, 2011
Thursday, March 31, 2011
CONVICTED BANKER LOST FREEDOM AND TWO HOMES
Convicted bank fraudster and political operative had two of his homes put on the market by the U.S. Marshals. The following excerpt is from the U.S. Marshals web site:
“WASHINGTON – Two N.Y. properties that belonged to convicted fraudster Hassan Nemazee have been listed for sale by a U.S. Marshals contractor. One of the properties, a New York City duplex, is listed at $28 million and is the highest-priced forfeited asset that the U.S. Marshals have ever listed for sale. Nemazee was convicted for a $292 million fraud scheme and is currently serving 12 years in a federal prison. “
Fraud seems to be a very well paying profession. I wonder why my high school guidance councilor never told me that if I became a fraudster my cribs would be worth more than a lot of small towns in America.
“WASHINGTON – Two N.Y. properties that belonged to convicted fraudster Hassan Nemazee have been listed for sale by a U.S. Marshals contractor. One of the properties, a New York City duplex, is listed at $28 million and is the highest-priced forfeited asset that the U.S. Marshals have ever listed for sale. Nemazee was convicted for a $292 million fraud scheme and is currently serving 12 years in a federal prison. “
Fraud seems to be a very well paying profession. I wonder why my high school guidance councilor never told me that if I became a fraudster my cribs would be worth more than a lot of small towns in America.
Tuesday, March 29, 2011
SEC VS FDA INSIDER IN INSIDER TRADING CASE
My father always said that “honesty was the best policy”. Perhaps people who work in government should write “Honesty is the best policy” on a chalk board 1,000 times. In the following case the SEC alleges that an FDA chemist practiced trading stocks illegally in advance of drug approval decisions being made public. Take a look at the following case excerpts from the SEC web site:
" Washington, D.C., March 29, 2011 – The Securities and Exchange Commission today charged a U.S. Food and Drug Administration (FDA) chemist with insider trading on confidential information about upcoming announcements of FDA drug approval decisions, generating more than $3.6 million in illicit profits and avoided losses.
The SEC alleges that Cheng Yi Liang illegally traded in advance of at least 27 public announcements about FDA drug approval decisions involving 19 publicly traded companies. Some announcements concerned the FDA’s approval of new drugs while others concerned negative FDA decisions. In each instance, he traded in the same direction as the announcement. Liang went to great lengths to conceal his insider trading. He traded in seven brokerage accounts, none of which were in his name. One belonged to his 84-year-old mother who lives in China.
In a parallel action, criminal charges filed by the Department of Justice against Liang were unsealed today.
“Liang victimized both the investors who were disadvantaged by his theft of inside information and the American citizens whose trust he violated by placing private gain above public good,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit, added, “The insider trading laws apply to employees of the federal government just as they do to Wall Street traders, corporate insiders, or hedge fund executives. Many government agencies like the FDA routinely possess and generate confidential market-moving information. Federal employees who misappropriate such information to engage in insider trading risk exposing themselves to potential civil and criminal charges for violating the federal securities laws.”
According to the SEC’s complaint filed in the U.S. District Court for the District of Maryland (Greenbelt Division), Liang works in the FDA’s Center for Drug Evaluation and Research. Beginning as early as July 2006, Liang purchased shares for a profit before 19 positive announcements regarding FDA decisions, shorted stock for a profit before six negative announcements, and sold shares to avoid losses before two negative announcements.
For example, the SEC alleges that Liang traded in advance of an FDA announcement approving Clinical Data’s application for the drug Viibryd. Liang accessed a confidential FDA database that contained critical documents and information about the FDA’s review of Clinical Data’s application, and then used that information to purchase more than 46,000 shares of Clinical Data at a cost of more than $700,000. After the markets closed on Friday, Jan. 21, 2011, the FDA issued a press release approving Viibryd. Clinical Data’s stock price rose by more than 67 percent the following Monday and Liang sold his entire Clinical Data position in less than 15 minutes for a profit of approximately $380,000.
The SEC alleges that Liang used the trading profits for his own personal benefit. Checks totaling at least $1.2 million were written from the accounts he used for trading to a bank account in his name, to him or his wife directly, or to credit card companies to pay off balances in accounts in his or his wife’s name. Nearly $65,000 worth of checks were written from the brokerage accounts to car dealerships to purchase vehicles later registered to Liang and his wife.
The SEC’s complaint alleges that Liang violated Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks a permanent injunction against future violations, disgorgement of unlawful trading profits and losses avoided plus prejudgment interest, and a financial penalty. The SEC’s complaint names Liang’s wife Yi Zhuge and the account holders for the seven trading accounts he used – Liang’s mother Hui Juan Chen, his son Andrew Liang, Shuhua Zhu, Zhongshan Chen, and Honami Toda – as relief defendants for the purpose of recovering ill-gotten funds to which they have no legitimate claim. Criminal charges by the Department of Justice against Andrew Liang were unsealed today in the District of Maryland.
The SEC’s investigation was conducted by Deborah Tarasevich, Carolyn Welshhans, Owen Granke, and Ricky Sachar – members of the SEC’s Market Abuse Unit in Washington, D.C. The SEC’s litigation effort will be led by Matthew Martens and David Williams. The SEC thanks the Department of Justice’s Criminal Fraud Section, the Federal Bureau of Investigation, the Department of Health and Human Services Office of Inspector General, and the U.S. Attorney’s Office for the District of Maryland for their ongoing assistance in this matter. The SEC’s investigation is continuing.”
It looks like Mr. Liang has a lot of problems. It is of course critical that this is not just a single case that the Department of Justice decides to investigate regarding fraud committed by government employees, officials and political appointees and the politicians who appoint them.
" Washington, D.C., March 29, 2011 – The Securities and Exchange Commission today charged a U.S. Food and Drug Administration (FDA) chemist with insider trading on confidential information about upcoming announcements of FDA drug approval decisions, generating more than $3.6 million in illicit profits and avoided losses.
The SEC alleges that Cheng Yi Liang illegally traded in advance of at least 27 public announcements about FDA drug approval decisions involving 19 publicly traded companies. Some announcements concerned the FDA’s approval of new drugs while others concerned negative FDA decisions. In each instance, he traded in the same direction as the announcement. Liang went to great lengths to conceal his insider trading. He traded in seven brokerage accounts, none of which were in his name. One belonged to his 84-year-old mother who lives in China.
In a parallel action, criminal charges filed by the Department of Justice against Liang were unsealed today.
“Liang victimized both the investors who were disadvantaged by his theft of inside information and the American citizens whose trust he violated by placing private gain above public good,” said Robert Khuzami, Director of the SEC’s Division of Enforcement.
Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit, added, “The insider trading laws apply to employees of the federal government just as they do to Wall Street traders, corporate insiders, or hedge fund executives. Many government agencies like the FDA routinely possess and generate confidential market-moving information. Federal employees who misappropriate such information to engage in insider trading risk exposing themselves to potential civil and criminal charges for violating the federal securities laws.”
According to the SEC’s complaint filed in the U.S. District Court for the District of Maryland (Greenbelt Division), Liang works in the FDA’s Center for Drug Evaluation and Research. Beginning as early as July 2006, Liang purchased shares for a profit before 19 positive announcements regarding FDA decisions, shorted stock for a profit before six negative announcements, and sold shares to avoid losses before two negative announcements.
For example, the SEC alleges that Liang traded in advance of an FDA announcement approving Clinical Data’s application for the drug Viibryd. Liang accessed a confidential FDA database that contained critical documents and information about the FDA’s review of Clinical Data’s application, and then used that information to purchase more than 46,000 shares of Clinical Data at a cost of more than $700,000. After the markets closed on Friday, Jan. 21, 2011, the FDA issued a press release approving Viibryd. Clinical Data’s stock price rose by more than 67 percent the following Monday and Liang sold his entire Clinical Data position in less than 15 minutes for a profit of approximately $380,000.
The SEC alleges that Liang used the trading profits for his own personal benefit. Checks totaling at least $1.2 million were written from the accounts he used for trading to a bank account in his name, to him or his wife directly, or to credit card companies to pay off balances in accounts in his or his wife’s name. Nearly $65,000 worth of checks were written from the brokerage accounts to car dealerships to purchase vehicles later registered to Liang and his wife.
The SEC’s complaint alleges that Liang violated Section 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and seeks a permanent injunction against future violations, disgorgement of unlawful trading profits and losses avoided plus prejudgment interest, and a financial penalty. The SEC’s complaint names Liang’s wife Yi Zhuge and the account holders for the seven trading accounts he used – Liang’s mother Hui Juan Chen, his son Andrew Liang, Shuhua Zhu, Zhongshan Chen, and Honami Toda – as relief defendants for the purpose of recovering ill-gotten funds to which they have no legitimate claim. Criminal charges by the Department of Justice against Andrew Liang were unsealed today in the District of Maryland.
The SEC’s investigation was conducted by Deborah Tarasevich, Carolyn Welshhans, Owen Granke, and Ricky Sachar – members of the SEC’s Market Abuse Unit in Washington, D.C. The SEC’s litigation effort will be led by Matthew Martens and David Williams. The SEC thanks the Department of Justice’s Criminal Fraud Section, the Federal Bureau of Investigation, the Department of Health and Human Services Office of Inspector General, and the U.S. Attorney’s Office for the District of Maryland for their ongoing assistance in this matter. The SEC’s investigation is continuing.”
It looks like Mr. Liang has a lot of problems. It is of course critical that this is not just a single case that the Department of Justice decides to investigate regarding fraud committed by government employees, officials and political appointees and the politicians who appoint them.
Monday, March 28, 2011
ONLINE PAYDAY LENDER PONZI SCHEME ALLEGED IN UTAH
The following is a case brought by the SEC which alleges fraud by a Utah pay day firm. The commingled funds of investors and the company seemed to have been used to set up a Ponzi scheme. The following is an excerpt from the SEC web site:
“Washington, D.C., March 28, 2011 – The Securities and Exchange Commission today announced that it has obtained a court order freezing the assets of two online payday loan companies and their owner charged with perpetrating a $47 million offering fraud and Ponzi scheme.
The SEC alleges that John Scott Clark of Hyde Park, Utah, promised investors astronomical annual returns of 80 percent on their investments in his companies – Impact Cash LLC and Impact Payment Systems LLC. Investors were told their money would be kept in separate bank accounts and used to fund payday loans and other aspects of the companies’ operations. However, Clark instead commingled investor funds into a single pool and used them to make unauthorized investments, pay fictitious profits to earlier investors, and finance his own lavish lifestyle.
“Investors were promised extraordinary returns while Clark was actually diverting their money to make such extraordinary personal purchases as a fully restored classic 1963 Corvette Stingray,” said Ken Israel, Director of the SEC’s Salt Lake Regional Office. “Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates.”
The SEC alleges that in addition to buying multiple expensive cars and snowmobiles, Clark stole investor funds to purchase a home theater, bronze statues and other art for himself.
According to the SEC’s complaint filed in U.S. District Court for the District of Utah, Clark lured at least 120 investors into his scheme. Besides word-of-mouth referrals from earlier investors, Clark also recruited investors by attending trade shows in various states, attending payday loan conferences, and paying salespeople to locate potential investors to meet with Clark. Clark paid one salesperson between more than a half-million dollars over a multi-year period to locate potential investors and attend payday loan conferences and trade shows.
The SEC alleges that from at least March 2006 to September 2010, Clark and the Impact companies raised funds from investors for the stated purposes of funding payday loans, purchasing lists of leads for payday loan customers, and paying Impact’s operating expenses. Impact did not distribute a private placement memorandum or any other document disclosing the nature of the investment or the risks involved to investors. The SEC’s complaint charges Impact and Clark with fraudulently selling unregistered securities.
According to the SEC’s complaint, Clark routinely altered investor account statements provided to him by Impact’s accounting department to create artificially high annual rates of return. The altered account statements with purported profits were then sent to investors. Account statements to customers showed annualized returns varying from 30 percent to more than 200 percent.
In addition to the asset freeze approved late Friday, the court has appointed a receiver to preserve and marshal assets for the benefit of investors. The SEC’s complaint seeks a preliminary and permanent injunction as well as disgorgement, prejudgment interest and financial penalties from Impact and Clark.”
When people are living well beyond their means that usually means one of two things: either they are borrowing their way into bankruptcy or they are stealing the money in some way.
“Washington, D.C., March 28, 2011 – The Securities and Exchange Commission today announced that it has obtained a court order freezing the assets of two online payday loan companies and their owner charged with perpetrating a $47 million offering fraud and Ponzi scheme.
The SEC alleges that John Scott Clark of Hyde Park, Utah, promised investors astronomical annual returns of 80 percent on their investments in his companies – Impact Cash LLC and Impact Payment Systems LLC. Investors were told their money would be kept in separate bank accounts and used to fund payday loans and other aspects of the companies’ operations. However, Clark instead commingled investor funds into a single pool and used them to make unauthorized investments, pay fictitious profits to earlier investors, and finance his own lavish lifestyle.
“Investors were promised extraordinary returns while Clark was actually diverting their money to make such extraordinary personal purchases as a fully restored classic 1963 Corvette Stingray,” said Ken Israel, Director of the SEC’s Salt Lake Regional Office. “Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates.”
The SEC alleges that in addition to buying multiple expensive cars and snowmobiles, Clark stole investor funds to purchase a home theater, bronze statues and other art for himself.
According to the SEC’s complaint filed in U.S. District Court for the District of Utah, Clark lured at least 120 investors into his scheme. Besides word-of-mouth referrals from earlier investors, Clark also recruited investors by attending trade shows in various states, attending payday loan conferences, and paying salespeople to locate potential investors to meet with Clark. Clark paid one salesperson between more than a half-million dollars over a multi-year period to locate potential investors and attend payday loan conferences and trade shows.
The SEC alleges that from at least March 2006 to September 2010, Clark and the Impact companies raised funds from investors for the stated purposes of funding payday loans, purchasing lists of leads for payday loan customers, and paying Impact’s operating expenses. Impact did not distribute a private placement memorandum or any other document disclosing the nature of the investment or the risks involved to investors. The SEC’s complaint charges Impact and Clark with fraudulently selling unregistered securities.
According to the SEC’s complaint, Clark routinely altered investor account statements provided to him by Impact’s accounting department to create artificially high annual rates of return. The altered account statements with purported profits were then sent to investors. Account statements to customers showed annualized returns varying from 30 percent to more than 200 percent.
In addition to the asset freeze approved late Friday, the court has appointed a receiver to preserve and marshal assets for the benefit of investors. The SEC’s complaint seeks a preliminary and permanent injunction as well as disgorgement, prejudgment interest and financial penalties from Impact and Clark.”
When people are living well beyond their means that usually means one of two things: either they are borrowing their way into bankruptcy or they are stealing the money in some way.
Sunday, March 27, 2011
In the following excerpt released by the SEC web site an Idaho company has been charged with fraudulently raising funds for a nuclear power project:
“ Washington D.C., Dec. 16, 2010 — The Securities and Exchange Commission today charged a self-described power company in Idaho with fraudulently raising funds for a $10 billion nuclear power project. The SEC is seeking an emergency court order to freeze the assets of the company and two executives.
The SEC alleges that Alternate Energy Holdings Inc. (AEHI) has raised millions of dollars from investors in Idaho and throughout the U.S. and Asia while fraudulently manipulating its stock price through misleading public statements that conceal the secret profits reaped by its CEO Donald L. Gillispie and Senior Vice President Jennifer Ransom. Gillispie has touted the company as a tremendous investment opportunity that could rival Exxon Mobil in profitability, despite the fact that AEHI has essentially no revenue and minimal operations.
The SEC suspended trading in AEHI stock earlier this week.
“In light of AEHI’s ongoing efforts to raise funding while promoting itself through a daily deluge of press releases, we needed to take immediate action to get to the bottom of the company’s misleading statements,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “Documents we have obtained to date indicate a scheme to personally enrich the CEO at the expense of investors.”
According to the SEC’s complaint filed today in federal district court in Boise, AEHI’s fundraising was facilitated by a scheme to drive up the company’s stock price, both through frequent press releases (at least 87 in 2010 alone) and efforts of paid stock promoters to manipulate the stock price. The SEC alleges that the company has made multiple misrepresentations, including claims that its executives had such confidence in AEHI that they had not sold a single share of company stock. Records obtained by the SEC show that Gillispie and Ransom have instead secretly unloaded extensive stock holdings and funneled the money back to Gillispie.
The SEC’s complaint also alleges that AEHI reported to the SEC and investors that Gillispie’s compensation was $133,000. However, Gillispie has actually reaped approximately six times that amount in 2010.
The SEC’s complaint charges AEHI, Gillispie, and Ransom with violations of the anti-fraud provisions of the federal securities laws, and names as relief defendants two companies controlled by Gillispie and Ransom (Executive Energy Consulting LLC and Bosco Financial LLC). In a motion filed simultaneously with the enforcement action, the SEC seeks emergency relief for investors including an asset freeze and a temporary restraining order enjoining the defendants from further violations of the securities laws.
The SEC acknowledges the assistance of the Idaho Department of Finance and FINRA in this matter. The SEC’s investigation is continuing.”
“Going Green” might be the next mortgage fraud/crisis. A lot of money is sloshing around out there for “Going Green” projects and where there is money there will be some if not a lot of fraud.
“ Washington D.C., Dec. 16, 2010 — The Securities and Exchange Commission today charged a self-described power company in Idaho with fraudulently raising funds for a $10 billion nuclear power project. The SEC is seeking an emergency court order to freeze the assets of the company and two executives.
The SEC alleges that Alternate Energy Holdings Inc. (AEHI) has raised millions of dollars from investors in Idaho and throughout the U.S. and Asia while fraudulently manipulating its stock price through misleading public statements that conceal the secret profits reaped by its CEO Donald L. Gillispie and Senior Vice President Jennifer Ransom. Gillispie has touted the company as a tremendous investment opportunity that could rival Exxon Mobil in profitability, despite the fact that AEHI has essentially no revenue and minimal operations.
The SEC suspended trading in AEHI stock earlier this week.
“In light of AEHI’s ongoing efforts to raise funding while promoting itself through a daily deluge of press releases, we needed to take immediate action to get to the bottom of the company’s misleading statements,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “Documents we have obtained to date indicate a scheme to personally enrich the CEO at the expense of investors.”
According to the SEC’s complaint filed today in federal district court in Boise, AEHI’s fundraising was facilitated by a scheme to drive up the company’s stock price, both through frequent press releases (at least 87 in 2010 alone) and efforts of paid stock promoters to manipulate the stock price. The SEC alleges that the company has made multiple misrepresentations, including claims that its executives had such confidence in AEHI that they had not sold a single share of company stock. Records obtained by the SEC show that Gillispie and Ransom have instead secretly unloaded extensive stock holdings and funneled the money back to Gillispie.
The SEC’s complaint also alleges that AEHI reported to the SEC and investors that Gillispie’s compensation was $133,000. However, Gillispie has actually reaped approximately six times that amount in 2010.
The SEC’s complaint charges AEHI, Gillispie, and Ransom with violations of the anti-fraud provisions of the federal securities laws, and names as relief defendants two companies controlled by Gillispie and Ransom (Executive Energy Consulting LLC and Bosco Financial LLC). In a motion filed simultaneously with the enforcement action, the SEC seeks emergency relief for investors including an asset freeze and a temporary restraining order enjoining the defendants from further violations of the securities laws.
The SEC acknowledges the assistance of the Idaho Department of Finance and FINRA in this matter. The SEC’s investigation is continuing.”
“Going Green” might be the next mortgage fraud/crisis. A lot of money is sloshing around out there for “Going Green” projects and where there is money there will be some if not a lot of fraud.
Saturday, March 26, 2011
RADIO MAN FINED FOR FRAUD BY SEC
The following excerpt from the SEC blog outlines a case and the punishment for a businessman who is accoused fraud:
Washington, D.C., March 25, 2011 — The Securities and Exchange Commission today charged Houston-area businessman Daniel Frishberg with fraudulent conduct in connection with promissory note offerings made to clients of his investment advisory firm.
The SEC alleges that Frishberg's firm Daniel Frishberg Financial Services (DFFS) advised clients to invest in notes issued by Business Radio Networks (BizRadio), a media company founded by Frishberg where he hosts his own show under the nickname "The MoneyMan." Frishberg failed to tell his clients about BizRadio's poor financial condition or his significant conflicts of interest with the note offerings that helped fund his salary at BizRadio.
Frishberg agreed to settle the SEC's charges by paying a $65,000 penalty that will be distributed to harmed investors. He will be barred from future association with any investment adviser.
"Contrary to his obligations as an investment adviser, Frishberg approved risky investment recommendations to his clients without ensuring that the risks and conflicts were properly disclosed," said Rose Romero, Director of the SEC's Fort Worth Regional Office. "Frishberg personally benefitted from the questionable investments that were recommended to his clients."
According to the SEC's complaint filed in federal district court in Houston, at least $11 million in promissory notes were issued by BizRadio and Kaleta Capital Management (KCM), which is owned by Frishberg's associate Albert Fase Kaleta. Frishberg and Kaleta jointly controlled BizRadio.
The SEC charged Kaleta and his firm with fraud in 2009, and the court appointed a receiver to marshal the assets of KCM and relief defendants BizRadio and DFFS.
The SEC alleges that Frishberg authorized 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.
The SEC's complaint alleges that Frishberg violated Section 206(2) of the Investment Advisers Act of 1940 and aided and abetted violations of Sections 206(1) and 206(2) of the Advisers Act.
Without admitting or denying the SEC's allegations, Frishberg consented to the entry of a permanent injunction against these violations and to pay a $65,000 penalty. Frishberg consented to the establishment of a fair fund for the distribution of his penalty to harmed investors, and agreed to be barred from association with any investment adviser or certain other registered entities.”
Washington, D.C., March 25, 2011 — The Securities and Exchange Commission today charged Houston-area businessman Daniel Frishberg with fraudulent conduct in connection with promissory note offerings made to clients of his investment advisory firm.
The SEC alleges that Frishberg's firm Daniel Frishberg Financial Services (DFFS) advised clients to invest in notes issued by Business Radio Networks (BizRadio), a media company founded by Frishberg where he hosts his own show under the nickname "The MoneyMan." Frishberg failed to tell his clients about BizRadio's poor financial condition or his significant conflicts of interest with the note offerings that helped fund his salary at BizRadio.
Frishberg agreed to settle the SEC's charges by paying a $65,000 penalty that will be distributed to harmed investors. He will be barred from future association with any investment adviser.
"Contrary to his obligations as an investment adviser, Frishberg approved risky investment recommendations to his clients without ensuring that the risks and conflicts were properly disclosed," said Rose Romero, Director of the SEC's Fort Worth Regional Office. "Frishberg personally benefitted from the questionable investments that were recommended to his clients."
According to the SEC's complaint filed in federal district court in Houston, at least $11 million in promissory notes were issued by BizRadio and Kaleta Capital Management (KCM), which is owned by Frishberg's associate Albert Fase Kaleta. Frishberg and Kaleta jointly controlled BizRadio.
The SEC charged Kaleta and his firm with fraud in 2009, and the court appointed a receiver to marshal the assets of KCM and relief defendants BizRadio and DFFS.
The SEC alleges that Frishberg authorized 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.
The SEC's complaint alleges that Frishberg violated Section 206(2) of the Investment Advisers Act of 1940 and aided and abetted violations of Sections 206(1) and 206(2) of the Advisers Act.
Without admitting or denying the SEC's allegations, Frishberg consented to the entry of a permanent injunction against these violations and to pay a $65,000 penalty. Frishberg consented to the establishment of a fair fund for the distribution of his penalty to harmed investors, and agreed to be barred from association with any investment adviser or certain other registered entities.”
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