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Bizradio Receiver Motion

Bizradio Receiver Motion

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Published by: editorial.online on May 07, 2010
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07/14/2010

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IN THE UNITED STATES DISTRICT COURTFOR THE SOUTHERN DISTRICT OF TEXASHOUSTON DIVISIONRECEIVER’S MOTION TO MODIFY ORDER 
Thomas L. Taylor III, Court-appointed Receiver for Defendant Kaleta Capital Management,Inc. (“KCM”), hereby files this Motion To Modify Order Appointing Receiver to expressly includeas part of the Receivership Estate the following individuals and entities: Defendant Albert F. Kaleta(“Kaleta”); Daniel Frishberg (“Frishberg”); and Relief Defendant Daniel Frishberg FinancialServices, Inc., d/b/a DFFS Capital Management, Inc. (“DFFS”), Frishberg & Kaleta CapitalManagement (“F&K”) d/b/a Frishberg & Kaleta Advisors, Relief Defendant Business Radio Network L.P., d/b/a BizRadio (“BizRadio”); BizMedia Network LLC (“BizMedia”), FrishbergGlobal Investments, LLC (“FGI”),and Portnoy, LLC(“Portnoy”).
APPOINTING RECEIVERAND FOR EMERGENCY ASSET FREEZESECURITIES AND EXCHANGECOMMISSION,Plaintiff,v.ALBERT FASE KALETA andKALETA CAPITAL MANAGEMENT, INC.,Defendants,BUSINESSRADIO NETWORK, L.P. d/b/aBizRadio and DANIEL FRISHBERGFINANCIAL SERVICES, INC., d/b/aDFFS CAPITAL MANAGEMENT, INC.,Relief Defendants,Solely for the Purposesof Equitable Relief.§§§§§§§§§§§§§§§§§§§Civil Action No. 4:09-cv-3674
Case 4:09-cv-03674 Document 22 Filed in TXSD on 05/04/10 Page 1 of 26
 
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I.
Daniel Frishberg and Defendant Albert Kaleta created a network of affiliated companies(KCM, DFFS, F&K,BizRadio, BizMedia, FGI andPortnoy)(the “FK affiliates”) --all owned and controlled by Frishberg and Kaleta. All of these entitieshaveconducted businesseither from ashared office suite
PRELIMINARY STATEMENT
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As shown below, all of the entities and individualssought to be included in the KCMReceivership by this Motionare inextricably intertwined with both KCM, the Defendant presentlyin receivership, and Defendant Kaleta, against whom disgorgement--in an amount to bedetermined--has already been ordered by this Court’sJudgment dated December 2, 2009.Asalleged by the SEC,Relief Defendants DFFS and BizRadio received funds and property from KCMwhich are proceeds of the unlawful activities of Defendants KCM and Kaleta; and Relief Defendantsobtained funds belonging to the defrauded KCM investors “under circumstances inwhich it is not just, equitable, or conscionable for them to retain the funds and property.”or from the homes of Frishberg or Kaleta. DFFS and F&K were investmentadvisory firms through which Frishberg andKaletadeveloped a substantialclient base. A number of investment advisoryclients of these entities became victims of the KCM promissory note fraud which is at the center of the present action. BizRadio and BizMedia operate a radio networkthat broadcasts programmingdesigned to attract clients to the DFFS and F&K investment advisory business. KCM was established to provide fundingboth to the investment adviser andtothe radionetwork through the sale of securities to the public. KCM was strategically positioned to raisecapital for Frishberg and Kaleta’s other businesses because their shared principals, Frishberg and Kaleta, provided KCM areadybase of potential investors--namelyFrishberg and Kaleta’sinvestment advisory clients.
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3050 Post Oak Blvd, Ste 1680, Houston, Texas.
Case 4:09-cv-03674 Document 22 Filed in TXSD on 05/04/10 Page 2 of 26
 
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Both KCM and Kaleta have been determined by this Court’s Judgment to have violated theSecurities Exchange Act of 1934 and other statutesin connection with their sale of KCM securitiesto the public.This Court’s judgment was entered upon the Commission’s charges that Kaleta and others had used KCM as a medium for raising money from members of the public, purportedly for the purpose of investing the proceeds in creditworthy small businesses which would return principal to the investors along with an attractive rate of interest.The Commission charged that, infact, KCM and Kaleta had induced investors to purchase KCM promissory notes using the proceedsto finance businesses owned and controlled by Kaleta, Frishberg and others --businesses whichwere anything but creditworthy.More than half of the KCM investors’ funds, were loaned to Relief Defendant BizRadio.Perpetrating a blatant, intentional fraud, Kaleta and Frishberg failed to disclose to KCM investorsthat all of BizRadio’s tangible assets had purportedlybeen “pledged”to third partieswhich would  potentially leave theKCM investors little more than BizRadio's dubious prospects for futureincome and --as it turns out –fraudand otherclaims against the entities and their principals.
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BizRadiois now the subject of an involuntary liquidating Chapter 7 bankruptcy petition brought by individuals who allege theyloaned money to BizRadio directly.In re BusinessRadio Network, LP, Case No. 10-32532 (Bankr. S.D. Tex -Judge Karen K. Brown). The putative Debtor filed a motion to dismiss the petition and an answer denying certain allegations in the petitionwhich is set for hearing on May 10, 2010, at 11:00 a.m. As set forth below, Plaintiff believes thatthe police powers exception to the automatic stay of Section 362 of the Bankruptcy Code isapplicable in the BusinessRadio Network LP case and,accordingly, thatthis Courtmay proceed 
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The Receiver is investigating the circumstances of these purported pledges and will challenge any assertion of priority by the recipients of these pledges vis-à-vis the KCM investors.
Case 4:09-cv-03674 Document 22 Filed in TXSD on 05/04/10 Page 3 of 26

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