KTEK-AM Houston (Alvin, TX) has seen its FCC license transferred to Thomas L. Taylor III as Receiver for BusinessRadio Houston Licensee LLC. But what does that mean for a previously announced deal to sell the station to Salem Communications?
RBR-TVBR contacted communications attorney Mark Denbo of Drinker Biddle & Reath to get the answer. He told us that the station continues to broadcast under an LMA to Salem and “it still is the parties’ intention for the sale to proceed.”
The order by US District Judge Nancy Atlas came in a case brought by the US Securities and Exchange Commission against Albert Fase Kaleta and Kaleta Capital Management (KCM). The SEC said appointment of a receiver was necessary to preserve the assets so that they can eventually be returned to investors harmed by the alleged misconduct of Kaleta.
The lawsuit brought by the SEC claims that KCM raised approximately $10 million from 50 investors in a fraudulent offering of promissory-note securities. The SEC said Kaleta told investors that KCM would use the offering proceeds to provide short-term loans to credit-worthy small businesses. Instead, KCM loaned about $6.7 million to BusinessRadio Network LP (dba BizRadio) and Daniel Frishberg Capital Management Inc. (dba DFFS Capital Management Inc.), which the lawsuit describes as “two financially precarious KCM affiliates who had no reasonable prospect of repaying the loans.” Kaleta is also accused of using approximately $1.5 million of the money raised to pay his own personal expenses.
Neither BizRadio nor DFFS are accused of any fraud themselves, but the SEC included them as “relief defendants solely for the purposes of equitable relief.”
The federal lawsuit by the SEC against Kaleta and KCM dates back to November and Taylor was appointed Receiver in December, but only after a recent order by Judge Atlas modifying the receivership order did Taylor file with the FCC to formally take possession of the license for KTEK.
Meanwhile, operations continue as they have since Salem began its LMA in March, operating it in a local cluster with KNTH-AM & KKHT-FM. Once an actual sale takes place, the cash proceeds will go to the Receiver to compensate the investors allegedly defrauded by KCM.
RBR-TVBR observation: As hard as it is for broadcasting entrepreneurs to find lending, the lesson from this is that you even have to be careful about whom your lender is.