The Securities and Exchange Commission says Albert Kaleta took in and misdirected $10M from about 50 investors, loaning much of it to radio network BizRadio and other interests. SEC alleges some of it went to pay Kaleta’s personal obligations.
BizRadio is a small AM-based network with affiliates in Houston, Dallas, San Antonio, Denver and Colorado Springs, according to the Houston Chronicle. Its business talk format is designed to appeal to a small upscale and well-educated audience.
SEC charged Albert Fase Kaleta and Kaleta Capital Management Inc. directly, and listed BusinessRadio Network L.P. d/b/a BizRadio and Daniel Frishberg Financial Services d/b/a DFFS Capital Management as “relief defendants solely for the purposes of equitable relief.”
Here is SEC’s summary of the charges: “Since approximately December 2007, KCM, a private company owned and controlled by Kaleta, has raised approximately $10 million from approximately 50 investors in a fraudulent offering of promissory-note securities. Kaleta solicited investors on KCM’s behalf, misrepresenting numerous important facts about the investment. For example, Kaleta represented that KCM would use the offering proceeds to provide short-term loans to credit-worthy small businesses. Instead, at Kaleta’s direction, KCM loaned approximately $6.7 million of the offering proceeds to Relief Defendants DFFS and BizRadio, two financially precarious KCM affiliates who had no reasonable prospect of repaying the loans. Kaleta also took approximately $1.5 million of the offering proceeds to pay his personal expenses. Finally, contrary to Kaleta’s representations regarding the use of offering proceeds, KCM, at Kaleta’s direction, used offering proceeds to make interest payments to some promissory-note investors.”
SEC noted that Kaleta was using some of the funds to pay personal credit card bills of more than $10K per month, as well as to pay for at least one Mercedes-Benz automobile.
SEC is seeking a prohibition of future violations, disgorgement of illicit profits, civil monetary penalty and a receiver for Kaleta Capital Management to preserve its assets for investors. It further wants disgorgement from the relief defendants.
The lawsuit was filed in the United States District Court for the Southern District of Texas, Houston Division.
Kaleta is said to have signed a consent order with the SEC admitting no wrong-doing and, of course, promising never to do it again. And former Kaleta partner Dan Frishberg says debt accrued by his firm and BizRadio will be repaid, and that he and Kaleta are no longer partners, according to the Chronicle.