Home      |     Court Filings      |     Statements      |     Claims      |     FAQS      |     Contact Us





8/24/2011 Status Update


The Receiver would like the investors/claimants to be aware of several significant developments which have occurred with respect to the progress of the Receivership.

Proposed Sale of Radio Station KTEK

As previously reported, the Receiver sought the District Court’s approval for procedures for the sale of Radio Station KTEK (the “Station”), an asset of the Receivership Estate. On April 4, 2011 the District Court entered an Order approving the proposed sale procedures. In summary, the Receiver was authorized to enter into a “stalking horse” agreement with South Texas Broadcasting (“STB”) and then to seek higher “topping bids” through an auction process.  The “stalking horse” sale of the Station provided for a consideration of $1,000,000 in cash and the discharge of approximately $1,500,000 in secured indebtedness held by STB. As ordered by the Court, the Receiver gave notice of the sale through publication in the Houston Chronicle. In addition to the notices required by the Court, the Receiver also advertised the proposed sale of the Station in two widely circulated trade publications/websites. The Receiver also contacted media brokers who had expressed interest in the Station. Notwithstanding these efforts, no “topping bids” were received by the deadline established in the Procedures Order and, accordingly, the Receiver sought confirmation of the sale of the Station to STB, pursuant to the “stalking horse” contract.

Prior to the hearing on Receiver’s Motion for Confirmation of the Sale, a group of investors, through counsel, objected to the sale on a variety of grounds and asserted that based upon documentation they had received in connection with their investments in BizRadio promissory notes, they held security interests in the Station assets superior to the security interest held by STB. They also contended that the hearing on the Sale to STB should be postponed because others who held potential interests in the Station had not been noticed. At the hearing on Motion for Confirmation, after hearing legal arguments with respect to the competing claims, the District Court determined that additional efforts to notify potentially interested parties should be undertaken. Subsequently, based upon the efforts of the Objectors and on the part of the Receiver, a comprehensive list of 172 potentially interested persons was compiled and on August 8, 2011 Receiver served the Motion for Confirmation and supporting papers on all of those persons. It should be emphasized that this extensive list includes anyone ever potentially asserting an interest in the Station and service upon them does not imply that the Receiver believes that any of those individuals served hold an interest superior to other investors/claimants upon the Receivership Estate.

Although at the hearing on June 28, 2011, the Court received arguments with respect to the competing claims of security interests, the Court reserved judgment on those issues and ordered a further hearing on September 15, 2011. The Court also established August 29,2011 as the deadline for any additional objections to the sale.

 Settlement with Richard Jordan

On August 23, 2011 the District Court authorized and approved the Receiver’s Settlement with Richard Jordan, a former officer and equity owner of Daniel Frishberg Financial Services (“DFFS”), one of the Receivership entities. In connection with his investigation regarding the Receivership entities, the Receiver determined that in or about October 2008, Mr. Jordan entered into a transaction with DFFS, Albert Kaleta and Daniel Frishberg, pursuant to which Mr. Jordan’s ownership interest would be purchased by DFFS. In or about November 2008, Mr. Jordan was paid the sum of $250,000 as a first installment on that purchase. The Receiver contended that the $250,000 paid to Mr. Jordan consisted of proceeds raised by Kaleta through the KCM promissory note offerings to investors.  Without admitting knowledge of the source of these proceeds, Mr. Jordan agreed to pay $250,000 to the Receivership Estate. $50,000 of this amount is to be paid within five days after execution of the Settlement Agreement. An additional $100,000 is to be paid by the anniversary of the initial payment, with the remaining $100,000 to be paid on or before December 31, 2012.  Pursuant to the terms of the Settlement, Mr. Jordan stipulated to the entry of judgment for any unpaid amounts should he default on any of these payment obligations.

Receiver v. Frishberg, Kaleta et al.

On August 23, 2011, the Receiver commenced an action in the U.S. District Court against Daniel and Elisea Frishberg, Albert Kaleta, Barrington Financial Advisors, Inc. (“Barrington”), and William C. Heath, Barrington’s president and CEO.

The suit alleges that the Frishbergs and Kaleta breached the fiduciary duties of loyalty and care which they owed to KCM, BizRadio, and DFFS (the “Receivership Entities”) as officers and directors, and seeks damages commensurate with the liabilities that the Receivership Entities were exposed to as a result of those breaches of fiduciary duty -- namely claims against the Receivership Estate by defrauded investors.  The suit also seeks the return of all KCM and BizRadio Note proceeds received, directly or indirectly, by the Frishbergs and Kaleta as fraudulent transfers from the Receivership Entities.

The Receiver seeks damages from Barrington and Heath for their participation with Frishberg in the tortious interference with and transfer of DFFS client accounts to Barrington, which represent substantially all of the assets of DFFS.  Frishberghas received payments from Barrington for these DFFS assets; by his Complaint the Receiver seeks the return of those payments to the Receivership Estate.

Anticipated Claims/Settlements

The Receiver is engaged in negotiations with other entities and individuals against whom the Receivership Estate has legally cognizable claims including, without limitation, claims upon promissory notes payable to the Receivership entities. It is anticipated that these negotiations will be concluded promptly.  In instances in which the Receiver is unable to achieve a settlement which is fair and equitable, litigation will be commenced prior to September 23, 2011 consistent with the District Court’s Scheduling Order.