On November 13, 2009, the Commission filed suit in the United States District Court for the Southern District of Texas against Houston businessman Albert Fase Kaleta and his company, Kaleta Capital Management, Inc. ("KCM"). Two other entities, Business Radio Network, L.P. d/b/a BizRadio ("BizRadio") and Daniel Frishberg Financial Services, Inc. (d/b/a DFFS Capital Management, Inc.) ("DFFS") were named as Relief Defendants solely for the purposes of equitable relief.
The Commission alleges that Kaleta and KCM raised approximately $10 million from approximately 50 investors in a fraudulent offering of promissory-note securities. The Commission further alleges that Kaleta misrepresented 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 the Relief Defendants DFFS and BizRadio, two financially precarious KCM affiliates who had no reasonable prospect of repaying the loans. Kaleta knew the financial condition of both companies because he was president, chief compliance officer, and a 44% owner of DFFS and, with others, controlled BizRadio. The complaint alleges that Kaleta also took approximately $1.5 million of the offering proceeds to pay his personal expenses. Finally, the Commission alleges that contrary to Kaleta's representations, he used investor funds to make interest payments to some of the promissory note holders.
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