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U.S. Securities and Exchange Commission

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21293 / November 13, 2009

Securities and Exchange Commission v. Albert Fase Kaleta, et al., Civ. Action No. 4:09-cv-3674 (United States District Court for the Southern District of Texas, Houston Division).

SEC Sues Houston Businessman for Conducting Fraudulent $10 Million Promissory-Note Offering

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.

The complaint alleges that Kaleta and KCM violated the anti-fraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The complaint further alleges that Kaleta violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The complaint requests permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties against the Defendants. In addition, the Commission has filed a motion asking the Court to appoint a receiver to collect, marshal, manage and distribute these assets for the benefit of investors.

Without admitting or denying the Commission's allegations, Kaleta and KCM have consented to permanent injunctions against future violations of the anti-fraud provisions. Kaleta and KCM have also consented to an order appointing a receiver.

SEC Complaint

 

http://www.sec.gov/litigation/litreleases/2009/lr21293.htm


Modified: 11/13/2009