No Bail for Microcap Ringleader B.J. Gallison

Gallison Family Photo

A Southern California guy whose parents were pillars of La Jolla society has just been told there is no way he’s getting bail. Harold (B.J.) Gallison Jr. was arrested on July 14th for the second time as the ringleader of multiple microcap frauds. On Friday the Dept of Justice showed a San Diego federal judge how B.J. Gallison has moved over $400k into beneficiary accounts in the last ten months while he likely knew he was once again under federal investigation. Meanwhile Wendy Silver Gallison, his wife, and their two small children are holed up in small house in a remote desert section of San Diego called Valley Center facing frozen bank accounts.

The career criminal history of B.J. Gallison for his role in everything from bucket shop broker dealer operations (La Jolla Captial) to his recent escapades of helping owners of microcap companies hide their stock and money launder their cash while they executed pump and dump schemes (Moneyline Brokers) has been chronicled by a seasoned San Diego investigative reporter and editor Don Bauder. (He is a colorful writer with great inside detail so I totally recommending reading his reports.)

This is a case of complete government fail to stop a man with no apparent respect for earning a dollar legally or respecting the laws of free markets. In the current case, filed June 24th and unsealed July 14th, the SEC sued 15 other people with him and the DOJ criminally charged 8 of Gallison’s cohorts.

There are likely others that are working as confidential informants or co-conspirators that the government hasn’t named yet in this case and I’d love to hear from anyone who knows these people. Starting with anyone from San Diego who has interacted with Wendy Silver Gallison. She was named as the director of two Nevada incorporated companies the DOJ said recently received monies from B.J. Gallison’s Moneyline operations.

I spoke with Wendy briefly today (home: 760-751-0141), who lives at 11966 Betsworth Rd Valley Center, Ca and she confirmed Faith Services Inc was a company related to her that she served as director. She got all caggy when I tried to get her to explain why B.J.’s off-shore broker dealer entities (Stix Pix Inc, Jurojin), named in the DOJ complaint, were making regular deposits into the Faith Services Comerica Bank account to the tune of $257,500 from September 2014 to March 2015. The only really answer I got out of Wendy was “I’d have to talk to the lawyer about that”. But she wouldn’t tell me who ‘the lawyer’ is. When I eventually asked what she thought of her husband’s arrest she hung up.

Now Wendy likely knew this payday with the government was coming. She tried to erase her Facebook page this month but a cached view still shows Wendy is a church going lover and likes Valley Central Community Church. Religious organizations are often an easy tax shelter for finance criminals but we still have no clear answer on how many other shell corporations B.J. and Wendy could have stuffed their ill-gotten gains in. I find it interesting that Wendy and the kids are living in a home worth less than the $421,400k the DOJ says her husband tried to hide in the last ten months. If you know Wendy from church in Valley Center, feel free to reach out to me at

Another unnamed long time person in the scheme could be B.J.’s lawyer Irving Einhorn who wrote me this week saying he’s not representing B.J. Gallison. Einhorn was named in a 2010 civil case by clients of Gallison’s at GISBeX (an online trading platform many think he started to run during his first prison sentence in 2005). The clients accused Einhorn, in court documents, of strong arming them to stop their litigation against GISBeX when the online broker wouldn’t return the money or stock in their account. Einhorn allegedly told the clients he’d report them to the SEC. The clients, who filed suit in South Florida, had been trading in one of the stocks listed in the most recent DOJ case $BYRN. The company was a total pump and dump and these GISBeX clients (who honestly could be nominee accounts) said they even found an email chain between Einhorn and Gallison about $BRYN being a pump and dump.

Gallison has now hired a former SEC enforcement lawyer, Steven Goldsobel, who hasn’t return my calls or emails for comment. Goldsobel has represented other microcap fraudsters. He was at Gallison’s detention hearing and wasn’t able to argue his client out of jail.

I have more detailed report on the players in this fraud and the microcap stocks involved at If you know more about Wendy, B.J. and their old lawyer friend Irving Eihorn please reach out to me at

DOJ Document presented at Gallison’s Bail hearing

Harold B.J. Gallison Money Deposits Sep-July by Teri Buhl

Baker Capital’s Investment Failed- URL Up For Sale

This story has been updated.

One of the most expensive URL’s has been put up for sale by Venture Capital firm Baker Capital after nearly a decade of failed attempts to turn a decent profit selling wine nationally online. I reported today for finance trade publication Growth Capitalist that Baker signed an exclusive deal to sell the business with a bulge bank but insiders say the URL is the only asset worth buying. Meaning so far offers are not exactly coming in and Baker is expected to take a huge loss on the investment.

Matt Marshall, founder of Venture Beat, first covered the legal saga of Baker Capital using unique voting rights to squash a sell to Liberty Media back in 2005. A sale that founder Chris Kitze and CEO George Garrick said would have made their investors $30 million.

Growth Capitalist writes today:

In 2004 CEO Garrick convinced Baker Capital to put in $17 million in an initial round which gave the venture firm 35% ownership, two board seats, and co-liquidation veto rights with Kitze. The right for a VC firm with a non-controlling stock interest to veto any sale of the company was rare but Garrick believed Baker partner Joe Saviano when he said they’d never use it. A mistake in vetting a VC firm’s character that Garrick said later in court filings he regretted.

Baker is basically the evil VC firm in this saga who got too greedy trying to push out the original investors but when they got control of they couldn’t turn it into anything worth selling for a profit or make a viable IPO. Court records show Baker invested at least $26 million into but it’s likely more millions were spent keeping it going for the last 6 years that they had control ownership. Amazon could be a likely buyer for the URL, a name that according to is now worth $5.4 million, but so far they don’t appear interested in buying it.

Baker also appears unable to admit their collapse in assets under management. The firm’s marketing material says they have $1.5 billion of AUM. But a check of their SEC records for registered investment advisors from December 2012 shows only around $500,000 of AUM. They also haven’t been able to close out and start a new fund since 2000 according to Capital IQ.

The deal highlighted a rich investor/tech company founder spending millions and 3.5 yrs of litigation in California State court to show the world that Baker Capital cheated them out of millions–only to watch the Judge rule in total favor of Baker because of how the transaction was set up under Delaware law. Gibson Dunn were Baker Capital’s lawyers on the deal and now tout the case as a win-win legal strategy for VC investors who hold significant stakes in companies and act in their own interest. Meaning it’s a legal strategy for how to screw over growth company founders.

This one is a buyer beware scare story for all you new tech or Bitcoin company CEO’s looking to the VC capital markets to grow your company. Chris Kitze the famed former founder of who has a history of successful start-ups told Growth Capitalist he’d never use a VC again. He’s since built two new tech and media companies–one about to launch out of beta that has some supper secret James Bond like two-way communication platform that even NSA and the FBI can’t get into. Kitze, who can’t comment on because of confidentiality agreements, is likely licking his chops and smiling at Baker loosing all their investors money on this deal.

There are ton of great details about the decade long history of the players involved in this company along with reasons why online retail wine sells will likely never be profitable so go read it at

UPDATE 7-2-13: Venture Beat has followed my reporting and add their own news that a whopping $75mn of VC and Angle money went into in the last decade. They also confirmed the revenue numbers that my sources have been told by the bankers selling this dog but the CEO leaves out the fact he is still at zero EBITDA.

UPDATE 7-3-13: The CEO who was placed in the job by Baker Capital has gone into spin mode. We stand by our news report at Growth Capitalist. Berqsund, the CEO, is likely worried about employees jumping ship off the news. The CEO, Rich Bergsund, doesn’t get to deiced when the company is up for sale…that Baker Captial’s lucky job.

Update 7–10-13: Apparently Baker Capital now has their CEO promoting company numbers that relate to cash flow two years ago (and one EBITDA number from 2010) without admitting what their net profits are for the last three years. Rob Manning, one of the few remaining people at Baker Capital, told the SF Business Journal his VC firm likes companies that generate cash flow. Rob also knows that M&A bankers like continued positive EBITDA (Earning before Interest, Taxes, Depreciation, and Amortization) and investors want to see a company can actually make money after a VC firm has spent 9 years pumping their cash into it.
Former public auditor and consultant Francine McKenna told this reporter, “Cash flow is very subjective and doesn’t equal positive EBITDA, positive EBITDA doesn’t equal a net profit. Tech companies that are getting ready for an IPO or sale love to taunt revenue or sales numbers but that’s not a picture of profitability.”
You see taxes and interest eat up a lot of cash flow. If a company tells you they have positive cash flow for one year they could just be delaying paying suppliers, sold an asset that year (like one of their on ground wine shops) or simply be paying their bills late. So when I see CEO’s responding to a news report with half baked numbers (that might not even been audited) I know they are in full spin mode.
Baker Capital also doesn’t deny they hired a big bank to sell I thought this story was newsworthy for Growth Capitalist subscribers because it showed a retail frontier that VC’s have pumped mega millions into but have been unable to nail down how to make the online business model really profitable for national wine sales. It also was a tale of how company founders can get screwed over by VC’s when they give up to much control for fresh capital.

Baker Capital (’s owner) and their attorneys were called for comment days before my news report ran at Growth Capitalist. All chose not to respond to the facts and comments we were planning to report.

Does a Material Weakness in New Canaan Financials Mean Problems for Muni Bond Investors?

New Canaan Town Sign

New Canaan’s town council received an external audit management letter that warned of possible material miss-statements in the town’s financials. The management letter, sent to town council and obtained by this reporter, talks about police overtime booked as receivables instead of an expense, a finance director for the Board of Ed having unchecked spending on his town credit card, double postings of tax collections, and inaccurate accounting records on bank accounts for years that the auditor said was impossible to reconcile. For a town with $129 million of public debt issued this is worrisome since it could affect their bond rating ,which would increase New Canaan’s borrowing cost. There also could be issues with compliance of State mandated regulations designed to protect the rights of bond investors.

In the audit world when a material weakness is issued in a report it’s their way of saying something doesn’t smell right. A ‘material weakness’ is more severe than a ‘significant deficiency’, which in turn is more severe than a ‘deficiency’ in internal controls.

Roy Abramowitz, C.P.A., and former treasure of the New Canaan Republican Town Committee said, “Material Weakness in my experience usually is a result of purposeful neglect of duties, incompetence , cover-up or out-right fraud.”

My favorite part was the auditor’s warning that the town ethics policy needed to be reviewed. Especially the ‘Ethics Policy for Disclosure of Interest in Transactions’ on page 18 of the Management Letter. You know the kind of thing where former First Selectman Jeb Walker could have given town contracts to organizations or people he might have had a financial connection to.

Abramowitz warned the Town Council and the Board of Finance that there could be internal control issues when Jeb Walker was in charge of New Canaan. When a Certified Public Accountant, with over two decades of experience, offers his professional opinion you’d think our elected officials would pay heed to the warning; but instead Roy’s own Republican Town Committee ostracized him. Then when Rob Mallozzi took over in 2010, the First Selectman still wouldn’t put Abramowitz on the Board of Finance because Roy thinks Mallozzi was concerned about political backlash from the RTC. Abramowitz says he was worried about federal regulators seeing the town’s loosey-goosey accounting standards as a possible securities violation because New Canaan has sold its debt to the public investing market.

And don’t think the S.E.C. isn’t going to start coming after towns that abuse their financial statements to get bonds sold. Today the securities regulator sued the Southern California town of Victorville for fraud in a muni bond deal where airport assets were overvalued. The also nabbed the broker/dealer who sold the bonds and it’s founder, Jeffery Kinsell, for his role in sucking up fees on inflated assets in the bond deals.

But it’s not just investors in New Canaan’s muni bonds that have cause for alarm; there is also concern residents were overcharged for their real estate taxes. Abramowitz wrote in a letter to a Town Council member this week, “This audit shows The Board of Finance, Town Council, and Board of Selectman utilized inaccurate financial data to formulate the town budget and compute the “mill rate” most likely resulting in an inflated “mill rate” and New Canaanites over-paying real estate taxes leading up to and during the worst economic debacle since the great depression.”

Apparently in New Canaan we can’t just elect officials to manage our finances and trust they’ll get the job legally and ethically done. It looks like we’ve also go to inspect their work and pay an expensive outside auditor to tell us cronyism is alive and flourishing in the Next Station to Heaven.

Update 4-30-13: The New Canaan Advertiser has now also posted the auditor’s Management Letter online and stated it shows the town had material noncompliance with laws and regulations . The Town Council now plans to have the Auditor explain what they found to the town at 6:30pm (Tuesday) at the New Canaan Nature Center. It will be interesting to see if the Auditor has been coached to down play the serious problems it found.

Auditor Management Letter for New Canaan, CT June 2012

Hedgie Greg Imbruce under Investigation by CT Banking Commision

Arrested New Stream Executive Bart Gutekunst

A New Canaan, Conn. man who owns a hedge fund called ASYM Energy is being investigated by Connecticut regulators. I reported at Growth Capitalist yesterday, Greg Imbruce allegedly offered a New Stream Capital founder a kickback if he sold oil and gas assets to Imbruce at a discounted price while New Stream was in bankruptcy. The deal involved a SPAC sponsored by Greg Sachs of Sachs Capital Group that was never finalized. Imbruce is currently facing an investor fraud suit filed by high-finance men who live in New Canaan and Texas. The Connecticut Banking Commission is also investigating Imbruce for misleading his investors about the lack of his own money invested in the fund and other possible violations.

I previously reported at Growth Capitalist on the New Stream founders arrest for 19 counts of Securities and Wire fraud. Bart Gutekunst, of Weston Conn. was the New Stream executive named in the report for being offered a kickback. Gutekunst, through his attorney, denied being offered a kickback but Imbruce was mum about it. Imbruce attorney Rick Slavin, of Cohen and Wolf, even admitted to the Banking Commission investigation when I interviewed him last week and said “How can you report that it’s confidential”. Welcome to the world of whistleblowers Slavin.

I wrote at Growth Capitalist:

According to a person who worked at ASYM, Imbruce offered Bart Gutekunst, co-founder of New Stream, a kickback of around $1 million if he got the price lowered. Accepting a kickback for a lower price for the oil and gas assets could have been a breach of fiduciary duty since Gutekunst was in charge of getting the best price possible for creditors of his hedge fund’s bankruptcy.

There is a lot great detail in the Growth Capitalist story describing how Imbruce appears to attempt to inflate assets that would have rolled into the SPAC to make it look like a higher valuation to the investing public. There are a bunch of well known hedge funds invested in the SPAC like Bulldog Investors, AQR and Pine River Capital. Luckily the hedge fund running the SPAC shied away from Imbruce after the initial due diligence inspection. They found his FINRA violations while working for Madoff Energy that he apparently never likes to tell anyone about.

I’ve reported on Imbruce troubles with lawsuits before here. He is an active sailor on the Connecticut Sound race scene and a member of the Stamford Yacht Club.

Arrested New Stream Executive Bart Gutekunst

Arrested New Stream Executive Bart Gutekunst

Greg Imbruce of ASYM

Greg Imbruce of ASYM

Editor’s Note: You can see some of the deal docs on the busted SPAC deal by Imbruce and New Stream here and here.

SEC Fines SAC’s Steve Cohen Millions but is Afraid to Say his Name

Stevie laughing with wife Alex at the SEC

SAC Capital run by Greenwich hedge fund manager Stevie Cohen agreed to settle insider trading violations with the Securities and Exchange Commission yesterday for $614 million. The regulator amended its complaint from November 2012 when it sued a SAC trader Matthew Martoma for making triple digit millions off inside info on two drug stocks. Martoma who worked at a division of SAC Capital called CR Intrinsic was as arrested by the Justice Dept and faces years in jail. I talked about the new information in the SEC complaint with RT’s most popular TV host Max Keiser yesterday on a radio program. It’s a short fun 3 minute listen that you see here.

What I found most appalling about this settlement is the SEC lays out dates, times, and conversations that Stevie Cohen has with his employee about the inside information and then he trades on it to avoid millions in losses. Except the SEC won’t even directly name him in the lawsuit. Yep- they just call him portfolio manager A and add in one line at the beginning of the complaint that portfolio manager A is the founder and owner of SAC Capital. Who we all know is Steve Cohen of Greenwich, Conn.

Stevie laughing with wife Alex at the SEC

Stevie laughing with wife Alex at the SEC

The settlement has a ton of penalty fees in it and the SEC is flying their press flag touting it’s their largest insider trading settlement ever. But what kind of impact does this have on other participants in the market if they think you can just pay your way out of insider trading. Unlike Diamondback and Level Global, funds seeded by Stevie Cohen, who had to shut down from the stain of guilty inside traders at their firms; SAC Capital is business as usual. Cohen didn’t loose his securities license and he can afford the fine considering is net worth is now up to $9-10bn. His firm also doesn’t admit any GUILT.

It’s one of the biggest slaps in main street’s face because it shows if you’re the world’s most famous trader, and have enough money, you can just pay the government to allow you to inside trade.

Now the Justice Department has a bulls eye on Stevie Cohen and has tried to build a case to arrest him since 2006 and could still make an arrest. I mean the SEC’s case only flat out tells them how Stevie did the inside trade. But with the statute of limitations in these cases they only have till June this year to make a charge. Right now it’s looking like Stevie just bought himself a get-out-of-jail pass and he’ll be collecting more millions as he rounds GO.

San Bernardino County Backs Down From Shoddy VC Plan Using Eminent Domain

A Southern California government official from a depressed county tried to go up against Wall Street this summer when he shocked the mortgage bond community by telling them he was thinking about using eminent domain to force-buy underwater mortgages out of the securities at a discount. That man was Greg Devereaux, a former city planner, who is the appointed CEO of San Bernardino County located in the Inland Empire of Southern California. It’s one of the largest counties in the state who had one of it’s larger cities file bankruptcy last year. On Thursday at a public hearing Devereaux did a bit of a 180 and basically said he couldn’t take the risk of using eminent domain because Wall Street would attack it and his constituents were voicing they really didn’t want to do it.

I was on the ground for six weeks this summer following the hearings and community reaction in the county. Viewers of RT’s Keiser Report saw me explain how these good-hearted muni officials were about to get bamboozled by a San Francisco venture capitalist with a firm call Mortgage Resolution Partners. What we were really faced with was two finance groups duking it out over profits with financial screwed homeowners as the sucker in the middle. MRP played San Bernardino’s heart-strings by promising to clean out the abundance of underwater homes in the county that were keeping real estate recovery at a stall.

Except as I exposed on Keiser Report, MRP was really just setting themselves up to make a double-digit profit if they could get Devereaux to break contract law and buy the underwater mortgages at a discount to their value within the mortgage bond. Meaning RMBS holders, which include pension funds, could get their investment wiped out. By breaking contract law San Bernardino County risked high borrowing rates via banks afraid to do business with anyone in the county going forward. The kicker was MRP wasn’t going to buy mortgages with borrowers who were not paying; instead they wanted the cream of the crop, the paying overvalued mortgages, so they could off load them down the road to the FHA or GSE’s. There wasn’t a lot of risk for MRP in the plan but there sure was for the local residents.

San Bernardino County spokesperson David Wert wrote in an email after the vote to drop eminent domain:

“Board Chairman Greg Devereaux pointed out many experts have warned the use of eminent domain would destabilize an already weak local housing market and even worsen the mortgage crisis. At the same time, very few local homeowners and other stakeholders expressed support for the use of eminent domain. Many, in fact, opposed such a strategy.”

When the plan was first presented the local Inland Emprie press and liberal media like Huffington Post were working like public relation dogs for MRP. Glossing over the fine print details of how a homeowner could get totally screwed if their loan was bought via eminent domain. But as my peers in the financial press picked up on what was really going on and we saw Reuters to the Wall Street Journal writing about the evil pitfalls residents would face and it got local business owners, real estate agents, or homeowners not underwater really worried.

Devereaux says he never fully committed to do MRP’s plan but he did think it was worth telling his residents about so a public debate could happen. That debate turned into a somewhat union ball breaking style of backroom convos by the wall street lobby groups with relators and homeowners across the county. Devereaux’s office told me SIFMA even threaten them ‘not to talk about eminent domain publically’ or all holy hell would break out for their local economy. That threat didn’t bode well with progressive minded Devereaux who thinks governments job is to share openly with it’s resident (shocking right). The county was hoping at some point data would come out that showed the plan was good for the community as a whole but bad data kept showing up in the press that made Devereaux look like he’d be Darth Vadar leading the evil empire if he just started condemning mortgages with his power of eminent domain.

San Bernardino County has some of the poorest neighborhoods in southern California mixed in with a few gem upper middle class cities like Lake Arrowhead and Redlands. Cites that didn’t allow a housing boom in the last decade and were not packed with underwater homeowners.

These cities are not particularly populated with people who understand high finance like you’d see in Fairfield County, CT but they are college educated, often Republican, and had to do some quick education on how a mortgage bond security worked. The best thing MRP did by coming to town was educate San Bernardino County residents how high finance products work so they can make better decisions the next time a stranger shows up looking like a healer with a quick fix plan to ‘help’ their troubled economy.

Devereaux said at the last hearing even he got an education from bond lobby groups like SIFMA and SIFMA sure now knows where San Bernardino is now. The county is still seeking housing fix proposals from the private sector–this time they will ask for firms to included a risk assessment in their plans. Good for Devereaux.

As for MRP they put out a spin statement this week that said in the last year they’ve talked to around 30 cities who are still entertaining their eminent domain housing plan – although Chicago has also turned them down. Tad Friend at The New Yorker was able to follow Steven Gluckstern of MRP around late this summer and detailed how a northern cal town, Salinas, was interested at first but after news reports started to show flaws and consequences to his plan they backed down.

I found it interesting Gluckstern choose a journalist, Tad Friend, who doesn’t have a history of reporting on high-finance or wall street firms to cover his agenda. Friend is a good story teller who was able to quote Gluckstern admitting the homeowner would not have a choice if their home was bought out of the RMBS via eminent domain. A glaring fact that hadn’t been reported yet. The New Yorker also doesn’t tell the reader where some of their bold statistical statements come from. Such as “yet even as homes prices have risen for six of the past seven months, twenty person of America’s homeowners remain underwater”. That kind of statement is just to broad and the reporter should know he needed to source in the story where that data comes from so the reader can judge its accuracy. (Friend has now answered he used corelogic numbers for his story but I think it should have been stated in the print) This is the kind of thing we saw Gluckstern do all last year. Throw up numbers that reporters had to go back and fact check. Jon Prior at Housingwire found his number of underwater homes for San Bernardino County included Riverside, which is not in San Bernardino County, and his 60% underwater projection was really only a 43% number according to corelogic.

America is founded on free market capitalism. It’s interesting to watch who’s still fighting to keep that alive these days.

Editors Note: I grew up in a resort mountain community called Lake Arrowhead that is in San Bernardino County. I haven’t lived there in near 20 years but I applaud its residents for doing their homework and using their voices to stop a plan they didn’t think would benefit their community. It was also refreshing to see that government listened to them.

Frontline: The Untouchables – Exposes how Wall Streeters Commit Fraud but Escape Jail

UPDATE 1-23-13 5pm: The Washington Post is reporting the DOJ’s Lanny Breuer, who was highlighted in The Untouchables, is stepping down. Now reporters had heard he was on his way out for a bit so WAPO could be reporting old news but it sure makes the Frontline film and my reporting seem to have made quite a stink at the DOJ today. Is this a case were great investigative journalism actually went to work for the American people?

1-23-13: There is a live chat with The Untouchables film maker Martin Smith today. I’d ask him if he thinks DOJ’s Lanny Breuer should still have his job.

Original Text
Tom Marano and his team of bandits at Bears Stearns mortgage trading desk took Wall Street for a ride in the last decade. I first broke news about them stealing billions from their own clients, which included pension funds, in January 2011 for The Atlantic. Tonight you’ll see how widespread their action went in a Frontline documentary film called The Untouchables.

Emmy winning documentary film maker Martin Smith contacted me this summer about my reporting on the Bear Stearns traders and the saga it entailed for JP Morgan. A bank who is now facing a Civil fraud suit by the NY AG, has $140 billion in civil RMBS fraud suits against them, and has setteled with the SEC for the double dipping scheme that attorney Eric Haas at Paterson Belknap first figured out.

When I first came about this story in early 2010 Reuters and Fortune, who asked me to pitch them, passed on it because they said the topic was too complicated. But it took only 24 hours for Dan Indivilgo (who is now writing for Reuters BreakingViews) to figure out this was a blockbuster piece of reporting and as a business editor at The Atlantic he convinced them to buy it. I only made $150 selling the story to The Atlantic instead of the few thousand dollars I’d make if I had sold it to a trade publication behind a paywall but I knew this story just had to printed online for the world to read. And they did.

Hundreds of Wall Streeters started to email or call me after they read it. People who might have never read my byline at the New York Post or Hearst Newspapers were calling to see what else I had on the outright fraud these financial titans committed. Their big takeaway was “I knew those Bear traders were always making too much money but I could not figure out how.” And the civil securities lawyers who called just wanted to play catch up to the sordid details the lawyers at Patterson Belknap had already figured out for their clients the mortgage bond insurers. Even the FHFA had an analyst call me to find out behind the scenes info and then copied Patersons Belknap’s suit when then filed for around $22 billion in civil fraud against JP Morgan.

You can see whistleblowers on camera tonight telling details I first reported about the level of due diligence Bear (and other banks) hired to mask the level of out right fraudulent loans the traders were aware of before they even put them into the mortgage securities they sold to the public.

Yet still we saw the NY AG only sue for civil fraud and not criminal fraud. Filmmaker Martin Smith got people to admit the DOJ was afraid if they actually charged these Wall Street bad boys with criminal fraud it would rock the financial system. An absurd notion for the DOJ to even consider. They are not bank regulators or butt boys for the banks like Tim Geithner. They are suppose to go after crime regardless of how it effects an industry. I consider this fraud against the American people– the DOJ didn’t do their job when the evidence was handed to them by reporters like me and Nick Verbitsky and sharp lawyers like the team at Patterson Belkanp.

But the real want-to-make-me-throw-up moment in the film came when I saw the DOJ’s Lanny Breurer tell Martin Smith he didn’t think journalist had found any whistleblowers who the DOJ hadn’t already interviewed. That’s was either an out right lie or he’s really in denial because as Nick Verbitsky said in the film he knows his unnamed whistleblowers were never contacted by the DOJ even though the lawyers at Paterson Belknap eventually got some them on the record for their civil suit against Bear Stearns/ JP Morgan. I second that…the DOJ has flat out not tried to reach a single whistleblower in my series of reporting on Bear Stearns/ EMC / JP Morgan.

The failure of the DOJ is the real crime we should never forget.

Editors Note:This news publication is funded by the generous donations of my readers. If you like what you saw in the Frontline Film or news report you see on this site please donate. You can do so via Paypal at Micro donations of $25 plus go a long way when readers like you contribute.

After Arrest Spongtech Fraudster Metter loaded Radio Stations with Debt: Greenwich’s WGCH facing Eviction

UPDATE 4:45pm: The head of the Greenwich DTC, Frank Farricker, tells me he’s been try to reach BTR’s receiver, Michael Craven, and his Delaware attorney at Morris James LLP to make an offer on the Greenwich Radio station but so far they’ve refused to call him back. Craven has also refused to return multiple request for comment.

Original Text
The Greenwich Radio Station, WGCH, run by alleged penny stock fraudster Michael Metter has been sued for eviction after racking up over $140k of unpaid management company bills. Court documents filed this week show Metter, who was arrested for criminal fraud in 2010, has racked up near a million of unpaid debt while the courts allow him to run the radio stations after he was released on bail.

Metter was removed as CEO of the Greenwich station last month and the former COO, Jeff Weber, was rehired as a consultant to run the stations while they are trying to be sold. A receiver, Michael Craven, was appointed to monitor the assets of WGCH’s parent The stations were forced into sale after the SEC was able to claim BTR as a relief defendant in the securities fraud suit against Metter and his penny stock company Spongetech because the regulator claims Metter used the station for money laundering in his Spongetech scam.

Since Metter’s arrest he’s loaded up BTR with so much debt that they are also behind on paying Connecticut state taxes, federal taxes, the stations’ vendors, and even some employees–but court documents show Metter continued to pay himself between $16,000 to $18,000 a month over the last two years.

The total bill for BTR vendors and creditors is $991,900 of which the Greenwich Broadcasting Company owes $195,362.

The Greenwich station landlord served a notice to quit the property as a result of nonpayment on July 24th asking WGCH to vacate their station at 71 Lewis St in downtown Greenwich, Conn by the end of the month. WGCH didn’t do it. The landlord stated the monthly rent was $5,647. Harrison Management Company then sold the overdue 10-yr lease, signed in August 2006 to 100 Maison St LLC, on September 7th. Harrison is listed in court records as being owed over $140,000. The new landlord filed suit on September 26th to evict and BTR’s receiver says he is now trying to negotiation with them to stay in the property. A fact the Greenwich Time reporters could have easily picked up on when they reported that Jeff Weber had been brought back after Metter was removed as CEO the first week of October– but they didn’t.

Weber is also the president of the Greenwich Chamber of Commerce. The receiver’s creditor spreadsheet, filed in court, shows the Chamber is owed $950 and even Weber has a claim of $24,000 against the radio company he’s working for again.

I previously reported on some of the BTR assets finally being sold at trade publication Growth Capitalist. This money is intended to go to the SEC for victims of Metter’s penny stock fraud. The Brockton Mass. station sold for $250,000 but after deal fees and cost the deal only netted $100,268 which has been placed in a court escrow account. Now BTR’s receiver is asking he court for $50,000 of the sale proceeds to pay some back rent so the radio stations aren’t forced out by their landlords.

There is also a sale contract signed, but not closed, for the Vegas station (KNUU) in the amount of $950,000. But that station is also facing eviction because Metter didn’t pay the rent. The Greenwich and Pittsburg stations have no sale offers. Metter has previously stated in court documents filed in the SEC’s case against him that he thought BTR assets would be worth around $6mn and the Greenwich station was listed for sale at $1.25mn. It’s unclear how Weber or Metter ever thought the Greenwich station would fetch a million sale price considering WGCH was unable to operate during Hurricane Sandy’s power outages because Metter had not bought the station a working back-up generator.

Unfortunately, the SEC’s plan to use money from the sale of the four BTR stations as restitution for mom and pop Spongetech investors has hit a big snag. BTR receiver, Michael Craven, hired a forensic accountant to validate a third-party secured claim against the assets of BTR by a New Jersey hard money lender Solutions Funding LLC. Last week Craven filed court documents stating Solutions Funding claim of $3.08 million is valid–this means the third-party lender will get paid before the SEC can collect any money for investors. Craven actually settled with Solutions Funding for $2.5 million and is waiting court approval to make them the senior secured creditor.

Court documents show the Vegas station has the most assets so it’s not likely the Greenwich or Pittsburgh station would generate a $950,000 price tag like the Vegas station has (a deal that still isn’t closed). So far the net proceeds to pay off Solutions Funding from the sale of the Brockton, Mass. station is only $50,000. So it’s not looking like SEC’s move to get any dollars out of is going to work out. The regulator did succeed in forcing Metter to sale the stations but now we see the beneficiary is going to be a high-interest hard money lender. What’s unclear is why did the SEC not inspect how Metter was using cash flow at BTR till it was too late. Why was he allowed to receive a six-figure income while rent wasn’t paid? Isn’t it their job to weed out people who habitually abuse the markets and securities laws?