In part one, I wrote about two bankruptcies and an SEC investigation involving Wallace-Bajjali. The problems noted by the SEC are the same ones that brought a lawsuit against Wallace-Bajjali earlier this year accusing partners David Wallace and Costa Bajjali of conducting a $3 million Ponzi scheme.
I wrote about this August 15 in Inside Joplin and the Turner Report.
Investors in two funds connected to Joplin’s master developer Wallace-Bajjali claim in a lawsuit filed this week in Harris County, Texas, District Court that firm owners David Wallace and Costa Bajjali were involved in a $3 million Ponzi scheme.
Wallace told the Amarillo Globe-News , We consider the lawsuit very frivolous. We consider it to be without merit and we are going to defend it vigorously.”
The scheme resulted in an SEC investigation, which ended with Wallace and Bajalli agreeing to pay $60,000 fines. Each man made his last payment three days before the city of Joplin hired the firm to conduct the $800 million development of Joplin’s tornado-stricken area.
In its complaint, which was filed May 20, 2011, the SEC alleged that between November 2006 and December 2008, Wallace and Bajjali “offered and sold securities in two real estate funds they controlled in Houston, Texas, called the Wallace Bajjali Investment Fund II, L. P. and the Laffer Frishberg Wallace Economic Opportunity Fund, L. P.
In written disclosures relating to the securities offerings, Wallace and Bajjali told investors they would limit the Funds’ investment in any one business or project to certain percentages of the money the Funds raised- no more than 33 percent for the Wallace-Bajjali Fund and no more than 20 percent for the Opportunity Fund.
“Contrary to their written representation, Wallace and Bajjali far exceeded these limits by heavily investing the Funds’ money in Business Radio Networks, L.P, doing business as BizRadio, a struggling media company. As a result, they subjected the Funds’ investors to substantially greater investment risk than the Funds’ written materials disclosed.”
The statement of facts filed by SEC says that by May 2007 the Wallace-Bajjali Fund had received more than $16 million and had invested more than $6.5 million in BizRadio. The ratio was even higher with the Opportunity Fund, where $7 million was raised and $4 million went to BizRadio, far more than the 20 percent limit. Court documents indicate Wallace and Bajjali entered into an agreement with a company called Investment Adviser in Houston to handle the securities funds. It would appear that the two are casting the blame on that company for violating SEC regulations.
5 comments:
You cannot expect that much money to lay around without some of it finding it's way to a "bleed off" account of some sort. In fact, that is a tradition in the City. I seem to recall the time when Joplin lost twenty-one million dollars because their money people were investing heavily in the Junk Bond Market. Money always gets spent, wasted or disappears.
Looking at the projects the City has undertaken in the last few years, maybe you all are lucky these have not happened.
Can anyone sing "Seventy six trombones led the big parade...."?
Welcome to the Music Man.
Silly Turner and the so called readers of his blog lead the SEC on a wild goose chase. People getting things done suffer from a thousand little naysayers.
Spending a little more time in church and a little less time scandal mongering
Spend enough time in Church and you end up becoming adept at burning Witches at the stake and smiting Infidels. No thanks oh devout one.
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