Audio- Costa Bajjali tells how Crossland Construction brought Wallace-Bajjali to Joplin

Before and after the Wallace-Bajjali firm became the master developer for the tornado-stricken area of Joplin, we have heard from company partner David Wallace. In this audio, recorded one year after the tornado, Wallace's partner Costa Bajjali tells how the firm came into Joplin almost from the moment the tornado hit.

What the Joplin Globe hasn't told you about Wallace-Bajjali, Part Two

Judging from what has been written about the city of Joplin's master developer, Wallace-Bajjali, in the Joplin Globe, it would appear that the newspaper's primary source of information was fired City Manager Mark Rohr. The following was originally printed in the November 28, 2013, Turner Report, based on a post I had written earlier in 2013.

With the millions of dollars that Joplin taxpayers will end up investing in the firm of master developer Wallace-Bajjali, you might think the area's newspaper of record, the Joplin Globe, would have conducted an investigation into the background of the Texas company. Except for about one paragraph ( a quote from City Manager Mark Rohr saying any problems weren't really problems), the Globe has continued to play cheerleader instead of looking after the public interest.

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.

What the Joplin Globe hasn't told you about Wallace-Bajjali, Part One

With the emergence this week of the city of Joplin's master developer, the Sugar Land, Texas, firm Wallace-Bajjali as a key player in the ethics problems surrounding Joplin City Councilman Mike Woolston and former City Manager Mark Rohr, I thought it was an opportune time to look back at some of what the Joplin Globe not only neglected to tell its readers, but most likely never ever bothered to investigate.

More and more, it is looking like the Joplin Globe has relied entirely on Mark Rohr for its information on Wallace-Bajjali.

The Turner Report has been looking into Wallace-Bajjali for the past couple of years and on July 9, 2013, I posted the following:

(Note: This is a slightly reworked version of a Turner Report post from November 26, 2012.)

The next three paragraphs are the extent of the Joplin Globe's investigation into the background of a company that eventually will most likely spend more than $1 billion in its large-scale plan to develop the tornado-damaged portion of Joplin.

Wallace Bajjali has been involved in two projects that hit difficulty. Rohr said the firm disclosed details of those problems in its Joplin proposal, and that inquiries by city officials verified the firm’s admissions. Those incidents involve a bankruptcy taken by some its partners in the Amarillo project, and fines paid to the Securities and Exchange Commission for investment fraud committed by two partners in a radio acquisition deal. - March 27, 2012, Joplin Globe

Two previous Wallace Bajjali projects hit snags because of problems involving partners. In one, work was delayed when a partner went bankrupt. In the other, a partner was found to have violated Securities and Exchange Commission rules in a business radio investment, which resulted in Wallace Bajjali paying a fine.

City Manager Mark Rohr previously said the firm’s principals voluntarily disclosed those issues, and a background investigation substantiated the firm’s disclosure. Rohr said he was satisfied that there was no wrongdoing on the part of Wallace Bajjali in those cases.July 2, 2012, Joplin Globe

That's it. The extent of the Joplin Globe's examination of the background of the Wallace Bajjali firm that has been entrusted to handle $794 million in development of the area struck by the May 22, 2011, is printed above.



And though everything that is written in those paragraphs may well be accurate, it certainly would be an excellent idea for the area's newspaper of record to examine Wallace Bajjali's problems with its developments in Waco and Amarillo, Texas.

It did not take me long to come up with this for the March 31, 2012, Turner Report.

As of Friday, David Wallace is free and clear as far as the Securities and Exchange Commission is concerned.

That was the day Wallace, CEO of Wallace Bajjali, the company expected to be hired as master developer for the city of Joplin's tornado recovery efforts Monday by the City Council, made his last payment covering his fine for fraud.

It was Wallace's fourth payment of $15,006.72, covering his $60,000 fine plus interest. His partner, Costa Bajjali, also made his final payment for that amount Friday, according to U. S. District Court for the Southern District of Texas documents.

Both men entered into agreements May 24, 2011, to pay the fines, though neither admitted to any wrongdoing.

Joplin city officials say they are fully aware of the SEC fines and have corroborated Wallace's claim that others were at fault.

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 represented to investors that 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.

Later that day, I followed up with information from the Amarillo Globe-News:

Earlier today, the Turner Report noted that David Wallace, CEO of Wallace Bajjali, the Texas firm recommended by the city of Joplin's Citizens Advisory Recovery Team to become the city's master developer in its tornado recovery, had made his final payment of a $60,000 fine for an SEC fraud violation.

Wallace and his partner, Costa Bazzali, neither admitted nor denied wrongdoing, but their deal also includes paying back approximately $1.2 million to investors.

From the Amarillo Globe-News:

The settlement approved Tuesday by U.S. District Judge Nancy F. Atlas ends claims that receiver Thomas L. Taylor asserted against Wallace Bajjali Development Partners entities in relation to an SEC investigation of Albert Fase Kaleta, Kaleta Capital Management, Daniel Frishberg Financial Services and BusinessRadio Network, Taylor said.

The settlement sets Dec. 31 as the final deadline for three Wallace Bajjali real estate investment limited partnerships to repay $879,176 in loans they got from Kaleta Capital Management, plus interest.

Under the agreement, Wallace Bajjali Development Partners also said it will pay an additional $350,000 to $400,000, with interest, from the firm’s private earnings from an Amarillo downtown revitalization project.

The SEC sued Kaleta, Frishberg and their businesses in 2009. The SEC appointed Taylor to trace money investors sank into Kaleta and Frishberg’s network of affiliated companies that allegedly commingled and misappropriated investors’ money, according to court documents in the ongoing SEC case and a related bankruptcy case.

Much of the investment capital allegedly misdirected by Kaleta and Frishberg went into the radio network, dubbed BizRadio, which “broadcast programming designed to attract clients” to a Frishberg financial services company and a Frishberg and Kaleta investment advisory business, according to a Feb. 11 status report in the bankruptcy case.

The SEC investigation extended to David Wallace and partner Costa Bajjali, who in May agreed to each pay about $60,000 in fines for exposing investors in struggling BizRadio to excessive risk, a situation Wallace blamed on the media company.

It should be noted that the Waco bankruptcy mentioned in my July 6 post was not mentioned in the earlier Joplin Globe coverage.

The troubling relationship between Mark Rohr and Wallace-Bajjali

When the Joplin City Council made its first aborted attempt to fire City Manager Mark Rohr, the people of Joplin- at least those who sent their comments to the Joplin Globe and other local media- seemed to be of almost one mind.

They wanted the council members who dared oppose Rohr to be strung up and they were not too happy with that Texas firm, Wallace-Bajjali, that the council brought in to be the master developer for the tornado-stricken area of the city.

Bringing in Wallace-Bajjali or any other master developer was the furthest thing from the City Council's mind in the days following the May 22, 2011, Joplin Tornado. The idea came from Rohr, who was fired this morning by the Joplin City Council following a marathon closed session. and the Citizens Advisory Recovery Team (CART).

When David Wallace of Wallace-Bajjali first came to Joplin is a matter that has not exactly been pinned down with some saying he was here even before the tornado. One thing is for certain- Wallace was in the city right after the tornado and was already working with Rohr and those involved with CART.

A profile by the investigative online magazine STRY noted the following:

There’s no clear answer as to when Wallace Bajjali formally came into the picture. Rohr says David Wallace was looking at construction projects in Joplin in the days before the storm. (CART Chairman Jane) Cage remembers Wallace showing up at meetings in the weeks after the tornado.

What is certain is that Wallace started talking about a formal partnership long before Joplin was ready to take action.

It was David Wallace, a developer, who pushed the idea that the city of Joplin should hire a developer and he had a ready partner in Rohr, who not only vouched for the Texas businessman, but also steered the City Council past Wallace-Bajjali's troubled history,which includes, as the Turner Report was the first area media outlet to note, involvement in two bankruptcies and a Securities and Exchange Commission investigation that led to Wallace and his partner, Costa Bajjali, both agreeing to pay $60,000 fines, though they insisted that other people were at fault.

The STRY article noted how Rohr steered the Joplin City Council past any concerns members might have had about Wallace-Bajjali:

But some things from Wallace Bajjali’s background nearly derailed a deal. In February (2012), the comapny agreed to a deal with the Securities and Exchange Commission (SEC) to pay back $1.2 million to investors. The SEC says the company was involved in a fraudulent scheme involving a media entity called BizRadio. The investors were less kind, saying Wallace Bajjali knowingly backed a Ponzi scheme.

In Amarillo, Texas, where Wallace Bajjali is working on a $113 million development project, one of their partners was forced into bankruptcy.

Rohr says he personally investigated the matters. He says he’s spoken to multiple officials in Amarillo about Wallace. When asked by council members about the SEC fines, Rohr says: “I described David as being a very trusting person. And in some of his business dealings, he got involved with people that, in retrospect, didn’t warrant that trust.”

The article also notes that though six companies submitted proposals for developing the tornado-stricken area of Joplin, Rohr provided far more favorable information about Wallace-Bajjali than the rest of the developers combined:

In April, city councilman Benjamin Rosenberg publicly criticized Rohr for not disclosing more information about the five other applicants. At that meeting, according to a Joplin Globe report, Rohr told council members that he would stake his reputation on Wallace’s company.

2013 in Review: Lawsuit alleges Joplin master developer involved in Ponzi scheme

(From August 2013)

(The following post originally ran in the August 15 Inside Joplin)

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 is the same one described in an articlepublished Saturday in Inside Joplin.

2013 in Review- City of Joplin's master developer involved in bankruptcy, millions of dollars in debt

(From July 6)
The master developers chosen by the city of Joplin to handle an $800 million project involving the area of the city hit by the May 22, 2011, tornado, filed for bankruptcy January 1 and are more than six million dollars in debt, according to court documents.