|
North's Internet money backer faces SEC charges
By Ted Cox | Daily Herald Columnist
Published: 6/16/2009 12:01 AM
David Hernandez, the financial backer behind Mike North's Internet radio venture, ChicagoSportsWebio.com, was hit by a federal Securities and Exchange Commission civil suit Monday accusing him of running a Ponzi scheme promising high returns on investments while diverting the money for other uses and for himself.
The complaint alleged Hernandez, of Downers Grove, has been shuttling funds between his ventures NextStep Financial Services, NextStep Medical Staffing and Spectrum Entertainment, the controlling firm of ChicagoSportsWebio, while also taking money for his personal use. It sought to immediately freeze all funds, a motion granted Monday by a federal judge in Chicago.
The civil case sought the return of all funds. A criminal case would be separate, although FBI agents reportedly executed search warrants at NextStep's downtown Chicago offices over the weekend.
Hernandez was convicted of wire fraud in 1998, the SEC complaint said.
"Hernandez bilked investors out of funds that he led them to believe were being invested properly and safely," said Merri Jo Gillette, director of the SEC's Chicago Regional Office. "Instead, he was paying investors in Ponzi-like fashion to keep his scheme afloat while he used their money for personal expenses and to start an online sports-talk venture."
North and his main staff from the simulcast of his Comcast SportsNet Chicago TV show "Monsters in the Morning" were fired from the Internet radio company last week after he pressed Hernandez on why paychecks were bouncing. North said Monday he had no inkling of Hernandez's past and that he had never had an ownership stake in the firm, as Hernandez kept control to himself.
"Thank God I didn't do anything improper. Thank God I wasn't handling the money," North said. "He would only sign the checks himself.
"We did a background check on the guy," North said. They never turned up anything, and the SEC claimed Hernandez raised $11 million from 100 investors in 12 states by saying he was running a highly profitable payday-loan business. In fact, he had no payday-loan contacts, and the complaint charged Next Financial is a "defunct" firm used as a conduit to shuffle the money.
ChicagoSportsWebio was still going on its Web site on Monday, but the future of the venture was in doubt after Hernandez abruptly left the studios following a staff meeting when news of the SEC complaint broke.
One ChicagoSportsWebio staffer said Hernandez was addressing the meeting when someone interrupted, saying, "You've been charged with fraud by the SEC."
"And his response was, 'That's old news,'" the staffer added. Hernandez left, saying they would reconvene at 1:30, but he never returned. "He's not going to call," said the staffer.
North and co-host Dan Jiggetts retain their "Monsters in the Morning" TV show on CSNC, an entirely separate entity, although even that's complicated as NextStep was the show's primary sponsor.
Published reports have suggested North could still save ChicagoSportsWebio by retaking the reins. After all, it was largely his idea to make a go at an Internet-based Chicago sports radio station. Yet he would have to find financial backing from a source not only with deep pockets, as appeared to be the case with Hernandez, but with legitimate deep pockets, which is rarer still.
"I want to do it. But I've got to find out legally what I can do," North said. "I want to help these guys. A lot of people went there because of me and Be," his wife, Be-Be North.
ChicagoSportsWebio had hired away talent like Jesse Rogers and George Ofman from WSCR 670-AM and Jonathan Hood from WMVP 1000-AM, and the early scuttlebutt in the industry wondered how the station was paying people from its position as a startup. It turned out, as ever, that when things are too good to be true, they probably are.
|
Login
Register
FAQ
Search
