By the end, Walker invested about $29,000 with DeAngelis for precious metals. He is unlikely to see that money soon. In September, Timothy and James DeAngelis were arrested and charged with theft in Stroudsburg, Pa. A federal grand jury in Pennsylvania is currently hearing evidence in what authorities suspect was a rob-Peter-to-pay-Paul, or Ponzi, scheme. Walker wasn’t the only loser. The bankruptcy trustee says an estimated 2,000 people have lost at least $16 million, Lawyers for the DeAngelises say the problems stemmed from a business downturn.
The case may be the latest example of how financial radio talk shows are being used as vehicles to steer listeners to questionable or outright fraudulent investments. Regulators say the problem is growing as more and more people tune in to these shows assuming they are getting objective financial advice. Instead, they say, it’s often difficult for unsuspecting listeners to distinguish between an advertisement and the host’s patter. Sometimes the show’s “guest experts” have in fact paid for air time to hype their own product, unbeknownst to listeners. Even more worrisome, a growing number of radio stations are simply selling whole blocks of time to investment firms,which then produce shows masquerading as regular programming. In a California ease last year, the wife of a stamp dealer was accused of playing the role of talk-show hostess to pitch stamps. Of the hundreds of financial-advice shows on the air, many offer solid, untainted advice. But a well-regarded host like Don McDonald says, “You can get away with murder on radio.”
The worst conflict occurs when hosts steer listeners to an investment in which they stand to profit. That’s what four of the DeAngelis customers charged Sonny Bloch with doing in a class-action civil-racketeering suit filed two weeks ago. The suit asserts that he was in league with the DeAngelis brothers, engaging in a scheme to promote “nonexistent” precious metals in exchange for a slice of the money sent by victims. The suit claims that Bloch did more than simply air commercials. It says he repeatedly endorsed the investment on the air, referring to his “good friends” the DeAngelis brothers, and promoted them at investment seminars. For this, the suit alleges, the DeAngelis brothers funneled about $15,000 a month in cash to Bloch and an additional $30,000 a month to his network, Independent Broadcasters Network.
Bloch, who broadcasts from his home in Tampa, Fla., called the allegations “fiction” and an attempt to find deep pockets to recover money. He insisted that he was only reading advertising scripts. “How am I supposed to know that they are ripping off people of millions of dollars?” he asked. “With 22,000-plus spots a year I try to be as careful as possible, but these guys had me totally fooled. I certainly didn’t see any of the $16 million or $20 million.” He also said that many other advertisers set up booths at his seminars. Bloch also denied the suit’s contention that he never bought coins despite saying so on the air; he says he bought between $4,000 and $5,000 worth.
Bloch, 58, has written six books on investing and claims that after 15 years his is the longest-running financial show on radio. But he has been dogged by questions over his advertisers. He left New York’s WABC station in 1991 at a time when station managers voiced concern over Bloch’s allegedly “sleazy” advertisers. Bloch said he resigned from WABC for a better offer.
However the case ends, it’s a cautionary tale for devotees of radio advice shows. “The problem is that these ‘gurus’ are frequently touting product in which they have a financial interest,” says Bill McDonald, the chief security regulator for California. Many people assume that radio stations police the shows, yet most say they can’t possibly investigate each advertiser. It’s best to remember: if an investment is so good, why do they need to hawk it over the radio?
