For more than a month now, Edward (Buz) Schwartz has been broadcasting financial advice and information to investors throughout Southern California on KMNY-AM (1600), a.k.a. "Money Radio," the first 24-hour all-business radio station in the country.
But no matter how hard they try, investors who live, work and drive in the heart of Los Angeles have yet to hear a word he's said.
Though Schwartz claims that his 5,000-watt Pomona-based station runs full bore from Barstow to San Diego--reaching all of Orange and Riverside counties and Los Angeles County east of the Harbor Freeway--the fact is that much of his potential audience can tune in only static and the muffled, stray signals of his more powerful, next-door-on-the-dial neighbor, 50,000-watt music station KDAY-AM (1580).
It has caused Schwartz more headaches than an IRS audit.
"Some of my investors are yelling at me," Schwartz said, "but I have promised them" that the problem will be resolved within six months.
But making good on that promise may be the least of his worries.
Schwartz has more than 1,000 partners in this venture. But, more bothersome than their insistent suggestions about how he should run the station, Schwartz is under investigation by the state Department of Corporations for alleged securities fraud.
Schwartz, 60, is a registered investment adviser and former engineer who began hosting a financial talk show on KIEV-AM (870) in 1984. A year later, he formed the National Investors Club of the Air, which bought air time from KIEV to broadcast Schwartz's talk show and sustained itself by selling some of that time to advertisers.
"When I started doing this, I found that there is a tremendous need out there for financial information," Schwartz said. "Everyone understands the dollar, and so everyone is an investor. We are trying to give them the information they absolutely need in today's market."
Schwartz soon decided that the best way to help people plan their financial futures would be to buy a radio station of his own. He said he called almost every station in Southern California, but found no one willing to sell.
Then, a member of his investment club called Schwartz to discuss methods of raising money to change the format of his own failing radio station. Schwartz persuaded him to sell it.
To raise enough money to buy KWOW-AM, a venerable, golden-oldies station in Pomona, and to ensure his own position as station manager and star on-air personality, Schwartz set up a limited partnership. He began soliciting investors on the air on his KIEV program, and, he said, raised $4.6 million from about 1,300 limited partners.
Schwartz and his many partners paid $2.4 million for KWOW-AM, and Schwartz and his production staff began broadcasting financial news 24 hours a day under the KMNY banner last month. Schwartz said the rest of the money will be used to run the station until it begins to pay for itself.
Meanwhile, Schwartz's partners, who have no legal say in the management of the station, "are forever calling to tell me what to do," Schwartz said.
"They want to know why we aren't getting more advertising. They want to make money."
But whether they like it or not, Schwartz said he intends to plow KMNY profits back into the station. He dreams of buying several more stations, creating a financial network called "California Money Radio," and eventually going public with his corporation.
At that point, at least several years from now, Schwartz claims that his investors will get back five to seven times their original investment. Until then, none of them will see any income from "Money Radio."
All that is on the up and up.
It is the way he went about raising the money to buy KWOW, however, that may have gotten Schwartz into trouble.
The state Department of Corporations is looking into allegations, raised in a newspaper article, that Schwartz may have engaged in fraud by filing false financial reports, by making misleading statements that minimize the risks involved in such investments, and by inflating the size of his radio audience and the broadcasting reach of KMNY's Pomona transmitter.
Elisa Wolfe, the attorney heading the investigation, would not say whether she has uncovered any evidence to prove these allegations. She said she hopes to make a determination soon.
If the Department of Corporations were to conclude that Schwartz had fraudulently marketed his limited partnership, it could invoke penalties that include revoking his permit to offer securities in KMNY, putting the station into receivership, and encouraging each investor to seek civil damages against him.
Schwartz contends that the allegations are without merit. He sees nothing fraudulent about having advertised securities in KMNY on his show at KIEV.
"Every single product that exists, from Vons markets to Cadillacs, is sold on the radio," Schwartz said.
"As the Department of Corporations has admitted itself, the bottom line is that these investors own a radio station. If they really thought I had done something wrong, they would have stopped us before now."
Barring any action by the state, "Money Radio" will continue to air Schwartz's three-hour talk show (weekdays from 2 to 5 p.m.) as well as market reports on financial news from around the world; interviews with prominent members of the business community; advice on real estate, pork bellies and investments of all kinds, and play-by-play of all USC baseball games, to at least 1,300 avid listeners in at least some areas of Southern California.