Ex-NAPFA chairman diverted nearly $50M from clients: DOJ

Justice department says Spangler used the cash to secretly invest in tech companies he owned

May 17, 2012 @ 4:27 pm

By Liz Skinner

A Seattle investment adviser who was formerly chairman of the National Association of Personal Financial Advisors took $47.7 million of client money and secretly invested it in two technology companies that he or his firm owned, according to a 23-count federal indictment announced on Thursday.

Mark Spangler, 57, was indicted by a federal grand jury on charges that include investment adviser fraud, wire fraud and money laundering, U.S. Attorney Jenny Durkan said.

“The Department of Justice is making the prosecution of financial fraud a top priority,” said Ms. Durkan. “These investors lost millions to a man they trusted to safeguard their resources.”

The Securities and Exchange Commission also disclosed on Thursday that it had filed a civil suit against Mr. Spangler.

Mr. Spangler was chairman of NAPFA, whose members consider their fee-only model to be the gold standard for unbiased advice, in 1998. In a statement, the group called the charges “severe” and said the allegations against Mr. Spangler “have been deeply concerning.”

“NAPFA strongly condemns the actions contained in the FBI indictment and SEC complaint and any behavior that violates the public trust,” the association said in a statement Friday. “In any organization, there are members or former members who act in unethical ways. Organizations like ours exist in part to set standards that promote ethical behavior.”

The association suspended Mr. Spangler's inactive membership in October when the FBI investigation was launched.

The SEC said Mr. Spangler told clients he would invest primarily in publicly-traded securities, but instead used their money to fund two startup companies, one of which is now bankrupt, the Securities and Exchange Commission said in its civil complaint.

“For an investment adviser to put his self-interest above the best interests of his clients is a disturbing abuse of trust,” said Marc Fagel, director of the SEC's San Francisco regional office.

RELATED ITEM Largest RIAs in Washington »

In the indictment, six investors said Mr. Spangler and his firm, The Spangler Group Inc., told them their money was invested in publicly traded companies and in bonds. Mr. Spangler provided them with misleading statements and then could not give clients any funds when investors asked to liquidate their holdings, the indictment said.

Between 2003 and 2011, Mr. Spangler is accused of investing $42 million of his clients’ money in TeraHop Networks Inc., a Georgia manufacturer of wireless devices, which has since ceased operations, and $5.7 million in Tamarac Inc., a Seattle firm that was recently acquired by Envestnet Inc. and is well known among advisers for its portfolio management software.

Mr. Spangler helped found Tamarac in 2000 and until 2011, was its chairman, according to the SEC and criminal complaint.

In a statement, Envestnet/ Tarmarac, as the firm is now known, said that Mr. Spangler never participated in the management of the company and no longer has any financial interest in the firm. “Despite the disturbing news of Mr. Spangler’s actions at the outset of Tarmarac’s founding, the firm has emerged as a successful venture,” read the statement.

Mr. Spangler's attorney, Jon Zulauf at Zulauf & Chambliss Law Offices in Seattle, did not return calls for comment.

This is actually the second high-profile investigation of a former NAPFA officer. In 2009, the SEC charged James Putman, who served as NAPFA's president in 1996 and 1997, with accepting about $1.24 million in kickbacks related to unregistered investment pools.

The assets of his firm, Wealth Management LLC in Appleton, Wis., eventually were frozen, and the firm later went into receivership.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Upcoming Event

Apr 26

Webcast

Cracking the Code: Making Sense of Alternative Investments

InvestmentNews Research estimates that $150 billion in alternative assets could be added to client portfolios among independent advisers over the next three years. Roughly 85% of all clients are now expressing interest in learning more... Learn more

Accepted for 1 CE Credit by the CFP Board. Pending by Investments & Wealth Institute for 1 credit towards the CIMA® and CPWA® certifications.

Featured video

INTV

Children of AI, and when they are coming to financial advice

Technology reporter Ryan Neal talks about the tremendous progress in artificial intelligence in other industries, and how its applications are slowly making headway in the advice sector.

Latest news & opinion

SEC advice rule hearing updates

Commission says a lot of work ahead, public will have 90 days to comment.

SEC advice proposal unveiling: Here's what to expect

Chairman Jay Clayton will initiate momentous action Wednesday, as the commission meets to debate a rule on broker and adviser standards.

How active are the largest actively managed funds?

Active-share measures for the 15 largest actively traded mutual funds.

Morgan Stanley's success looks long in the tooth to analyst

Sanford C. Bernstein & Co. analyst Christian Bolu, concerned over stalled adviser growth and what it means for lending and deposit growth, believes the stock will "under perform."

Retirement coverage gap, 401(k) rollovers are big emerging threats for plan advisers

Proliferation of state retirement programs approaching the 'tipping point' where it will lead the federal government to step in.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print