Mark Spangler Indicted On 23 Counts Of Fraud And Money Laundering; Government Seeks $41.7 Million

Thursday, May 17, 2012 20:56
Mark Spangler Indicted On 23 Counts Of Fraud And Money Laundering; Government Seeks $41.7 Million

Tags: advisor industry people | Dodd-Frank | fiduciaries | NAPFA | RIA compliance | sec | securities fraud | US investing

Former NAPFA chairman Mark Spangler was indicted by a Seattle grand jury Thursday, charged criminally with diverting $41.7 million from investors into risky start-up ventures in which he had an ownership stake.

The 23-count indictment (see below) was handed down just after the Securities and Exchange Commission filed a civil complaint against Spangler.

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“These investors lost millions to a man they trusted to safeguard their resources,” said,” said Jenny A. Durkan, U.S. Attorney for the Western District of Washington. “We are working closely with the SEC to ensure Mr. Spangler is held accountable for his fraud.”
Emily Langlie, a spokesman for the U.S. Attorney in Seattle, said the charges — if Spangler is found guilty — could result in a sentence of up to 20 years in jail.
Spangler, from 1996 to 1998, was chairman of the National Association of Personal Financial Advisors, an association of fee-only advisors that has long championed investor protection and in recent years been a vocal backer of the movement to require all advisors be bound by the fiduciary standard under the the Investment Advisers Act of 1940. The second paragraph of the SEC press release poignantly noted Spangler’s former position with the NAPFA.
The Spangler investigation first came to light publicly last September, after the FBI sought and was granted a search warrant to conduct a surprise raid on Spangler’s home, reportedly seizing documents and electronic files.
Thursday's indictment refers to six unnamed investors whose funds were allegedly diverted by Spangler to two ventures, TeraHop Networks and Tamarac Inc. TeraHop, a wireless device maker, ceased operations in April 2011, according to the indictment and was put into receivership by Spangler last September. Tamarac, a rebalancing software application, was sold to Envestnet, a turnkey asset management provider, in a deal that closed earlier this month, for $54 million.
The federal indictment charges that Spangler not only diverted clients’ money without their knowledge to the two privately held companies but also that Spangler charged the two companies more than $1.1 million between 2005 and 2011 for his services. Tamarac executives in the past have said the fraud case would not affect Tamarac’s operations.
NAPFA members have asserted that Spangler had stopped being active in the association shortly after he served as its leader and was no longer a full member of the group. But the scandal has been a public relations nightmare for the association as it has been campaigning against the creation of a self-regulatory organization that would be run by FINRA. 
Moreover, Spangler was the second former NAPFA chairman to face fraud charges. Former NAPFA president James Putman, an advisor in Appleton, Wisconsin, was charged civilly by the SEC in May 2009 with accepting $1.24 million in kickbacks derived from investments made by unregistered investment pools, and with breaching his fiduciary duty and fraud by misrepresenting the safety and stability of his clients’ investments. A federal court on April 24 awarded summary judgment to the SEC against Putman and he’s been ordered to pay $1.53 million in disgorgement and $130,000 in civil penalties.


Spangler Indictment

Comments (7)

So much for purported integrity. This is a real smudge on NAPFA, and our industry.
vguettlein , May 18, 2012
Maybe now THEY won't look down their nose at the rest of us who have valid business reasons for not joining their "society".
vguettlein , May 18, 2012
It doesn't look like he's a NAPFA member any longer; according to this piece, he's been out of NAPFA for a decade or more. What is it that you expect the association to do when a former member is charged with a crime? The actions of a few do not define the entire membership.

With regards to the looking down at folks, well, sad to say, but I've experienced this first hand from NAPFA leadership--as a student attendee to a national conference, no less. I understand exactly were this sentiment comes from.
ericm205 , May 18, 2012
This is EXACTLY why the title or definition approach does not work. Just because you have a title or designation, it means nothing.

The problem is that neither the SEC, State Regulators (who is always forgotten in this discussion) or FINRA auditors have the ability to look at an account and say 'whoa, what the heck is that?'

What is needed is the understanding that being a fiduciary is a process that is easily recognized (ie DOL ERISA approach) before choosing a regulator.

brentb843 , May 18, 2012
I wouldn't use this dishonest person's past association with NAPFA as an opportunity to discredit the organization and what it stands for. You can ask people to adhere to a standard but some will still violate it and this happens in all walks of life.
jalfonso , May 18, 2012
It’s disappointing that the author continues to use the indiscretions of a particular individual in an attempt to discredit NAPFA. NAPFA is and will continue to be the leading voice for objective advice delivered in the best interest of the client. Show me another organization that has done as much to protect the profession and the interests of consumers and I will consider it.
We all know that there has never been a member of the FPA, a CFP certificant, a CFA charter holder, a CPA, a wirehouse broker etc., etc. accused of and/or convicted of similar charges or worse.
What type of advisor does the author use? What are his biases regarding this matter?
a guest , May 19, 2012
Reuters, AdvisorOne, Financial Planning, Mutual Fund Wire all led their coverage with the "former NAPFA chairman" angle. Rest assured, if a one-time chair of the CFP Board, FPA, CFA Institute, or even the AICPA PFP Executive committee were indicted for defrauding clients, it would be treated much the same in the media.
agluck , May 19, 2012

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