Securities Law Updates | New Releases/No Action Letters
June 26, 2012
Prosecutors: Former Head of the National Association of Personal Finance Advisors Diverted Client Funds to His Own Risky Start-Up Ventures
USA v. Spangler
Case No. 2:12cr133, United States District Court for the Western District of Washington, 5/17/2012
A long-time Seattle financial advisor has been indicted by a federal grand jury with 23 criminal counts, including wire fraud, money laundering and investment advisor fraud, announced U.S. Attorney Jenny A. Durkan.
Mark F. Spangler, 57, of Seattle is accused of diverting investor money from accounts he managed to risky start-up ventures in which he or his investment firm had an ownership interest. Spangler allegedly diverted more than $46 million to two companies, one of which is now shut down after failing to generate any positive revenue. Those who invested in the funds managed by Spangler, as part of The Spangler Group Inc.(TSG), were not told that their money was being invested in risky start-up companies. Spangler and several of his companies went into receivership last year.
The Securities and Exchange Commission has filed a civil suit against Spangler as well.
“The Department of Justice is making the prosecution of financial fraud a top priority,” said U.S. Attorney Durkan. “These investors lost millions to a man they trusted to safeguard their resources. We are working closely with the SEC to ensure Mr. Spangler is held accountable for his fraud.”
The six investors described in the indictment were told their funds were conservatively invested in publicly traded companies and in bonds. Spangler allegedly provided them misleading statements over time, falsely describing the value of their accounts and how the money was invested. When investors sought to liquidate their holdings, Spangler was unable to provide them any funds, because the money had been funneled to the high risk start-up ventures that were not profitable.
According to the indictment, Spangler established a variety of funds as early as 1998 to pool investor money to buy publicly traded stocks and bonds. Spangler co-founded the two startup companies in the early 2000s—Tamarac Inc. in 2000 and TeraHop Networks Inc. in 2002. Tamarac Inc. is headquartered in Seattle and provides software to financial planners.
TeraHop Networks Inc. is headquartered in Georgia and manufactured wireless devices used to monitor the location and activity of people and physical assets such as construction equipment.
TeraHop has ceased operation. Spangler not only failed to disclose to his investors that he was diverting significant amounts of their funds to TeraHop and Tamarac, but he also failed to disclose that he was involved in the management of these companies, had an ownership interest in Tamarac, and was receiving payments from both companies.
The indictment contains an order of forfeiture, which will be used to try to recover assets for the investors.
The case is being investigated by the FBI and Internal Revenue Service Criminal Investigation (IRS-CI).
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