Another ex-NAPFA prez in hot water

FBI raids home of adviser Mark F. Spangler in probe of alleged fraud; served as president of financial advisers association in 1999

FBI agents searched the home of a former president of the National Association of Personal Financial Advisors in a probe related to allegations that the adviser had swindled clients out of millions of dollars.
According to a federal search warrant, authorities Sept. 23 raided the home of Mark F. Spangler, owner of advisory firm The Spangler Group Inc. and president of NAPFA in 1999. Federal authorities sought evidence of a crime related to mail, wire and securities fraud, as well as money laundering, according to the search warrant.
News of the FBI raid was originally reported by seattlepi.com in early October.
No charges have been filed against Mr. Spangler, according to Emily Langlie, a spokeswoman with the Department of Justice.
According to an affidavit from Special Agent Spencer Walker, an investigation had revealed that Mr. Spangler had invested in “high-risk private companies” without his clients’ consent and misled them into believing that their money was invested in funds holding publicly-traded securities.
Mr. Walker claimed that Mr. Spangler had a personal and business interest in at least two of the private companies: He was chairman of technology company Tamarac Inc. and president of the now-defunct TeraHop Networks Inc. According to Tamarac chief executive Stuart DePina, Mr. Spangler was asked to step down from the company’s board earlier this year and had never been active with the outfit.
The FBI agent noted in his affidavit that the Securities and Exchange Commission is conducting a parallel civil investigation of Mr. Spangler. The SEC would not confirm whether such an investigation is ongoing.
Mr. Spangler’s firm, which had managed $106 million, according to his Form ADV, went into receivership in June, according to court documents filed with King County Superior Court in Washington State.
A group of clients, seeking to subject the adviser to examination by their attorneys in relation to the receivership, also are claiming that Mr. Spangler had violated his fiduciary duties by investing their money in the privately held startups.
One of those companies, TeraHop, closed down and led to a loss of more than $50 million for clients, according to documents filed with the King County Superior Court.
A call to Mr. Spangler’s attorney, Ronald J. Friedman of Lane Powell, was not immediately returned.
This is not the first time a former NAPFA president has had a run-in with the law. In 2009, James Putman, who served as president of the organization of fee-only advisers from 1996 to 1997, was charged with accepting some $1.24 million in kickbacks related to unregistered investment pools.
The assets of Mr. Putman’s firm eventually were frozen, and the firm later went into receivership. Mr. Putman is still in civil litigation with the court-appointed receiver, Faye B. Feinstein, and with the SEC.
A call to Mr. Putman seeking comment was not immediately returned.
NAPFA maintained that the adviser’s alleged actions would not tarnish the group’s reputation.
“At this point, Mr. Spangler may only be guilty of misjudging his client’s risk tolerance — something any adviser could face in these volatile times,” said NAPFA in a statement. “We don’t know all of the facts in this ongoing investigation, but we will not allow the alleged actions of one individual to taint the good name of NAPFA and those professionals who comprise our membership.”

(Davis D. Janowski contributed reporting to this story.)