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A Former Napfa Official Is Guilty of Fraud

November 11, 2013

The Schadenfreude was palpable late last week after a federal jury in Seattle found former Napfa chairman Mark Spangler guilty of wire fraud and money laundering. As Financial Advisor reports, the owner of high-profile RIA the Spangler Group used his clients’ savings to invest in startups without telling them where their money was going. Perhaps predictably, advisors from other channels are asking the equivalent of “What can you expect?” One FA reader writes, “Napfa is a sham, and ‘fee-only’ is a battle cry for those who fear the oversight of compliance and the regulators.”

But Spangler’s case has been bizarre from the start, because while he kept quiet about his venture-capital hobby with clients, he was outspoken about it with peers in the industry. According to an FA column published when the FBI first homed in on him just over two years ago, Spangler talked at a 2000 Napfa conference about his startups, noting that many of his clients were wealthy employees of fast-growing Seattle companies like Starbucks and Microsoft. When Spangler described his investments, the columnist noted, “It sounded perfectly plausible that clients who earned their wealth in successful VC-type companies could get easily comfortable with more of the same.”

Spangler was co-founder of TeraHop, a Georgia technology company that went belly-up in 2011, and of Seattle’s Tamarac, a maker of portfolio rebalancing software that Envestnet bought in February 2012 for $54 million, according to FA. The U.S. Attorney said his clients never consented to invest in such businesses, and their losses over the years reached $50 million. Meanwhile, besides funneling their assets into his startups, Spangler bought personal luxuries including a yacht. The SEC filed a civil complaint against him last year; that case will proceed after the criminal trial has ended, according to the Seattle Times.

The newspaper says Spangler is scheduled to be sentenced on Feb. 6, when he could get life in prison. “I hope they throw the book at him,” wrote one Seattle Times reader.

By Joan Warner
  • To read the Seattle Times article cited in this story, click here.
  • To read the Financial Advisor article cited in this story, click here.