Blotter: June 2012

Ex-NAPFA Man Charged

The SEC charged Mark Spangler, the former chairman of the National Association of Personal Financial Advisors, with secretly diverting around $48 million in client money into two risky tech startups he co-founded. The Seattle-based investment advisor told his clients he would invest primarily in publicly-traded securities, but beginning around 2003, he and his advisory firm, The Spangler Group, began funneling most of his clients’ money into the private technology firms. Spangler was CEO of one of the companies, which is now bankrupt. It’s a bit of a black eye for NAPFA, which has long held itself out as a group that represents the most upstanding financial advisors in the business, those who are fee-only and therefore claim to have no conflicts.

Overseas Boiler Room

Nicholas Louis Geranio and a number of associates were charged with operating a $35 million international boiler room scheme. According to the SEC, the Hawaii resident covertly founded eight small U.S.-based companies, installed hand-picked management, and then recruited overseas boiler rooms—mostly in Spain—that pressured investors into buying stock in these companies. The boiler rooms raised more than $35 million from investors, while Geranio pocketed over $2 million in consulting fees from proceeds of the fraudulent sales.

Phony Accounts

The SEC alleges that David Blech created more than 50 brokerage accounts to manipulate securities markets. According to the SEC, Blech created these accounts in the names of family members, friends, and even a private religious institution. Blech then used the accounts to buy and sell large amounts of stock in two biopharmaceutical companies to create the appearance of activity in the securities and maintain their market price, which he then used to his financial advantage. Blech, who was previously convicted of securities fraud, also solicited investments for biopharmaceutical companies—including the two companies whose stock he manipulated—despite being barred by the SEC from acting as a broker-dealer.

The SEC also alleges that Blech and his wife Margaret Chassman broke federal securities laws when they repeatedly made unregistered sales of securities and failed to disclose their transactions in the various brokerage accounts. According to the SEC, Blech engaged in his scheme in 2007 and 2008.

TAGS: Industry
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