It's a PR issue for the Seattle software dynamo after the the former NAPFA chairman, former Tamarac chairman and RIA faces a heavy SEC scrutiny and FBI investigation
Investment manager Mark Spangler, an investor and former chairman of Tamarac, Inc., is in the midst of investigations by the SEC and the FBI – but Tamarac’s CEO insists that Spangler’s troubles will not derail the company’s phenomenal growth.
Spangler, the 56-year-old principal of The Spangler Group Inc., which managed $106 million of assets, the former (1996) chairman of National Association of Personal Finance Advisors and former chairman and major backer of Tamarac, is under investigation for fraud and money laundering.
Federal agents have raided the home of the Seattle investment manager, who is alleged to have moved client funds into startup companies he managed without their knowledge. He then lost much of their money after one of the firms went under.
Spangler’s close relationship with Tamarac, a popular software company with RIAs, has forced chief executive Stuart DePina, to face the PR fallout head-on. In February, after one of Spangler’s ventures had gone bust, putting him in a serous cash bind, Tamarac asked him to step down as chairman.
“It was enough of a red flag,” DePina says.
Spangler readily agreed, DePina adds. “Mark understood it.”
Spangler, who invested several million dollars in Tamarac through his company, Spangler Ventures, now only owns less than 1% of the company, according to DePina.
“I’m highly disappointed in what Mark has [allegedly] done,” he says. “....There is no way this is going to come back on Tamarac.” One reason he personally feels disappointed is that some of the investors work for him.
A matter of degree
Still, DePina, who became the majority owner of Seattle-based Tamarac in 2007, says that Spangler’s wrongdoing may not be nearly as widespread as the scope of the investigation and the contents of the affidavit, published by Advisors4Advisors indicates. He adds that all of Spangler’s clients were “accredited investors.” This basically means that a person has $200,000 in income or $5 million of assets.
Spangler, who has not been charged with a crime, is suspected of taking money from clients who believed it was intended for one investment and then putting it in another.
DePina says that Tamarac’s clients – all small business people themselves – have kept faith with his firm despite Spangler’s troubles, but DePina fears that the ugliness of the situation could ward off new business.
“Customers get it,” he says. “I’m more concerned about prospects questioning our credibility.”
Leaps and bounds
DePina says that he is certain that all current investors in Tamarac are invested willingly and that they want to remain invested.
And with good reason: the company has experienced consecutive years of 50% growth and has built up its revenues to about $10 million. Revenues for this year may grow at a rate closer to 60% and 2012 has similar prospects for growth.
Tamarac has thrived by creating rebalancing software that is competitive with industry rivals – and at a much lower cost. See: Tamarac claims what was unthinkable two years ago — that it is on the same playing field as iRebal for rebalancing software.
It has also created a bundled mini-ecosystem of applications, Including Schwab PortfolioCenter and Microsoft’s CRM, that has also proved popular with RIAs. See: A close look at Tamarac’s Advisor 9 and its strategic use of Schwab software. The company serves about 400 advisory firms and has 100 employees. When DePina came aboard in January 2007, the company had only eight employees.
There were about 100 investors invested with Spangler Ventures when he was compelled to file for bankruptcy. As part of that process, his 64-foot yacht valued at $850,000 and a $1.3 million house in Seattle’s Portage Bay neighborhood were put on the block
Much of investors’ money ended up being poured into the now-defunct TeraHop Networks, a Georgia-based firm that made inventory-tracking equipment.
Contacted for comment by the Seattle Post-Intelligencer for its article, FBI: Seattle investor lost millions of clients’ money, on the subject, Spangler’s attorney Ronald J. Friedman declined to discuss the allegations in detail but said his client is cooperating with investigators.
“Mr. Spangler regrets this turn of events in regard to his business and intends to fully cooperate with authorities in their ongoing investigation,” Friedman said. “It is too early in the investigation to say more.”