Seattle financial adviser turned 'devious swindler' facing decades in prison Once a leader in investment, Spangler Group head faces 20 years

Mark Spangler, pictured in a promotional photo submitted into evidence during his fraud trial. Mark Spangler, pictured in a promotional photo submitted into evidence during his fraud trial. Image 1 of / 3 Caption Close Seattle financial adviser turned 'devious swindler' facing decades in prison 1 / 3 Back to Gallery

UPDATE: Mark Spangler was sentenced Thursday to 16 years in prison.

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A leading Seattle financial adviser who lied to his clients as he squandered more than $18.6 million of their money on failed businesses will serve 20 years in federal prison if prosecutors have their way.

Having sunk his customers’ fortunes on a pair of deeply dysfunctional startup companies, Mark Spangler hid losses in a desperate bid to get the accounts back in the black. Instead, Spangler, a former chairman of a national financial advisers group, looked on as his clients lost millions on bad investments he made with their money but without their knowledge.

Convicted in November on 32 of the 33 federal fraud-related counts he faced, Spangler continues to claim he was looking out for his customers. Now 60, Spangler may never be free again if the prosecutor’s recommendation is followed.

“He is a good man and he asks for a reasonable sentence,” federal public defender John Carpenter told the court, asking that Spangler be sentenced to five years in prison.

“The government’s recommendation is unreasonable; if followed, Mr. Spangler would likely die in prison, or at best, be released with only a few years left to live. That level of punishment is not called for.”

Federal prosecutors note, though, that Spangler lived very well as his clients’ life savings and estates evaporated. In eight months before the FBI arrived at his home, Spangler spent nearly $40,000 on boating alone.

Assuring his clients he was being cautious with their investments, Spangler “bet big” on a pair of doomed startups.

Spangler directed millions to two privately held, cash-poor companies in which he had a leadership role. One of those firms appears to have closed in March and cost Spangler’s investors at least $46 million. More than half of that loss was later recovered through bankruptcy proceedings.

Documents filed in state court by Spangler show he was managing the fortunes of more than 100 investors spread around the country when he went bankrupt in 2011. A court-appointed attorney sold off Spangler’s assets – including a 64-foot yacht valued at $850,000, and a $1.3 million house in Seattle’s Portage Bay neighborhood – in an effort to settle the debts.

Complaining to the Securities and Exchange Commission after they learned their money had been invested in a shaky startup, four Spangler Group clients said the investment funds’ bylaws had specified that nearly all of the money would be kept in securities on publicly traded markets. Without their knowledge, they told the SEC, Spangler invested their money in non-public, illiquid private companies – chiefly TeraHop Networks – with which Spangler had connections.

Describing himself as a "nationally recognized expert in financial planning," Spangler appeared on CNN and national radio, and was a source for content published in The Wall Street Journal, The New York Times and Fortune magazine. In part because of that reputation, he was managing more than $100 million in investments in early 2011, when it all came crashing down.

According to court filings, Spangler launched TeraHop, an inventory-tracking equipment maker, after buying the intellectual property of another failed venture he was involved in.

Spangler’s various funds invested at least $51 million in TeraHop. One fund, SV11, accounted for nearly $40 million of that amount. Investigators contended Spangler transferred his clients’ money directly to TeraHop to cover the company’s monthly payroll.

Spangler also invested his clients’ money in Tamarac Inc., an accounting software maker based in Seattle. Spangler served as the company’s chairman and director, and was on the board there until February 2011.

As the businesses foundered, Spangler churned out false account statements and PowerPoint presentations meant to allay his clients’ fears. He lied to his clients directly, hired reputable attorneys to legitimize the fraud and then duped them by mischaracterizing changes in their portfolios.

In the end, Spangler was running a Ponzi scheme, using new investors' money to replace money lost by others. Many of those Spangler bilked were good friends and clients of long standing; several have written the court declaring his innocence.

Spangler’s business collapsed in 2011, prompting him to pack up his home, sell his yacht and consider leaving the country. The FBI searched his home in September 2011 and federal fraud charges followed in 2012.

Convicted following a jury trial, Spangler has not admitted his guilt. Prosecutors and Spangler’s public defender do not agree on how much Spangler’s fraud cost his clients, though the amount is likely between $18 million and $20 million.

Writing the court, Assistant U.S. Attorney Mike Lang said Spangler broke his clients’ trusts while wrecking their finances.

Touting the code of ethics he penned for The Spangler Group, Spangler put himself forward in trade publications and through the National Association of Personal Financial Advisors, where he served as chairman in the late 1990s.

“He lulled his clients into a false sense of security by touting his ethics, his professionalism, and his membership in NAPFA,” wrote Lang, who prosecuted the case alongside Assistant U.S. Attorneys Carl Blackstone and Francis Franze Nakamura.

“His clients trusted him, and remained with him to the bitter end, even when he was lying to their faces, because the defendant portrayed himself – publicly and repeatedly – as a man who should be trusted,” the prosecutor continued. “This hypocrisy justifies a stern rebuke.”

For his part, Spangler has asked to be sentenced to five years in prison, though even that term – seven years shorter than the minimum sentence the defense contends that federal rules suggest – is described as overlong by his attorney.

Writing the court, Carpenter said Spangler invested his clients’ money with the best intentions.

Spangler wrongly believed Tamarac and TeraHop would make money for his clients, Carpenter said in court papers. He didn’t hide his assets once the investments collapsed, allowing his clients to recoup some of the money he lost.

For the fraud, Carpenter asserted, Spangler faces a sentence similar to those handed down for murder, child rape or air piracy.

“It is safe to say, idiomatically, … that the fraud guidelines are now completely out of whack,” said Carpenter, who is representing Spangler at sentencing alongside Alan Zarky. “Mr. Spangler made plenty of mistakes, but his is not on par with defendants who commit these sort of offenses.”

In letters to the court, Spangler’s victims – most of them wealthy individuals saving with an eye toward a financial legacy – wrote of plans to posthumously support charities and their children. Spangler’s greed scuttled those dreams.

Describing Spangler as “a devious swindler,” Lang said the disgraced advisor was looking out only for himself in the end. Spangler collected more than $4 million in fees in the last years of his business.

“What sets him apart from so many other fraud defendants, though, is the defendant’s ability to sit across from longtime clients and close, personal friends and lie directly to their faces, time after time,” Lang said in court papers. “This cold reality suggests that he has lost whatever moral compass he may have had.

“It also suggests that he has reached a point in life where he is out solely for himself, with no compunction about lying boldly, cleverly, and often.”

Currently free on bond, Spangler is scheduled to be sentenced Thursday afternoon by U.S. District Judge Ricardo Martinez.

CORRECTION: An earlier version of this story incorrectly stated that Spangler has been jailed. He was released on bond following the jury verdict.

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Seattlepi.com reporter Levi Pulkkinen can be reached at 206-448-8348 or levipulkkinen@seattlepi.com. Follow Levi on Twitter at twitter.com/levipulk.