Other red flags, Mr. Townsend said, are not knowing where the money you are investing is being held, who the auditor is, whether you are personally liable if the investment fails and if the (sponsor) has a track record.
The onus is on investors, though, to understand what they are agreeing to. According to the affidavit, Mr. Spangler had some clients sign agreements that allowed him to change how their money would be (invested). In particular, Mr. Spangler added a section in the revised document called “Illiquidity of Investments,” which stated that some of these investments might have to be made for a longer period of time to be (profitable).
“It goes back to understanding what you’re signing,” said Elaine Scoggins, a director at Merriman, an investment (advisory) in Seattle. “Ask a lot of questions if you don’t understand. There’s always the option of getting a second opinion.”
For people who lose money in private placements, there is little good news. The recovery process will be slow and there is no guarantee on how much an investor will get back.
Kent L. Johnson, a venture capitalist who is president of KLJ Consulting, is the court-appointed receiver for the Spangler Group. He said nearly all of the assets that had not been lost were invested in various (private) companies, and it could take up to three years to unwind those investments.
He said he hoped to recover about 50 percent of the $68 million that he estimated remained, at least on paper. That would then be (distributed) to the 80 investors on a pro rata basis.
“It’s just going to take some time to allow those companies to mature and maximize their value,” Mr. Johnson said. “If you try to liquidate them too early it wouldn’t be worth as much.”
