FBI investigating Idaho Falls investment firm

Mar 6th, 2017 | By | Category: Idaho Falls

By Luke Ramseth, The Post Register

On the morning after the November election, FBI agents raided the Idaho Falls headquarters of Yellowstone Partners, a well-established investment adviser with satellite offices around the West and more than $850 million in assets under management.

Agents were “conducting court-authorized activity related to an ongoing investigation,” FBI spokeswoman Sandra Barker confirmed this week, saying she could not comment further.

The U.S. Securities and Exchange Commission also has been looking into practices at the firm, according to a denial by the SEC of a request for records. The denial was based on the stated need not to “interfere with enforcement activities.” FBI and SEC officials refused to acknowledge an investigation when initially asked about the company in late November.

Yellowstone Partners CEO Eric Rubin, who was hired last month, said Thursday the firm was “fully cooperating with investigators,” and “our real focus is servicing our clients.” He said he didn’t think the company had “anything to hide.”

Established in 2005 by Idaho Falls resident Dave Hansen, Yellowstone Partners has “a clear objective of being among the premier wealth management firms in the nation,” according to its website.

It manages about 3,000 accounts, some worth millions of dollars. According to a firm brochure, clientele for its management and financial planning services is made up of “high net worth” and “ultra-high net worth individuals.” The firm’s luxury stone and stucco headquarters is located off Sunnyside Road and Merlin Drive. It has seven satellite offices, including a Boise branch that opened in 2015, with roughly two dozen employees.

The Wednesday morning FBI raid — where agents spent several hours seizing computer files and other records — capped months of turmoil within the company, according to multiple people with knowledge of the situation who spoke to the Post Register on the condition of anonymity, due to the ongoing investigation.

Yellowstone attorney Brett Tolman confirmed that the federal investigation, as well as an internal audit the firm is conducting, is looking for inappropriate fees taken from client accounts going back several years. He said a number of fees have been refunded to clients.

Tolman, former U.S. Attorney for the District of Utah, said the SEC and FBI probes were “parallel proceedings.” While the SEC is looking for compliance issues with the company itself, the FBI has a more narrow criminal investigation, he said.

“At this point, we’re just as interested as anybody else to make sure the appropriate fees were taken out,” Tolman said.

Former employees say significant irregularities — what appeared to many as over-billing — were found last spring by Yellowstone employees in a number of client accounts. The former employees say the events touched off an internal controversy over what had caused the irregularities, which appeared isolated to one group of accounts under one adviser.

Several Yellowstone employees left the firm by the early summer. Some said they felt uncomfortable with the situation. The SEC conducted an audit of the company around the same time.

In July, the firm hired Karen Steighner, a compliance consultant from Denver, who according to her website “provides executive-level direction and oversight of enterprise-wide audits, risk assessments, investigations and compliance reviews.” In August, Yellowstone filed with the SEC a flurry of 11 quarterly reports dating back to 2013 detailing its investment holdings, according to commission records.

In the weeks leading up to the November raid, the FBI began quietly interviewing former employees of the company; it is not known when the agency began its probe.

At least five more people, some who said they were caught off-guard by the seriousness of the developments, have departed the company in recent months since around the time of the raid, according to the sources and employee listings posted on the Yellowstone website.

As of last month, a major leadership shakeup had occurred, according to employee listings on the website and an SEC form. Instead of his longtime role of president and CEO, Hansen was listed along with several others as a wealth management adviser. Hansen did not return a call or email this week seeking comment.

Other people have also moved out of Yellowstone’s top leadership posts, including Cameron High, the longtime chief compliance officer and a minority owner, who recently departed his job with the company and was no longer listed on the website.

Rubin is the new CEO, having been hired last month from the New York City firm RiskX Investments. In addition to their Yellowstone roles, Hansen and Yellowstone’s current Chief Investment Officer Rick Baird had worked together as portfolio managers at New York-based American Independence Financial Services, of which Rubin was president. American Independence later became RiskX. Baird declined to comment about the investigation.

Rubin said he was brought in to “provide some new leadership, and take the firm to a new level.” He said he was already generally familiar with Yellowstone’s operations.

“The most important thing is, we’re going to keep cooperating with (the FBI and SEC),” Rubin said. “Our clients are all getting serviced, nobody is out any money, there’s no problems with any investments or anything, and we’ll keep working through this with the regulators.”

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