Arizona regulators went after two Phoenix insurance agents this week who allegedly sold unregistered securities by routing investors into Minneapolis money manager Trevor Cook's $190 million Ponzi scheme.
The state's securities division on Monday asked the Arizona Corporation Commission to revoke the securities license of one of the men and to order both men to pay fines and restitution for client losses.
The regulatory filing also could spell trouble for Wayzata money manager Jason (Bo) Beckman, whose firm, Oxford Private Client Group, was cited as one of the investors' channels into Cook's Ponzi scheme.
Cook pleaded guilty to fraud and tax charges this year and was sentenced to 25 years in prison. Beckman has not been charged, though he faces civil claims arising from the scheme. He recently settled one claim in arbitration for $50,000; three more claims totaling $11.2 million are pending arbitration, according to regulatory filings.
Beckman's attorney, W. Patrick Judge, declined to comment.
The regulatory action in Arizona targets Joseph Mack, Mack Financial Group and Darin Whittington. Regulators say Mack and Whittington conduct seminars in Arizona and other states on insurance and annuity products, and they have a commission-sharing agreement for jointly held clients.
According to regulators, the men hired Secure Retirement Solutions to invite prospective investors to workshops that promised free meals. The workshops allegedly included a pitch for a foreign currency investment through Beckman's Oxford Private Client Group and another company, Oxford Global Partners, which Cook ran. Both firms had offices in the Van Dusen mansion in Minneapolis.
Mack and Whittington funneled more than $9 million from 70 clients into Cook's currency scheme, collecting sales commissions of 2 to 3 percent, regulators say. In addition, they say that Mack and Whittington charged some investors an "entry fee" of up to 2 percent, which they shared with Oxford.
Dan Nielsen, a retired dentist living in Green Valley, Ariz., said that Mack constantly talked about Beckman and what a thorough job of due diligence he had done on the currency investment. Nielsen said he invested $250,000. "This is quite a chunk of my retirement money. I've got five kids," he said. "I'm 80 years of age. This kicked me right in the teeth."
Neither Mack nor his firm were registered to deal in securities. Whittington was a registered securities dealer for part of the time he allegedly pitched the currency investment, but he did not record those transactions through the securities firm where he worked, regulators say. Arizona securities rules describe that practice, known as "selling away," as "dishonest and unethical."
Neither Whittington nor Mack could be reached Friday for comment.
In a January interview, though, Mack denied promoting the currency investment. "I'm a disgruntled, upset and very concerned investor," he said, explaining that he sank substantial sums of his own and his family's money into the currency program.
Mack said he did refer clients who asked him about alternative investments to Oxford -- primarily to Beckman -- and collected a "finder's fee" for those who invested. "The fee that I got was so minuscule, it wasn't even a focus of my business," Mack said.
As for Whittington, Mack said he was unaware of him having any involvement with Oxford, "other than maybe a referral here or there."
Arizona regulators say Mack and Whittington had about 34 jointly held clients who invested in the currency program. They want the Corporation Commission to revoke Whittington's securities registration; to deny Whittington's pending securities sales application; to fine Whittington and Mack up to $5,000 for each violation of Arizona's securities laws; and to order them and their spouses to pay restitution.
Mack and Whittington have 10 days to request a hearing and 30 days to file a response.
Dan Browning • 612-673-4493
