Business

FBI raids Idaho investment firm over excessive fees, firm says they have been refunded

The Yellowstone Partners headquarters in Idaho Falls.
The Yellowstone Partners headquarters in Idaho Falls. 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 in Boise and 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.

Yellowstone attorney Brett Tolman confirmed that the federal investigation, and an internal audit the firm is conducting, are 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 Utah, said the SEC and FBI probes are “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.

Yellowstone Partners CEO Eric Rubin, who was hired last month, said Thursday that 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.”

The 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.

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.” It has seven satellite offices, including a Boise branch that opened in 2015 in the Belgravia Building at 465 W. Main St. with roughly two dozen employees.

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.

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

As of last month, Hansen, the longtime president and CEO, was listed on the site 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 left the company and is no longer listed on the website.

Rubin, the new CEO, was 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.

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.”

Baird declined to comment.

The Idaho Statesman contributed.

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