White Collar Greed 

Some Utah businessmen say the Utah Division of Securities treats them like common thugs. What’s the problem?

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Doing a “Monica”
“I’m the infamous case No. 2,” says Dick Mack. In the audit, Mack’s story is presented as a target of UDS litigation for the past five years. He successfully defended himself against the division’s charges on three separate occasions. Mack’s case is still pending with the Utah Supreme Court and since UDS has seemed to have locked on to Mack like a pit bull, the audit identified the division’s tactics as “vindictive.”

Mack first came under state scrutiny in 2002. He was included in a civil suit against an agent who was a subordinate when Mack was a branch supervisor for Walnut Street Securities. The agent, Roy Hafen, had been selling unlicensed securities for a business venture purporting to produce electronic advertising services installed in gas pumps at stations, according to court documents. A state district judge would exempt Mack from the civil suit, determining he couldn’t have profited from the scheme since he didn’t know it was happening.

“They [Securities investigators] tried to hammer me and, basically, I told them they were full of shit,” Mack says, six years later. “I wasn’t going to be intimidated. If anything they’d said was true, I’d have been on my hands and knees doing a ‘Monica [Lewinsky]’ trying to cut the best deal possible.”

UDS’s second suit dropped the allegation of collusion with Hafen and instead charged Mack with negligent supervision of his subordinate. UDS sought to revoke Mack’s license, arguing he ignored red flags such as a document stating Hafen’s other company was seeking a $20 million loan from an offshore bank on the Caribbean island of Antigua.

“That’s not true,” Mack says. “They [just] throw the kitchen sink at you and hope something sticks and then cut a deal.”

City Weekly obtained a copy of the form in question through an open-records request. It shows Hafen’s separate business did, indeed, seek a $20 million loan from a private bank in “Ategia” [sic]. Hafen’s signature is on the document— just above Mack’s.

When Mack got the administrative charges, he believed he wouldn’t stand a chance before Klein as the hearing officer. “That’s just their hanging court,” Mack says. He decided on a different strategy. He filed suit against UDS, arguing that by a variant of the “double jeopardy” rule, he couldn’t be tried twice for the same charge.

A 5th District Court judge sided with Mack. UDS appealed the case, but Mack won again. The division appealed to the state Supreme Court, where the case is pending. “Nobody’s ever fought them before,” Mack says adding, “Ninety-five percent of the people [UDS] deal with are guilty of something. The problem is they have no way out for somebody who isn’t guilty of something.”

Klein denies any vendetta against Mack for having told Securities to “piss up a rope.” The litigation continues because the district court decision could, Klein argues, set a precedent that would limit how UDS brings future charges against suspected scam artists.

“The question has become much bigger than Mr. Mack,” Klein says. Because the lower courts agreed with Mack, they created the possibility UDS might be able to bring only one type of a charge—be it administrative (like revoking a license), civil or criminal—in future cases. “So,” Klein says, “If somebody steals money from his clients, can we bring criminal charges and revoke his license or can we only do one or the other?”

Mack believes the blow he’s struck is a victory for all securities agents, who, he says, have been bullied by UDS previously, including the independent representatives who have worked for him in the past. Rep. Jim Bird, for example, was an independent contractor for Walnut Securities under Mack’s supervision during the original investigation. At this time, Bird was not yet an elected representative.

Mack and Bird maintain there’s never been any ethical conflict in their pursuit of UDS because the two men never had an employer/employee relationship. Bird was a 1099 independent contractor for Mack, not a traditional, W2 employee. This meant Mack didn’t sign checks for Bird and couldn’t fire him. But as a supervisor, Mack was responsible for Bird complying with securities laws. If he wasn’t compliant, the broker/dealer could have fired Bird.

Bird isn’t currently under Mack’s supervision. They’re now both independent agents working under contract for the same broker/dealer, Sammons Securities. Mack says he supervised Bird years before he became a legislator and that the outcome of Mack’s case wouldn’t benefit Bird financially.

“He’s not trying to feather his own nest,” Mack says. “Jim Bird is a hero in this deal and every security rep in the state needs to thank him because we finally got some justice.”

But even before the audit’s release, the rumors of UDS mismanagement Bird voiced may have helped secure some justice for Mack.

Last March, Ducks Unlimited, a national duck-hunters lobby group, was hosting its annual silent auction fund-raiser. The beer flowed and bikini-clad waitresses served drinks. That night, Mack says, he introduced himself to Utah Attorney General Mark Shurtleff. Mack says Shurtleff had heard his name mentioned but wasn’t familiar with his case. Mack says he told Shurtleff he was in a “scrap” with UDS and predicted the audit would be “very adverse” to the division.

Mack claims Shurtleff assured him when the audit was over, the attorney general’s office would “look into it” and do something to “make it right with you if the audit shows they’ve been unjustly pursuing you.’” Mack contends the meeting was harmless and believes the audit has vindicated him, despite auditors specifically stating they would not address the legal merits of any cases the audit mentioned.

In an interview with City Weekly, Shurtleff remembers the meeting differently. He says he only assured Mack that if there was anything in the audit relevant to him, he could meet with Shurtleff to discuss it. No promises were made, Shurtleff says.

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