Colorado authorities have sued a Boulder private-fund manager, claiming he misled investors who had placed $25 million under his management and spent their money on himself.
A Denver judge on Wednesday froze the assets of Mark Hamilton Yost and his company, Yost Co., and temporarily barred them from selling securities in Colorado. The assets in Yost’s fund, Yost Partnership LP, were less than $20,000, according to the Colorado Division of Securities.
Yost told investors the fund’s assets were $28 million as of Dec. 31 and that the net increase in assets from operations for 2009 was $6.5 million, according to the state’s complaint.
It’s the latest in a string of financial frauds alleged in Colorado, including those by investment managers Sean Mueller and Shawn Merriman.
Roughly 50 people, many from Yost’s hometown of Fremont, Neb., lost about $25 million that they invested with him since 1991, said deputy securities commissioner Gerald Rome.
“He misrepresented to investors the amount in the fund and their returns, thereby lulling them into thinking their funds were safe and secure and making money,” Rome said.
Yost also “misused the fund in ways not intended by investors.”
Yost did not return calls for comment, and his attorney, Richard Vermeire, said only that he and his client are “fully cooperating” with authorities.
The state alleges Yost paid himself excessive fees based on the inflated gains he reported in the fund. He also spent investors’ money on himself, including paying insurance on his airplane, according to the complaint.
Yost was chairman of Flatirons Bank as well, which he and a group of investors bought in 2008. The state claims Yost arranged two fraudulent “straw man” loans totaling $4 million in early 2009, transferred the money to one of his entities and paid it to fund investors who had been demanding their money back.
The Colorado State Banking Board suspended Yost on Aug. 19 based on information about one of the fraudulent loans.
Flatirons president Kyle Heckman said the bank notified the state immediately when it learned of irregularities related to Yost’s activities and continues to work with state investigators.
“This was an isolated incident that does not affect any existing customer loans or deposits. It appears that Mr. Yost’s actions were driven by his activities in other investment partnerships and were otherwise unrelated to the business of Flatirons Bank. No other bank employees, directors, or consultants were involved,” Heckman said.
The bank is well-capitalized and its liquidity position strong, he said. The bank, which has one branch in Boulder and one in Longmont, had assets of $106.7 million as of June 30, according to the FDIC.
Yost was a hedge-fund manager in Chicago before moving to Boulder prior to the Flatirons purchase. There, he worked for Wanger Asset Management before starting his own fund, Intrinsic Capital Partners, according to news reports.
He is a graduate of St. Olaf College in Northfield, Minn., and earned an MBA from the University of Chicago, according to an interview with St. Olaf Magazine in 2007.
Greg Griffin: 303-954-1241 or ggriffin@denverpost.com
