Editor’s note: This story has been updated to reflect the employment status of KayLynn Dalebout.
A company that provides liability insurance has asked a federal judge to declare that Yellowstone Partners and its former owners and officers violated the terms of its policy. It seeks for the company to refund more than $400,000 it advanced for legal defense.
It’s been a little more than a year since the FBI raided the Idaho Falls headquarters of the investment advisory firm, established in 2005 by Dave Hansen, who has since moved to Arizona, according to the suit.
The sole owner and member of the firm is now DeGrand Management, according to the suit, which is incorporated in Wyoming and owned by Doyle Beck. DeGrand Management purchased the firm in April, according to a Securities and Exchange Commission document. DeGrand Management’s purchase of Yellowstone Partners came after reports of the FBI investigation.
The suit was brought earlier this month by Wesco Insurance Co., which is based in Delaware and provided liability insurance to both Yellowstone and its officers.
The need for legal defense arose from an SEC investigation of irregularities with customers’ accounts, according to the suit, in which customers were being repeatedly billed management fees in a single year that were supposed to only be billed once per year. According to the suit, those extra fees amounted to more than $5 million, which was later refunded to clients. The suit states the fees were taken in advance to meet payroll and pay expenses.
It quotes a November 2016 SEC order finding that led to subpoenas of the companies’ former management, in order to investigate possible fraud in billing practices. It said the employees “may have been or may be employing devices, schemes or artifices to defraud a client or prospective client.”
In July 2016, the firm self-reported the irregularities to the Securities and Exchange Commission, according to a letter attached to the suit as an exhibit.
At the time of the November 2016 FBI raid, Yellowstone Partners had more than $850 million in assets under management, according to previous Post Register reports. The company was described as a well-established investment adviser with satellite offices around the West.
In addition to the company and Hansen, the suit names former CEO and Chief Investment Officer Richard Baird, former COO Paul Weimer, former Municipal Bond Manager Michael Dustin and former CFO KayLynn Dalebout as defendants. According to the suit, Yellowstone Partners agreed to indemnify them, meaning it would bear their legal costs.
Wesco argues its money should be refunded because the company admitted violating securities laws, so its legal expenses aren’t covered under the policies taken out by Yellowstone. Its policy contains a clause denying insurance for any “wrongful act.”
Yellowstone and its new management have yet to file a response to the suit, as have its former officers.
Dave Hansen is now a partner at Elite Advisor Institute in Mesa, Ariz. The company’s website says he is “the co-founder of SRG’s Elite Advisor Institute training and coaching platform.”
Beck didn’t respond to a request for comment.
Reporter Bryan Clark can be reached at 208-542-6751.