Financial adviser’s death raises questions about sale of investment firm

Just over two weeks ago, Stanley Mark Powell, a 53-year-old investment manager who lived in a $3 million Austin mansion with his wife and three children, was found in Pontotoc Cemetery, a lonely patch of scrubland roughly halfway between Austin and Abilene, the West Texas town where he grew up.

He was dead, from an apparently self-inflicted gunshot wound.

Now, Powell’s financial dealings have raised questions about Atlanta-based Invesco’s plans to sell Atlantic Trust, the private wealth management firm where he worked. In April, Invesco announced the $210 million cash deal to sell Atlantic Trust, which also is based in Atlanta, to Canadian Imperial Bank of Commerce, which is headquartered in Toronto.

Federal prosecutors in Texas are investigating allegations that Powell, who headed Atlantic Trust’s Austin office, borrowed millions of dollars from dozens of prominent, wealthy investors across the state. Most are now wondering what happened to their money.

Both CIBC and Atlantic Trust have downplayed the potential fallout from the investigation into Powell’s financial dealings. They said Powell’s transactions were unrelated to his job, and don’t appear to have touched clients’ funds.

However, one Texas bank has sued Atlantic Trust and Invesco, seeking repayment of a $1.6 million loan to Powell. The bank alleges that Atlantic Trust said Powell had enough money in a personal account at the firm to cover the loan, and that Atlantic Trust CEO Jack Markwalter confirmed the collateral agreement.

Powell failed to repay the loan, and the funds were missing from Powell’s account at Atlantic Trust following his death, the bank said in its lawsuit.

At least two securities class-action law firms are circling. They say Atlantic Trust and Invesco could be liable for investors’ losses and potential violations of federal securities laws if they failed to supervise Powell closely enough.

It’s unclear how much Powell borrowed from wealthy investors in Austin, Houston, Dallas and other cities, and what he did with the money. Several investors told the Austin American-Statesman that Powell asked them for personal loans for investment opportunities he’d identified. They said he promised to pay them back with substantial interest in as little as 90 days. (The American-Statesman is a sister publication of the Atlanta Journal-Constitution. Both are operated by Cox Media Group.)

Powell, an avid golfer who was active in several charitable organizations, met many of the people he eventually borrowed from at charity banquets or on the golf course. His father was former CEO of Baylor Health Care System in Dallas, and he moved among Austin’s wealthiest circles. Some investors said his reputation as a Christian, a family man and a trustworthy investment adviser made many people comfortable loaning him large sums of money.

But investors began having difficulties getting Powell to repay loans in recent months. After his funeral, many discovered they weren’t alone.

“He contacted a lot of people and wanted to borrow money,” said Carl Paul, of Austin, who founded Golfsmith, a specialty golf and tennis business that he sold last year to a Canadian company for $97 million.

Paul said Powell borrowed money from a family-run business, RPR Management, that oversees the family’s assets, and hasn’t been repaid.

The controversy can’t be helpful for a money management firm that bases its business on building a trusted reputation and long-standing relationships with affluent individuals, foundations and endowments. Atlantic Trust’s new clients must have at least $5 million worth of assets to manage.

“It clearly is an issue,” Jack Williams, a Georgia State University law professor, said of the suspicions surrounding Powell.

But he said CIBC may want to go ahead with the acquisition anyway, which could be key to its plans to expand in the United States.

“This is a strategic acquisition for (CIBC),” said Williams.

At this point, it’s too early to tell whether Atlantic Trust will be liable for any losses stemming from Powell’s activities, said Williams. CIBC and Invesco could deal with potential losses by renegotiating the price, or CIBC may go ahead with the deal as it stands, he said.

Both Invesco and CIBC are downplaying the possible impact of Powell’s mysterious side-business and death on the planned acquisition.

“Following Mark Powell’s death, we became aware of unusual transactions Mr. Powell seems to have conducted personally outside of his work for Atlantic Trust. We advised the authorities. We have no reason to believe that client accounts were accessed,” an Atlantic Trust spokesman said in an email.

“We’re very pleased with our pending acquisition,” Gerald McCaughey, chief executive of CIBC, said Thursday in a quarterly earnings conference call with investors. He said he expects the acquisition to be completed by year-end.

Victor Dodig, senior executive vice president over CIBC’s wealth management unit, said in the same conference call that the Austin incident was “clearly a personal matter reflecting the private actions of an individual now deceased.” He added that CIBC’s preparations to take over Atlantic Trust’s operations are “well underway.”

Atlantic Trust, a 187-employee business with a dozen locations and $21.7 billion in assets, is a relatively small part on Invesco’s operations. Invesco had $729 billion under management at the end of March.

CIBC gets about 14 percent of its $12.5 billion in revenues from its wealth management business. The bank hopes the Atlantic Trust acquisition will boost its access to wealthy U.S. households, where “assets are growing 50 percent faster than those of average U.S. household,” said McCaughey.

Williams said it’s natural that the companies involved in the sale of a business will downplay the possible impact of a suspected fraud by one of its employees, even if they are privately renegotiating new terms to adjust for potential legal costs and client losses.

But during last week’s conference call with investors, he added, CIBC had a “great opportunity to put out some trial balloons” about potential problems with the deal, and didn’t.

“It tells me that they’re comfortable with the risks associated” with the deal, he said.

Grantham reported this story from Atlanta. Harmon, a staff writer for the Austin American-Statesman, reported from Austin.

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