Pat Davison, a Billings businessman, community leader and former Republican candidate for governor, was charged Friday with violating the Montana Securities Act and defrauding investors of $1.2 million.

The state Auditor's office, which regulates state insurance and securities matters, alleges Davison sold securities without a license and engaged in dishonest and unethical practices.

On Monday, two unnamed investors complained to the auditor's office about Davison's investment practices, including investing $1.2 million into fake accounts.

"It is important in all these cases that they be investigated carefully and handled judiciously and that's what we intend to do,'' state Auditor John Morrison said.

In June, Morrison lost the Democratic primary for the U.S. Senate.

The office also issued a temporary cease-and-desist order against Davison and his two companies, Davison LLC and P&N Ventures, from continuing the alleged illegal practices.

The FBI also is investigating, but would not confirm or deny that it seized documents from Davison's office Friday morning.

"This is an ongoing investigation and it has sensitivities and it would be inappropriate for me to make any kind of a comment,'' FBI Special Agent Jan Caldwell in Salt Lake City told The Associated Press.

Davison could not be immediately contacted at home or at his office at 401 N. 31 St. His recording at his downtown Billings office said, "I am going to be out of the office for about the next month until about the middle of September and will not be checking voice mails at this time.''

In addition to Friday's charges, investors have lodged at least four complaints against Davison while he worked as a broker at UBS PaineWebber (now UBS Financial Services) in Billings. These charges also were noted in the auditor's complaint.

UBS spokesperson Christine Walton in New York City said the first complaint was made in July 2000 and three more came in 2004.

"I believe our firm made restitution of about $500,000 on the four complaints involving Davison,'' she said.

Davison, 49, worked as a financial adviser for UBS PaineWebber from September 2001 through March 2003, when he resigned.

His securities license ended when he left the firm and the auditor said Davison hasn't sought another license.

According to the auditor's complaint, Davison is accused of persuading two families to invest $1.2 million with his companies.

The first complainant said Davison asked for a withdrawal of $500,000 from a PaineWebber account in October 2003 so he could invest in two IRAs at First Citizens Bank. The investor was promised 18 percent interest for 67 days on one IRA.

When a monthly distribution check bounced, the investor went to the bank and learned the accounts didn't exist, according to the complaint.

A second complaint said that in 2002, Davison talked the family into investing in a 7 percent tax-free interest bond issued by "The St. Labre Indian School Trust.'' St. Labre officials said no trust existed.

Last May, Davison asked the same couple to invest $100,000 with Davison LLC. He said the note was guaranteed by him personally and backed by 1,500 shares of ExxonMobil Corporation common stock.

In 2004, Davison ran for governor, but lost the June Republican primary. He has served as chairman of the Yellowstone Republican Central Committee and was a strong supporter of former Gov. Marc Racicot. He is active in the Billings Catholic school system and served on the Montana Board of Regents for seven years.

Davison was serving as Montana finance chairman for Sen. Conrad Burns, R-Mont., but resigned July 27.

When asked why Davison resigned, Burn campaign spokesman Jason Klindt said, "I think he said personal reasons.''

Until earlier this month, Davison also was associated with Wesco Resources, a Billings natural resources company interested in developing the Otter Creek coal reserves, among other projects.

"Our business has separated itself from Pat Davison and we have removed him from any management responsibilities and any involvement in our projects,'' Chief Executive Mike Gustafson said Friday.

This separation occurred within the past 10 days and was by mutual decision, he said.

Davison worked on company projects, but was not an employee and never made any financial investments in Wesco, he said.

"As shocked as I am, this really involves Pat's life outside of any previous relationships with any of Wesco's projects,'' Gustafson said. "I hope Pat can get his personal and family life together.''

If proven, Davison faces charges of $5,000 per violation.

If he violates the temporary cease-and-desist order, he could face fines of up to $5,000 and/or 10 years in prison.