Hoover and Hoover Capital Management, Inc.
LITIGATION RELEASE NO. 17487 / April 24, 2002
SEC v. Hoover and Hoover Capital Management, Inc., Civ. A. No. 01 CV 10751 (RGS) (D. Mass.)
SEC BRINGS ADDITIONAL CHARGES AGAINST FORMER BOSTON-AREA MONEY MANAGER STEVIN R. HOOVER FOR THEFT OF CLIENT FUNDS
The Securities and Exchange Commission (the "Commission") today announced the filing of an amended complaint in federal court in Boston bringing additional charges against money manager Stevin R. Hoover, and his registered investment advisory firm, Hoover Capital Management ("HCM"), and adding Hoover's unregistered investment advisory firm, Chestnut Management, as a defendant. The amended complaint alleges that the defendants solicited and obtained investments in the Chestnut Fund LP, a domestic hedge fund established by Hoover in April 2000, by making fraudulent misrepresentations to prospective investors, both orally and in writing in the fund's private placement memorandum. The amended complaint also alleges that during an 18 month period after establishing the hedge fund, the defendants misappropriated more than $625,000 from the hedge fund, improperly used these funds for personal and business expenses, and concealed the misappropriation by distributing fictitious account statements to investors. At the same time defendants were depleting the hedge fund's assets, Hoover was also using his position as the fund's investment adviser for his own personal gain. In February 2001, Hoover agreed that the hedge fund would purchase convertible debentures in a privately held company. During negotiations over the terms of the debentures, Hoover, in breach of his fiduciary duties to the hedge fund, offered that the company could pay a lower interest rate on the hedge fund's investment in return for Hoover receiving both a higher "finder's fee," and options to purchase common stock in the company. Lastly, the amended complaint alleges that to satisfy the hedge fund's obligation to purchase the convertible debentures, Hoover invested $700,000 that belonged to another client, a private charitable foundation. This investment was not disclosed to the foundation, and the foundation's investment management agreement with Hoover expressly prohibited investments in privately-held companies.
The Commission filed its initial complaint on May 2, 2001 charging Hoover and HCM among other things, with misappropriating $475,000 from HCM clients between 1995 and 1998. On November 15, 2001, the Commission filed a motion for a temporary restraining order and asset freeze based on allegations that Hoover and HCM has misappropriated more the $470,000 from the Chestnut Fund. The court entered a temporary restraining order against Hoover and HCM on November 19, 2001. On December 13, 2001, with defendants' consent, the court entered a Preliminary Injunction and froze Hoover and HCM's assets (except for funds unrelated to the fraud acquired after November 21, 2001).
For more information see Litigation Release No. 17248, December 19, 2001; Litigation Release No. 17240, November 19, 2001; Litigation Release No. 17236, November 16, 2001; and Litigation Release No. 16983, May 2, 2001.
![]() | SEC Complaint in this matter. |