United States Securities and Exchange Commission
Investment Advisers Act of 1940
Release No. 2071 / October 25, 2002
File No. 3-10921
Administrative Proceedings Instituted Against Paul J. House and Brandon R. Moore Based on an Order of Permanent Injunction
The Securities and Exchange Commission ("Commission") announced that it has instituted public administrative proceedings against Paul J. House and Brandon R. Moore ("Respondents") of Decatur, Illinois. The proceedings are based on the injunction entered, on June 20, 2002, in the case of SEC v. House Asset Management, L.L.C., et al., Case No. 02-2147, against the Respondents. The Respondents, without admitting or denying the allegations made in the Commission's Complaint, consented to the entry of an order permanently enjoining them from violating Sections 5(a), 5(c), 17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act of 1933, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, Sections 206(1) and 206(2) of the Advisers Act of 1940, and Section 7(a) of the Investment Company Act of 1940. The Commission in its Complaint for the district court action alleged that Respondents had engaged in a scheme to defraud investors in a hedge fund. The Commission also alleged that Paul House was the managing member of House Asset Management, L.L.C., the adviser to the hedge fund, and Brandon Moore was its chief financial officer. The Commission alleged further that the Respondents falsely told investors that the hedge fund had generated cumulative returns of up to 148% when the hedge fund had lost at least $850,000 during its operation. Additionally, the Commission alleged that the Respondents misrepresented the use of proceeds to investors by claiming that the proceeds would be used to engage in a profitable securities trading program when Respondents borrowed at least $400,000 from the hedge fund to purchase real estate for themselves. Further, the Commission alleged that the Respondents made false and misleading statements in offering materials about House's background as a broker and omitted to disclose the Respondents' prior personal bankruptcies.
A hearing will be scheduled before an administrative law judge to determine whether the allegations contained in the Order are true, to provide Respondents an opportunity to dispute these allegations, and to determine what sanctions, if any, are appropriate and in the public interest.