U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20234 / August 9, 2007
SEC v. Wood River Capital Management, LLC, et al., U.S. District Court for Southern District of New York (Civil Action No. 05-CV-8713) (NRB)
Court Enters Final Judgment by Consent as to Former Hedge Fund Manager John H. Whittier
The Securities & Exchange Commission ("Commission") announced today that on August 6, 2007, the Honorable Naomi Reice Buchwald, United States District Judge for the Southern District of New York, entered a Final Judgment by Consent against defendant John H. Whittier ("Whittier"). The Final Judgment permanently enjoins Whittier from future violations of Section 17(a) of the Securities Act of 1933; Sections 10(b), 13(d) and 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") and Rules 10b-5, 13d-1, 13d-2, 16a-2, and 16a-3 thereunder; and Sections 206(1) and (2) of the Investment Advisers Act of 1940. The Final Judgment also orders Whittier to pay disgorgement of $5,535,571 plus prejudgment interest thereon of $798,339, for a total of $6,333,910, representing Whittier's ill-gotten gains from the fraud alleged in the SEC's Complaint. Whittier may offset from this $6,333,910 the amount of forfeiture and restitution payments imposed against and paid by him in the parallel criminal case, United States of America vs. John H. Whittier., 07 CR 087 (JSR) (S.D.N.Y. 2007), brought by the U.S. Attorney's Office for the Southern District of New York. Whittier consented to entry of the Final Judgment without admitting or denying the allegations in the Commission's Complaint.
The Commission's Complaint, filed on October 13, 2005, alleged that Whittier repeatedly made material misrepresentations to investors regarding the oversight and diversification of two hedge funds he managed — Wood River Partners, L.P. and Wood River Partners Offshore Ltd. The Complaint alleged that despite promising investors that the funds would be broadly diversified, Whittier nonetheless amassed a position in one small-cap stock (Endwave Corp.) which far exceeded the ten percent cap on individual long positions set forth in the funds' offering memoranda and which eventually exceeded more than forty percent of Endwave's outstanding shares. According to the Complaint, notwithstanding this extraordinary position, Whittier failed to file the stock ownership reports that were required to be filed when the funds' Endwave position exceeded five percent and then ten percent of Endwave's outstanding shares. The Complaint further alleged that, as president of the investment adviser to the Wood River Offshore hedge fund, Whittier's material misrepresentations also defrauded his advisory client, the board of directors of that fund, and prospective clients.
For more information, see Litigation Release No. 19428 (October 13, 2005).