SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 16983 / May 2, 2001
SEC CHARGES INVESTMENT ADVISER AND HIS FIRM WITH MISAPPROPRIATING OVER $475,000 OF CLIENT FUNDS
SECURITIES AND EXCHANGE COMMISSION V. STEVIN R. HOOVER AND HOOVER CAPITAL MANAGEMENT, INC. (United States District Court for the District of Massachusetts, Civil Action No. 01 CV 10751 (RGS) (D. Mass.)
Today, the Commission announced that it filed a civil fraud action against money manager Stevin R. Hoover and his investment advisory firm, Hoover Capital Management, Inc. ("HCM"), in the United States District Court for the District of Massachusetts alleging that they misappropriated over $475,000 from their clients through forged checks, unauthorized transfers, and overbilling of management fees. During the period 1995 through 1999, when the fraudulent conduct occurred, Hoover resided and HCM was located in Boston, Massachusetts. Hoover currently lives in Kansas City, Missouri.
The complaint alleges that Hoover and HCM misappropriated client funds by making $404,000 of unauthorized transfers from client accounts. The Commission alleges that Hoover misappropriated the money by forging clients´ signatures and causing checks to be issued without the knowledge or approval of his clients. Hoover also overbilled clients more than $70,000 in management fees. The Commission alleges that Hoover used some of the client monies to support his lifestyle by purchasing a car valued at more than $40,000 and by paying off a personal credit card bill of approximately $60,000. The complaint also alleges that one of the targets of Hoover´s scheme was an ailing 72-year old Bedford, Massachusetts widow. In June 1997, less than a month before the widow died, Hoover forged her signature on a letter which directed $50,000 to be transferred from her brokerage account to HCM. In addition, the Commission alleges that during 1998 and 1999 Hoover breached his fiduciary duty to his clients by obtaining more than $1 million in personal loans from them by making misrepresentations about the purpose of the loans; a substantial portion of the personal loans remains outstanding. Further, the Commission alleges that HCM provided materials which contained significant misrepresentations regarding the firm´s assets under management to clients, the media and information services which rank investment advisers. The complaint also alleges that HCM failed to disclose material information in forms filed with the Commission pursuant to the Investment Advisers Act of 1940 and that HCM failed to maintain accurate books and records.
As a result of the conduct described in the Complaint, the Commission has charged Hoover and HCM with violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 204, 206(1), 206(2), 206(4), and 207 of the Investment Advisers Act of 1940 and Rules 204-2(a)(5), (6),(7),(9), and (10), 204-2(e)(1) and 206(4)-1(a)(5) thereunder. The Commission´s complaint seeks disgorgement of Hoover and HCM´s ill-gotten gains, plus prejudgment interest, and civil penalties.http://www.sec.gov/litigation/litreleases/lr16983.htm