SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17236 / November 16, 2001
SEC FILES FOR EMERGENCY RELIEF AGAINST FORMER BOSTON-AREA MONEY MANAGER STEVIN R. HOOVER CLAIMING THAT HE CONTINUED TO DEFRAUD CLIENTS DESPITE ONGOING LAWSUIT FOR PRIOR CLIENT THEFTS
SEC 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 on that November 15, 2001, it filed an emergency motion in federal district court in Massachusetts against money manager Stevin R. Hoover and his registered investment advisory firm, Hoover Capital Management ("HCM"), seeking a Temporary Restraining Order based on their continuing violations of the federal securities laws. In the papers filed in court yesterday, the Commission claims that between at least April 2000 and September 30, 2001, Hoover, HCM, and an unregistered adviser that Hoover controls, Chestnut Management LLC, transferred over $470,000 out of the Chestnut Fund LP, a domestic hedge fund managed by Chestnut Management, and improperly used these funds for personal and business expenses. The motion for emergency relief was filed in the Commission's pending action SEC v. Hoover and Hoover Capital Management, Inc., Civ. A. No. 01 CV 10751 (RGS) (D. Mass.), which alleges, among other things, that Hoover and HCM misappropriated $475,000 from HCM clients between 1995 and 1998.
In its emergency motion, the Commission claims that even after filing the complaint in SEC v. Hoover, et al., and during the pendency of that action, Hoover and HCM misappropriated money from a $2.5 million hedge fund client they controlled, the Chestnut Fund. These thefts began in April 2000, while Hoover, HCM and an unregistered adviser controlled by Hoover, Chestnut Management, were based in Boston. The fraud continued through at least September 30, 2001, after Hoover and his companies had moved to Kansas City, Missouri. According to the Commission, Hoover, HCM and Chestnut Management transferred at least $470,000 out of the Fund and used the money for improper purposes, including rental payments on Hoover's $5,000-a-month luxury apartment in downtown Boston, payments on current and back rent owed for HCM's offices in Kansas City and Boston, rental payments for Hoover's personal residence in Fairway, Kansas, loans to Hoover and HCM and repayments to current and former HCM clients who were victims of the 1995-1998 fraud.
In the papers filed in support of its emergency motion for a Temporary Restraining Order, the Commission claims that Hoover and HCM violated Sections 206(1) and (2) of the Investment Advisers Act of 1940. It seeks entry of an order temporarily restraining Hoover and HCM from directly or indirectly continuing to violate the federal securities laws, preliminary and permanent injunctions, asset freezes, prohibitions against the destruction or alteration of documents, disgorgement and civil penalties.