SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17240 / November 19, 2001
SEC OBTAINS TEMPORARY RESTRAINING ORDER AGAINST FORMER BOSTON-AREA MONEY MANAGER STEVIN R. HOOVER FOR THEFT OF CLIENT FUNDS
SEC v. Stevin R. Hoover and Hoover Capital Management, Inc., Civil Action No. 01CV10751-RGS (D. Mass.)
This morning the federal district court in Massachusetts granted the Commission's emergency motion for a temporary restraining order against money manager Stevin R. Hoover and his registered investment advisory firm, Hoover Capital Management ("HCM"), based on their continuing violations of the federal securities laws. In its motion for a temporary restraining order, which was filed on November 15, 2001, the Commission claimed that between at least April 2000 and September 18, 2001, Hoover, HCM and an unregistered adviser that Hoover controls, Chestnut Management LLC, withdrew more than $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 had previously misappropriated $475,000 from HCM clients between 1995 and 1998.
In connection with today's hearing, the Commission claimed that even after being sued by the Commission for their earlier fraudulent conduct, Hoover and HCM misappropriated money from a $2.5 million hedge fund client, the Chestnut Fund. These thefts began in April 2000 while Hoover, HCM and Chestnut Management were based in Boston. The fraud continued through at least September 18, 2001, after Hoover and his companies had moved to Kansas City, Missouri. According to the Commission, Hoover and HCM, sometimes directly and other times indirectly through Chestnut Management, took at least $470,000 out of the Fund and improperly used the money. The improprieties including making payments for Hoover's apartment in downtown Boston, making loans to Hoover and HCM, and repaying current and former HCM clients who were victims of the 1995-1998 fraud. These misappropriations also included $30,000 taken from the Fund that was used to make a rent payment to former Kansas City Chiefs place-kicker Nick Lowery, for the Fairway, Kansas home Hoover is renting from Lowery.
The Court today granted the Commission's request for a temporary order restraining Hoover and HCM from directly or indirectly violating Section 206(1) and 206(2) of the Investment Advisers Act of 1940 and prohibiting the destruction or alteration of documents, an accounting, and, against Hoover, HCM and Chestnut Management, an asset freeze.