SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17666 / August 8, 2002
SEC v. Hoover and Hoover Capital Management, Inc., Civ. A. No. 01 CV 10751 (RGS) (D. Mass.)
MONEY MANAGER STEVIN R. HOOVER PLEADS GUILTY TO SECURITIES FRAUD
On August 7, 2002, money manager Stevin Hoover entered a guilty plea before Judge Douglas P. Woodlock of the U.S. District Court for the District of Massachusetts to one count of securities fraud in violation of Section 206 of the Investment Advisors Act of 1940. Hoover is scheduled to be sentenced on October 31, 2002. Hoover faces a maximum penalty of 5 years in prison, followed by a 3 year term of supervised release, and a $250,000 fine.
Hoover, age 53, is the sole owner of Hoover Capital Management, Inc. ("HCM"), a registered investment adviser, and Chestnut Management LLC ("Chestnut Management"), an unregistered investment adviser. Appearing before Judge Woodlock, Hoover admitted that he engaged in a scheme to defraud his investment advisory clients by diverting nearly $200,000 from client accounts to his own account. Hoover spent the misappropriated money on such things as a luxury automobile for his wife and paying off personal credit card debt.
Hoover's guilty plea does not resolve the Securities and Exchange Commission's pending civil enforcement action against Hoover, HCM and Chestnut Management. In its enforcement action, the Commission alleges that between 1995 and 2001, Hoover misappropriated nearly $3 million from clients, including the Chestnut Fund LP, a hedge fund founded and managed by Hoover. The Commission also alleges that Hoover solicited and obtained investments in the hedge fund by making fraudulent misrepresentations to prospective investors, and that Hoover attempted to conceal his misappropriations by distributing fictitious account statements to investors.
The Commission filed its initial complaint against Hoover and HCM on May 2, 2001. On November 15, 2001, the Commission filed a motion for a temporary restraining order and asset freeze based on newly discovered evidence. The court entered a temporary restraining order and asset freeze against Hoover and HCM on November 19, 2001. On April 24, 2002, the Commission amended its complaint to add Chestnut Management as a defendant and allege additional charges against Hoover and HCM based on newly discovered evidence.