SECURITIES AND EXCHANGE COMMISSION
LITIGATION RELEASE NO. 17981 / February 11, 2003
SEC v. Hoover and Hoover Capital Management, Inc., Civ. A. No. 01 CV 10751 (RGS) (D. Mass.)
FINAL JUDGMENT ENTERED AGAINST MONEY MANAGER STEVIN R. HOOVER
The Securities and Exchange Commission ("Commission") announced today that the Honorable Richard G. Stearns of the United States District Court for the District of Massachusetts entered a final judgment by consent against former money manager Stevin R. Hoover, age 54, and his two wholly owned entities, Hoover Capital Management, Inc. ("HCM"), formerly a registered investment adviser, and Chestnut Management LLC, an unregistered investment adviser.
In its complaint, the Commission alleged that between 1995 and 2001, Hoover misappropriated funds from investment advisory clients, including the Chestnut Fund LP, a hedge fund founded and managed by Hoover. The Commission also alleged 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.
Without admitting or denying the Commission's allegations, Hoover and his entities consented to a final judgment ordering them to pay disgorgement and prejudgment interest in the amount of $1,011,007.48. The defendants also agreed to entry of injunctions that permanently enjoin them from future 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 206(1) and 206(2) of the Investment Advisers Act of 1940 ("Advisers Act"). Defendants Hoover and HCM were additionally permanently enjoined from future violations of Sections 204 and 206(4) of the Advisers Act and Rules 204-2(a)(5), 204-2(a)(6), 204-2(a)(7), 204-2(a)(9), 204-2(a)(10), and 206(4)-1(a)(5) thereunder. Civil penalties were not imposed on the defendants based on representations made in their sworn Statements of Financial Condition. In addition, the Court has appointed Keith D. Lowey, CPA, of Foxborough, Massachusetts, as Receiver over the hedge fund and over accounts of other remaining clients of Hoover or his entities.
In a relating administrative proceeding, Hoover and HCM consented, without admitting or denying the underlying allegations, to the entry of an Order Making Findings and Imposing Remedial Relief. The Order permanently bars Hoover from association with an investment adviser and censures HCM. HCM withdrew its registration as an investment adviser with the Commission in January 2002.
Previously, Hoover pleaded guilty to criminal charges that he defrauded investment advisory clients out of nearly $200,000 in violation of Section 206(2) of the Advisers Act. Hoover is currently serving a 18 months prison sentence, which will be followed by 3 years of supervised release during which he will be barred from providing any financial services or actingas the custodian for funds belonging to other people.
For more information see Litigation Release Nos. 17825 (November 1, 2002), 17666 (August 8, 2002), 17487 (April 24, 2002), 17284 (December 19, 2001), 17240 (November 19, 2001), 17236 (November 16, 2001) and 16983 (May 2, 2001).