Stevin Hoover

Overview

Stevin R. Hoover was a Boston-area money manager who built a public reputation — he was featured in Worth magazine’s 1998, 1999, and 2000 articles on selected money managers’ stock picks — before his career ended in criminal and civil fraud proceedings (SEC complaint). Hoover was the sole shareholder, chief executive officer, and portfolio manager of Hoover Capital Management, Inc. (“HCM”), a registered investment adviser, and the sole owner and manager of Chestnut Management LLC, the unregistered adviser that ran the Chestnut Fund LP hedge fund he founded in April 2000 (SEC complaint). He lived and worked in Boston until about September 2000, when he relocated to the Kansas City, Missouri area; HCM filed an amended Form ADV changing its address to Kansas City that October (SEC complaint). The U.S. Securities and Exchange Commission’s case against him spanned two distinct phases: a 1995–1999 pattern of forged signatures, overbilled fees, and false personal loans, and a 2000–2001 scheme that used the new hedge fund as the vehicle (SEC complaint).

The 1990s: forged endorsements, overbilled fees, and client loans

The SEC’s complaint alleged that between 1995 and 1998 Hoover misappropriated over $479,000 from clients, through $404,000 in unauthorized withdrawals from client accounts and at least $75,166 in overbilled management fees (SEC complaint). The mechanics were blunt. When a client’s payment was needed, the SEC alleged, Hoover or his staff would fax Charles Schwab instructions to issue a check payable to the client; Schwab mailed the check to Hoover’s offices or a redirected address; and Hoover then forged the client’s endorsement and deposited the money into HCM’s operating account or his personal account (SEC complaint).

The named victims show how far the conduct reached. From Alexander S. Coke, an Amsterdam-based client with about $4 million under management, Hoover allegedly withdrew $231,000 without consent; on March 10, 1998 he forged Coke’s signature and endorsed a $40,171 check over to “ForeignMotors West” to buy his wife a sports utility vehicle (SEC complaint). From Christian P. Hinneberg of Hamburg, whose account address was quietly changed to a Boston post office box, Hoover allegedly withdrew about $108,000; one forged $60,000 check was endorsed over to American Express as payment on Hoover’s personal credit card (SEC complaint). Matilda Cuneo, an elderly widow in Bedford, Massachusetts, was in the hospital and non compos mentis when the SEC said Hoover faxed Schwab a forged letter of authority to transfer $50,000 from her account to HCM’s operating account — she died weeks later, and the SEC said her estate had to demand repayment (SEC complaint). And after a personal relationship with Susan Bacon ended, the SEC alleged, Hoover redirected the address on her children’s custodial accounts to his own home, then forged her signature on checks totaling over $16,000 drawn from her children’s accounts (SEC complaint).

Beyond withdrawals, the SEC alleged that Hoover overbilled clients at least $75,166 in advisory fees between 1995 and 1998, charging higher percentage rates than agreed or charging the same quarter’s fees twice (SEC complaint). He also significantly overstated HCM’s assets under management in materials given to clients and the media — telling Forest Hills Cemetery and Adelphi University the firm managed $151 million and $205 million respectively, while HCM’s own Form ADV filings reported only $65.1 million and $74.3 million (SEC complaint). Between August 1998 and August 1999, Hoover borrowed almost $1 million from clients under what the SEC said were false pretenses: $400,000 from Coke, supposedly to buy out his ex-wife’s interest in HCM, backed by false financial statements claiming Hoover owned a “Hoover Hill” neighborhood in Franklin, Pennsylvania — where he in fact owned no real estate; $405,000 from Joanne Morris Camer, supposedly for a bill and a divorce settlement, which Hoover admitted in testimony he used to repay Coke; and $150,000 from Heilwig and Jim Nille, of which $50,000 went to living expenses (SEC complaint).

The Chestnut Fund: a new vehicle after the SEC investigation began

By the end of 1999, the SEC said, Hoover knew the Commission was investigating the conduct described above — and he began perpetuating the fraud through a hedge fund he created and controlled (SEC complaint). In April 2000 he established the Chestnut Fund LP and Chestnut Management LLC, and began soliciting investments by making fraudulent misrepresentations to prospective investors (SEC complaint). The private placement memorandum told at least twelve prospective investors that Deloitte & Touche, Ernst & Young, or Rothstein Kass would audit the fund; none of the three firms was ever retained to perform an audit (SEC complaint). It named Murray Stahl, the editor of an investment research report, as a co-manager and member of Chestnut Management; Stahl was never affiliated with the fund (SEC complaint). And Hoover told prospective investors he was putting his own and his family’s money into the fund — including, in one email, his wife’s money and his young child’s college savings; in fact neither Hoover nor his family invested anything (SEC complaint).

Over the next eighteen months, the SEC alleged, Hoover misappropriated more than $625,000 from the fund, often characterizing withdrawals as “loans” the fund’s documents did not authorize (Litigation Release No. 17487). The uses included a $30,000 “officer draw” for himself, payments toward his improperly obtained Camer loan, back rent, legal fees unrelated to the fund, a $600 airline VIP club membership for himself and his wife, a $10,000 donation to the Catholic Schools Foundation to satisfy a personal pledge, and $3,000 paid to his wife K. Mechelle Hoover for “consulting” (SEC complaint). To conceal the drain, the SEC said, Hoover sent investors statements falsely showing the fund was profitable: on December 29, 2000 he emailed an investor that “the Chestnut Fund is going great guns, up about 18% since April,” while the fund was actually losing money; the fund took in more than $3.3 million of investments and by the end of October 2001 was worth, at most, $1.75 million (SEC complaint).

Self-dealing at Three Dog Bakery and the Kaplen Foundation diversion

While depleting the fund, the SEC alleged, Hoover also used his position as its investment adviser for personal gain. In late 2000 he began discussions with Three Dog Bakery, Inc., a privately held Kansas City company, about a fund investment (SEC complaint). During negotiations over convertible debentures, Hoover offered the company a lower interest rate in exchange for a higher “finder’s fee” and stock options paid into a custodial account belonging to his daughter — writing in one email that “my wife insists on this” (SEC complaint). On February 15, 2001, acting for the fund, Hoover signed an agreement committing it to purchase up to $3 million of the company’s 9% convertible debentures, with the finder’s fee and options folded into the final terms (SEC complaint).

But the fund had less than $1 million in available assets. To meet the commitment, the SEC said, Hoover wired $700,000 in three February–March 2001 transactions from the account of another client, The Kaplen Foundation, a charitable foundation based in northern New Jersey — without the foundation’s knowledge, and in violation of its investment management agreement, which expressly prohibited investments in unregistered securities (SEC complaint). The debenture itself stated in all caps on its front page that it had not been registered under the Securities Act of 1933, a fact Hoover knew (SEC complaint).

Guilty plea, judgment, bar — and victims repaid

The SEC filed its initial complaint on May 2, 2001; on November 15, 2001 it filed an emergency motion alleging Hoover had kept stealing even while being sued, transferring over $470,000 out of the Chestnut Fund between April 2000 and September 2001 for personal and business expenses — including rent on a $5,000-a-month luxury apartment in downtown Boston and repayments to earlier fraud victims (Litigation Release No. 17236). The next day a federal court granted the temporary restraining order and froze the assets; the SEC’s release noted that $30,000 of the fund’s money had gone to rent on Hoover’s Fairway, Kansas home — paid to former Kansas City Chiefs place-kicker Nick Lowery, from whom Hoover was renting (Litigation Release No. 17240). On December 13, 2001, with the defendants’ consent, the court entered a preliminary injunction and froze their assets (Litigation Release No. 17487).

On August 7, 2002, 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, admitting he had engaged in a scheme to defraud his investment advisory clients by diverting nearly $200,000 from client accounts to his own account — spending it on, among other things, a luxury automobile for his wife and paying off personal credit card debt (Litigation Release No. 17666). He was sentenced to 18 months in prison followed by three years of supervised release, during which he was barred from providing financial services or acting as custodian of others’ funds (Litigation Release No. 17981). On February 11, 2003, the court entered a final judgment by consent ordering Hoover and his entities to pay disgorgement and prejudgment interest of $1,011,007.48 and permanently enjoining future violations; civil penalties were not imposed, based on representations in the defendants’ sworn statements of financial condition (Litigation Release No. 17981). Two weeks later, the SEC issued an administrative order, also by consent, permanently barring Hoover from association with an investment adviser; HCM withdrew its adviser registration in January 2002 (Litigation Release No. 17981). In October 2004, the court approved an initial distribution plan under which receiver Keith D. Lowey of Foxborough, Massachusetts distributed $1.1 million to Hoover’s victims (Litigation Release No. 18934).

What this profile does not claim

This profile is built from the SEC’s pleaded allegations and releases, the facts Hoover admitted in his guilty plea, and the consent resolutions that followed. The complaint’s allegations are the Commission’s claims, not court findings, and the civil judgment and administrative bar were entered without Hoover admitting or denying those allegations. The profile does not cover any activity by Hoover after the October 2004 victim distribution, for which no independently readable coverage was found. It also does not adjudicate the truth of individual allegations beyond what Hoover admitted in court or consented to.