Former Hedge Fund Principal Pleads Guilty In Manhattan Federal Court To Stealing Over $1 Million
Preet Bharara, the United States Attorney for the Southern District of New York, announced that BERTON HOCHFELD, the former Manager of Hochfeld Capital Management, L.L.C. (“Hochfeld Capital”), pled guilty today in Manhattan federal court to securities fraud and wire fraud charges in connection with an investment scheme in which he stole more than $1 million from investors. HOCHFELD pled guilty before U.S. District Judge Paul A. Crotty.
Manhattan U.S. Attorney Preet Bharara said: “Berton Hochfeld may have had all the trappings of being a sophisticated investment adviser in control of a limited liability corporation, a partnership and a hedge fund, but at the end of the day he was simply a thief who stole money from the investors who trusted him. Investment fraud is a serious offense that damages investor confidence and the markets, and we will continue to prosecute it aggressively.”
According to the charging instruments in this case and statements made in open court today at the plea proceeding:
HOCHFELD was the Manager and organizer of Hochfeld Capital, a limited liability company incorporated in Delaware that, at various times, maintained an office in New York, New York. Hochfeld Capital, in turn, served as the General Partner of the Heppelwhite Fund, L.P. (the “Heppelwhite Fund”), a hedge fund that was formed to invest in publicly traded securities, mainly in the technology sector. In connection with the management of the Heppelwhite Fund, HOCHFELD made false representations to investors regarding their investments, and misappropriated their money.
For example, by December 2010, HOCHFELD was aware that Hochfeld Capital’s internal accounting for the Heppelwhite Fund reflected an inflated net asset value (“NAV”), as compared to the value reflected in the books of the prime broker where the fund’s assets were actually located. Despite his knowledge of the disparity, HOCHFELD caused monthly statements to be sent to Heppelwhite Fund investors that reflected the inflated NAV calculated by internal accounting records.
From April 2011 through October 2012, HOCHFELD also withdrew money from the Heppelwhite Fund for his own personal use, ultimately misappropriating more than $1 million. During this period, at HOCHFELD’s direction, monthly account statements were provided to Heppelwhite Fund investors that falsely represented the fund’s value by failing to account for the money that he had withdrawn. At a meeting in October 2012, HOCHFELD admitted to certain investors that he had taken more than $1 million from the Heppelwhite Fund and that he spent portions of that money on antiques and vacations.
* * *
HOCHFELD, 66, of Stamford, Connecticut, pled guilty to one count of securities fraud and one count of wire fraud. He faces a maximum sentence of 20 years in prison on each count. The defendant also faces a fine of the greater of $5 million or twice the gross gain or gross loss from the offense on the securities fraud charge, as well as a fine of a lesser amount on the wire fraud charge. In connection with his guilty plea, HOCHFELD agreed to forfeit the illegal proceeds of his crimes and will be ordered to pay restitution to the victims of his offenses.
HOCHFELD is scheduled to be sentenced by Judge Crotty on June 27, 2013, at 3:00 p.m.
Mr. Bharara praised the investigative work of the FBI. He also thanked the U.S. Securities and Exchange Commission for their assistance.
This case was brought in coordination with President Barack Obama's Financial Fraud Enforcement Task Force, on which Mr. Bharara serves as a Co-Chair of the Securities and Commodities Fraud Working Group. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated, and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Jillian Berman is in charge of the prosecution.