Houston Venture Capitalist Charged With Fraud
|July 25, 2011|
HOUSTON - Harvard H. Hill, of Houston, has been charged with three counts of wire fraud in connection with an investment in the general partnership of a Houston-based venture capital fund he promoted, United States Attorney José Angel Moreno announced today.
Hill, 74, surrendered to FBI agents this morning as a result of the return of the three-count indictment on July 21, 2011. He made his initial appearance this morning before U.S. Magistrate Judge Mary Milloy. He is scheduled to appear again today at 1:45 p.m., at which time the issue of bond will be decided.
The indictment alleges that Hill defrauded an investor in the general partnership that managed the James Sunbelt Investment LP Fund that Hill promoted. Hill, who has operated venture capital funds in Houston under the name Houston Partners, solicited an investor to become a special limited partner in the general partnership. Under the supposed structure of the fund, the general partnership would receive 20% of the fund’s profit distributions and a 2% annual management fee. The special limited partner would receive a percentage of the general partnership’s stake, so the ability to repay the special limited partner depended in significant part on the amount invested in the fund given the annual 2% management fee.
The indictment alleges that Hill misrepresented that millions of dollars were already in the fund under the management of the general partnership, provided false information listing the names of companies in which the fund was supposedly invested and falsely claimed that professors at Rice and MD Anderson Cancer Center had agreed to serve on the fund’s Scientific Advisory Board. The indictment further alleges that within a week of the investor wiring $500,000 to Hill in July 2006, Hill had transferred over half the funds to a personal account in his name, a bank account controlled by a member of Hill’s family and an account in the name of another fund in which Hill had past due expenses. According to the indictment, within two months of receipt of the investment, more than 80% of the money had been spent and was not used for promoting and managing the fund.
Each wire fraud count carries a potential punishment of up to 20 years in prison and a $250,000 fine.
The case was investigated by the FBI and is being prosecuted by Assistant United States Attorney Gregg Costa.
An indictment is a formal accusation of criminal conduct, not evidence.
A defendant is presumed innocent unless convicted through due process of law.