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October 16, 2005
Another hedge fund convicted by the SEC for improper investments
A hedge fund scandal has rocked the hedge fund industry, the new hedge fund to be convicted by the Securities and Exchange Commission (SEC) for false promises and its defrauding investors. The SEC announced the civil lawsuit against Mr. John Whittier, a former media and telecommunications analyst for investment firm Donaldson, Lufkin & Jenrette, and now the current hedge fund manager of Wood River Partners LP and Wood River Partners Offshore Ltd., based in San Francisco and Ketchum, Idaho. The court has appointed a receiver for the two funds seeking unspecified civil fines and restitution from Mr. Whittier and the funds. This episode has been a latest in the series of enforcement actions by the SEC in recent months against largely regulated hedge funds. The SEC has accused the company on its non-appointment of a genuine auditor to track the investments, and no such audit trails have been found. The most shocking aspect in this scandal was that the fund had invested about 65 per cent of its portfolio in a company by the name Endwave Corp., to acquire 45 per cent stake in it. The fund had invested in Endwave from 2002 through 2004 where the company’s stock had spiraled down from high of $55 in July, this to the recent low of $12.69 Oct 13, this year. The Mercury News Reports:
The Wood River funds were founded by Whittier, a former media and telecommunications analyst for investment firm Donaldson, Lufkin & Jenrette. The SEC said in its suit that from February 2003 to the present, investors put tens of millions of dollars in the funds based on promises of a broad diversity of investments and strict oversight by an auditor. But Whittier had no audits done and invested heavily in the stock of one small company, Endwave Corp., the agency alleged.
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