Hedge fund manager indicted in $88 million fraud scheme
Federal charges were filed against former hedge fund manager John Wittier of Hailey, Idaho, for a securities fraud scheme that created losses of $88 million. He has been charged with one count of securities fraud, one count of failing to make an SEC filing disclosing the beneficial interest of 5% or more in a publicly traded security, and two counts of failing to make anSEC filing disclosing the beneficial interest of 10% or more in a publicly traded security.
Whittier was the founder, operator, and manager of Wood River Partners, L.P. and Wood River Partners Offshore, Ltd. He also owned and controlled Wood River Capital Management, LLC, the investment advisor for the hedge funds.
It is alleged that he falsely represented to investors that he would pursue a broad investment strategy with no investment constituting more than 10% of the hedge funds’ holdings. Whittier then failed to make required public filings that would have disclosed his concentrated holdings in Endwave Corporation. Wood River Partners and Wood River Partners Offshore held about 80% of the common stock of Endwave. Disclosure is required when ownership exceeds 10%.
Whittier invested about 85% of his investors’ $127 million portfolio in Endwave stock. Clearly, this was not the diversification he promised to investors. A significant drop in Endwave’s stock price caused the value of Wood River’s hedge fund portfolio to drop, triggering margin calls which Whittier was unable to fulfill. Brokers liquidated the hedge funds’ positions, and by October 2005, Whittier and the hedge funds were out of business. Total losses to investors equal about $88 million.
