Former Head of Hedge Fund Faces 20 Years For Fraud

John H. Whittier, the former head of Idaho hedge-fund company Wood River Capital Management LLC has been indicted on criminal charges that he engaged in a securities fraud scheme that allegedly cost investors $88 million. The SEC originally filed civil charges against Whittier and WRC back in October 2005. Whittier could serve as much as 20 years on each count.

Whittier has been charged with securities fraud, failure to disclose a beneficial interest in 5% or more in a publicly traded security and two counts of failing to disclose a beneficial interest of 10% or more in a publicly traded security.

Prosecutors alleged Thursday that Whittier, from fall 2004 to September 2005, schemed to defraud investors in the company's U.S.-based Wood River Partners LP and Cayman Islands-based Wood River Partners Offshore Ltd. hedge funds by acquiring beneficial ownership of more than 70% of the common stock of EndWave without disclosing that ownership as required by the SEC.

The government said Whittier also accumulated beneficial ownership for the Wood River U.S. fund and other managed accounts of more than 20% of the common stock of New Jersey digital media and publishing company MediaBay Inc. without disclosing that ownership as required by the SEC.

Prosecutors alleged that Whittier falsely represented to investors that the funds had a broad investment strategy and no investment would ever constitute more than 10% of their holdings, he also falsely represented to investors that the U.S. fund was audited by outside auditors.