Old Hill Partners and Its Private Hedge Funds Allegedly Defrauded Investors Westport Hedge Fund Manager John Howe Accused of Tax Fraud, SEC Violations and Siphoning Client Funds On the surface, Westport, Connecticut’s John Christopher Howe appears to have it all and to come from the right pedigree. He went to the elite Middlesex prep school of Concord, Massachusetts where he met his wife, Sarah, graduated from Tufts and Columbia Universities, has two children, and managed a $40 billion bond fund on Wall Street. He lives in a $2 million home in Westport, and had a beautiful summer house on an exclusive section on Cape Cod. John Howe is a doting father who is wasting little time spending money on a lavish wedding for his daughter in Cabo San Lucas, Mexico. On the professional side, Mr. Howe is the majority owner and fund manager of numerous on- and off-shore private hedge funds including Old Hill Partners, Patriot Group, and other funds located in Darien, Connecticut. Life appears good and Mr. Howe lives it large. But Mr. Howe’s good life is about to change. That’s because he and his private hedge funds are the target of IRS and SEC investigations for allegedly committing tax fraud and violating U.S. securities law. Although details involving these investigations are sparse, they stem from a Boston whistleblower who reported Mr. Howe and his funds to the IRS and SEC for allegedly committing tax and securities fraud. In turn, the whistleblower has accused Mr. Howe of forcing the debtor into bankruptcy as a means to retaliate against the whistleblower. A whistleblower advocacy group in Europe has also announced that a second whistleblower has come forward and will fill claims against Mr. Howe alleging that he and other partners siphoned client funds to his personal accounts, and overcharged management fees to his investors. As one lawyer notes: “The optics in this case do not favor Mr. Howe- a private hedge fund manager. He may have committed tax fraud, violated securities law, and threatened and intimidated a debtor not to report him to the IRS and SEC. Then to top it off, there is a pending claim by a second whistleblower that Howe may have stolen client funds.” This is the second time Mr. Howe has been accused of stealing client funds. The allegation that Howe stole client funds was previously made in an unrelated case several years ago. In that case, the New York Post reported that Mr. Howe had transferred investor funds into his personal accounts in violation of securities law. The private hedge fund business is concentrated in southern Connecticut’s Fairfield County, among a small, close-knit community. News of the pending fraud investigations into Howe and his funds has already become viral. S. Joseph Schimini, a professor of investment management adds, “The key to attracting investors to a private hedge fund is your reputation. Once there is any inkling of impropriety, the investors run like rats. Take a look at Bernie Madoff, as a prime example.” As of two weeks ago, Howe’s problems had appeared to be limited to tax fraud and securities violations. That changed with the recent public announcement that a possible second whistleblower filing was pending with allegations that Mr. Howe and others “siphoned” client funds, among other claims. Schimini observes: “If Mr. Howe is charged with stealing client funds, all bets are off. Mr. Howe gets elevated quickly to being a mini-Madoff and we all know what happened to Bernie and his investors.” In the meantime, life in the little town of Westport is likely to get more interesting as another hedge fund executive prepares to fight for his lifestyle, reputation and perhaps, his freedom. .
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