(Adds others filing charges, new throughout)
By Svea Herbst-Bayliss
BOSTON, May 21 (Reuters) - A former Massachusetts money manager, whose clients said he stole $1.6 million from them, was charged with fraud on Wednesday and could spend 20 years in prison if convicted, state and federal officials said.
The U.S. Attorney in Massachusetts, the Securities and Exchange Commission and Massachusetts’ top securities regulator filed charges against Stephen Lewis Hochberg, accusing him of wooing clients into investing in a fake real estate fund.
The officials said he claimed to have managed $8.6 million, but used the money instead as his to support own lifestyle.
Hochberg, 60, could not be reached for comment.
A certified public accountant, whose licensed lapsed in 1999, Hochberg promised returns of as much as 8 percent per year to investors in his real estate fund, Realty Funding LLC, officials said.
He persuaded an 81-year-old widow to put the $150,000 she raised by selling her condominium into municipal bonds that he would buy for her, federal securities regulators said. Instead Hochberg used the money to pay other investors, who were threatening to sue him over other losses, the SEC said in its complaint.
From time to time, Hochberg, who was not registered as an investment adviser, would make payouts, but only in attempt to try and raise more investors’ funds, state investigators said.
One client began to suspect Hochberg was cheating and approached him last year, officials said. Instead of getting his money back, the client’s father received an emotional e-mail from Hochberg apologizing and pleading for more time.
“I don’t know what to say after destroying a trust that you had in me for 36 years,” Hochberg wrote, adding that his wife “has been in tears, her family has come here from NY to support her - so I beg that you allow me some time to make that happen - I need 7 to 10 days,” his e-mail continued. He did not return money, the SEC said.
Officials said Hochberg used at least $106,042 to make payments at gas stations, a car dealership, restaurants, toy stores and even rented a clown and a juggler.
“The information alleges that Hochberg took this money under the guise that it would be invested in a commercial real estate venture in Massachusetts or in a tax free investment vehicle,” U.S. Attorney Michael Sullivan said in a statement.
“In actuality, Hochberg deposited the funds from his victims into bank accounts that he controlled and then spent the money for personal expenses and debts,” Sullivan added.
Sullivan said Hochberg could face up to 20 years in prison, plus three years of supervised release and a $5 million fine, if he is convicted on the federal government’s seventeen charges of wire fraud and securities fraud. (Editing by Derek Caney and Leslie Gevirtz)