SEC Charges Broker for Diverting Assets to Hedge F

NEW YORK (HedgeWorld.com)–Stone House Capital Partners LP, a purported hedge fund, is at the center of a fraud case involving the misappropriation of funds in certain brokerage accounts.

The Securities and Exchange Commission is alleging that Todd M. Eberhard of Eberhard Investment Associates and Park South Securities diverted US$9.7 million out of brokerage accounts to Stone House, which Mr. Eberhard claimed was an unaffiliated San Francisco-based hedge fund that held US$1.6 billion in Eberhard customer funds.

In truth, Stone House operated out of Park South’s offices in Melville, N.Y., and had US$1.75 million in two accounts with Banc of America Securities, according the SEC. One of the BofA accounts was a contribution account, while the other was a prime brokerage account with assets being first deposited in December 2002. On Dec. 20, Stone House allegedly received, by wire transfer to the contribution account, at least US$250,000 from Robert Pellegrini’s Park South IRA account.

Mr. Eberhard allegedly fabricated a fax containing summary data for two Stone House accounts containing US$9.7 million for Mr. Pellegrini, who invested with Mr. Eberhard in 1999 on the recommendation of Mr. Pellegrini’s personal trainer. The SEC said that Mr. Eberhard was able to conceal substantial losses by diverting the assets.