Deferred Prosecution Agreement with Scott Jonathan Herckis

UNITED STATES OF AMERICA 

SECURITIES AND EXCHANGE CO.MMISSION 

DEFERRED-PROSECUTION AGREEMENT 
1. In connection with an investigation, the Division of Enforcement ("Division") of 
the United States Securities and Exchange Commission ("Commission") alleges that 
Scott Jonathan Herckis ("Respondent"), the former Fund Administrator for the 
Heppelwhite Fund, LP (the ''Fund"), in 2011 and 2012, aided and abetted violations of 
Section 17(a) ofthe Securities Act of 1933 {"Securities Act"), Section 1 O(b) ofthe 
Securltjcs 
Exchange Act of 1934 ("EJ:(cbangc Act''), and Rule 1 Ob-5 thereunder, and 
Sections 206( I), (2) and (4) of the Investment Advisers Act of 1940 ("Advisers Act") and 
Rule 206(4)-8 thereWlder, by improperly transferring Fund assets to the Fund's manager, 
and by preparing and providing materia1ly overstated account statements to Fund 
investors ("Investigation"). Prior to a publ.ic·enforcemenl action being brought by the 
Commission against him, Respondent has offered to accept responsibility for his conduct 
and to admit the factual statements contained in Paragraph 6 in any future Commission 
enforcement 
action in the event he breaches this Agreement. According1y, the 
Commission and the .Respondent enter into this deferred prosecution agreement 
("Agreement,') on the following terms and conditions: 
ELl G1.8 ILITY 
2. The Respondent certifies that he has never been charged or found guilty of 
violating the federal securities laws, or a party to a civil action or administrative 
proceeding concerning allegations or findings ofviolations of the federal securities laws. 
TERM 
3. The Respondent understands and agrees that the provisions ofthis Agreement are 
in full force and effect from November 8, 2013 to November 8, 20 J8 (the "Deferred 
Period"), unless expressly stated otherwise. 
COOPERATION 
4. The Respondent agrees to cooperate fu11y and truthfully in the Investigation and 
any.other related enforcement litigation or proceedings to which the Commission is a 
party (the "Proceedings'~). regardless of the time period in which the cooperation is 
required. Jn addition, the Respondent agrees to cooperate fully and truthfully, when 
directed by the Division's staff
1 
in an official investigation or proceeding by any federal, 
state, 
or self-regulatory organization ("'ther Proceedings',). The fulJ, truthful, and 
continuing cooperation ofthe Respondent shall include, but not be limited to: 
a. producing aiJ non-privileged documents and other materials to the 
Commission as requested. by the Division's staff, wherever located, in the possession, 
custody, or control of the Respondent; 
.~ 

b. appearing for interviews, at such times and places, as requested by the 
Division's staff; 
c. responding fully and truthfulJy to all inquiries, when requested to do so by 
the Division's staff: in connection with the Proceedings or Other Proceedings; 
d. testifying at trial and other judicial proceedings, when requested to do so 
by the Division's staff, in connection with the Proceedings or Other Proceedings; 
e. accepting service by mail or· facsimile transmission of notices or 
subpoenas for documents or testimony at depositions, hearings, trials or in connection 
with 
Lhe Proceedings or Other Proceedings; 
f. appointing his undersigned attorney as agent to receive service ofsuch 
notices and subpoenas; 
g. waiving the territorial limits on service contained in Rule 45 of the Federal 
Rules of Civil Procedure and any applicable local rules, when requested to appear by the 
Division's staff; and 
h. entering into tolling agreements, when requested to do so by the 
Division's staff, during the period of cooperation. 
STATUTE OF LIMITATlONS 
5. The Respondent agrees that the running ofany statute of limitations applicable to 
any action or proceeding against him authorized, instituted, or brought by or on behalfof 
the Commission arising out ofthe Investigation ("Proceeding"), inc1uding any sanctions 
or relief that 
may be imposed therein, is tolled and suspended during the Deferred Period. 
a. The 
Resp~ndent and any ofhis attorneys or agents shall not include the 
Deferred Period in the calculation of the running of any statute of limitations ot· for any 
other time-related defense applicable to the Proceeding, including any sanctions or relief 
that 
may be imposed therein, in asserting or relying upon any such time-related defense. 
b. This agreement shall not affect 
any appHcabl.e statute of limitations 
defense or any other time-related defense that may be available to Respondent before the 
commencement 
oftbe Deferred Period or be construed to revive a Proceeding that may 
be barred by any applicable statute of limitations or any other time-related defense before 
the commencement ofthe Deferred Period. 
c. The running ofany statute of limitations applicable to the Proceeding sha11 
commence again after the end ofthe Deferred Period, unless there is an extension of the 
Deferred Period executed in writing by or on behalf of the parties hereto. 
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d. This agreement shalt not be construed as an admission by the Commission 
relating to the applicability 
of any statute of limitations to the Proceeding, including any 
sanctions or reliefthat may be imposed therein, or to the length of any limitations period 
that may apply, or 
to the applicability of any other time-related defense. 
STATEMENT OF FACTS 
6. If this case had gone to trial, the Commission would have presented evidence 
sufficient 
to prove the following facts: 
a. Herclds, age 42, is a certified public accountant who resides in Stamford, 
Connecticut. Herckis is the owner and managing member ofSJH Financial, LLC, a 
financial and accounting services ·t1rm in Stamford, Connecticut. 
b. From December 20 I 0 through September 2012, Herckis, through his firm 
SJH, was the Fund Administrator for Heppelwhite Fund, LP, a Delaware limited 
partnership. During the relevant time period, 1-leppelwhite operated as a hedge fund with 
offices in Stamford, Connecticut. The Fund had approximately twenty-tive investors and 
at least six mi11ion dollars in assets. 
c. Berton M. Hochfeld, age 66, is the sole shareholder and manager of 
Hochfeld Capital Management, L.L.C. ("HCM"), a Delaware corporation. HCM is the 
General Partner of the Fund. Hochfeld, through HCM, managed the Fund during the 
relevant time period. Hochfeld was charged with securities fraud by the Commission and 
consented to a judgment ordering an injunction. an asset freeze. and other relief in 
November 2012. See S.E.C. v. flochfeld et tll., 12-CV-8202 (S.D.N.Y.). Hochfeld also 
pled guilty to securities 
fraud and wire fraud in a related criminal case in January 2013. 
See U.S.A. v. Hochfeld, "l3-CR.00021 (S.D.N.Y.). 
d. In December 2010, Hochfeld hired Herckis as the Fund Administrator tor 
the Fund. Herckis was paid a fixed tee of $4,000 per month. Herclds' responsibilities for 
the Fund included, among other things, calculating the performance ofthe Fund's 
investments, preparing monthly account statements for Fund investors, managing and 
accounting tor contributions to, and withdrawals from, investor accounts at the Fund, 
paying Fund expenses, and corresponding with potential investors. Herckis had no prior 
experience as a fund administrator. 
e. 
l-ICM, as the General Pat·tner, and each of the Fund's limited partners 
("investors"), had capital accounts at the Fund. Pursuant to a Limited Partnership 
Agreement, HCM was required to maintain a  balance in its capjta( account equal" to at 
least 1% of the Fund's total assets. The Fund was prohibited from making loaqs to HCM 
or Hochfeld, and was prohibited from com~ingling Fund assets with funds from any 
other source. · 
f. When Herckis becam~ the Fund Administrator in late 2010, HCM's 
capital account at  the Fund had a positive balance. Throughout his tenure as the Fund 
Aaministrator, when instructed by Hochfeld. Herckis would arrange transfers of money 
3 


from the Fund to accounts owned or controlled by Hochfeld. Herckis accounted for these 
transfers as withdrawals 
from HCM's capital account at the Fund. By April or May 
2011, Herckis realized 
that as a result of these transfers, HCM's capital account at the 
Fund was overdrawn and had a negative balance. 
g. Notwithstanding this negative balance, Herckis continued to transfer 
money from the Fund to Hochfeld when instructed. 'For example, in March 2012, 
Herckis authorized a transfer of$64,000 
from the Fund's bank account to Hochfeld. At 
the time, HCM's capital account already was overdrawn by approximately $600,000. 
h. Over time, Herckis began to question Hochteld about these transfers and 
the negative balance in HCM's capital account. Hochfeld repeatedly assured Herckis that 
he would repay the Fund. Ultimately, through these improper transfers that Herckis 
authorized, Hochteld misappropriated more than $1.5 million from the Fund. Herckis 
knew, or was reckless in not knowing, that these transfers were improper. 
i. As the Fund Administrator at Heppelwhite, Herckis was responsible for 
calculating the Fund's monthly rate of return, and preparing and providing investors with 
monthly account statements. I-lerckis also p.rovided potential investors with marketing 
materials that included the Fund's current and historic monthly and 
annual rates ofreturn. 
j. Throughout his tenure as the Fund Administrator, the monthly account 
statements that Herckis prepared and provided 
to investo~, and the rate of return 
information he provided to potential investors. were materially overstated. These 
documents and infonnation were materially overstated as a result of several factors, 
including historical inaccuracies in the Fund's books and records., Hochfeld's 
misappropriation 
of assets from the Fund, and Herckis' use of unsupported and 
inaccurate rates of return on the Fund's investments. Herckis knew, or was reckless in 
not knowing, of these material misstatements. 
k. In addition, over time Herckis knew that there was a growing discrepancy 
between the Fund's net asset value ("NAV") that he calculated using the fund's internal 
records (which Herckis used to create the monthly account statements for investors), and 
the 
NAV reported by the Fund's prime broker, which was materially lower. After 
Herckis was unable to resolve the 
djscrcpancy on his own, he eventually persuaded 
Hochfeld to hire an outside consultant. Throughout 2012, 
.Her.ck.is worked with the 
outside cons~ltant, and the Fund's prime broker. to resolve the NAV discrepancy, which 
by June 2012, had grown to approximately $1.5 million. 
I. In September 2012, as a result ofHerckis' growing concerns about HCM's 
overdrawn capital account and 
the material NAV discrepancy, Herckis resigned as the 
Fund Administrator and contacted government authorities. Het·ckis vo1untarily provided 
immediate and complete cooperation in the resulting SEC investigation, including 
producing 
voluminous documents and helping SEC staff understand how Hochfeld was 
able to perpetrate his fraud. As a result, the SEC was able to file an emergency action 
and freeze mo1-e than $6 million in assets of the Fund, HCM. and Hochfeld which, subject 
to court approval~ will be distributed to the Fund's investors. 
4 


PROHIBITIONS 

7. During the Deferred Period, the Respondent understands and agrees to comply 
with the following prohibitions: 
a. to refrain from vjoJating the federal and state securities laws; and 
b. to refrain from violating the applicable rules promulgated by any self-
regulatory organjzation or professional licensing board; 
c. to refrain fi·om association with any broker, dealer, investment adviser, 
municipal securities dealer, municipal advisor, transfer agent, or nationally recognized 
statistical rating organization; 
d. to refrain from serving or acting as an employee, officer, director, member 
ofan advisory board, investment adviser or depositor of, or principal underwriter for, a 
registered investment 
company or affiliated person of such investment adviser, depositor, 
or principal underwriter; and 
e. to refrain from acting or serving as a fund administrator for, or providing 
any other services to, any hedge fund or registered investment company. 
UNDERTAKINGS 
8. During the Deferred Period, the Respondent understands and agrees to perform 
the following undertakings: 
a. to provide written notification to the Division, within five days, if he has 
been questioned, charged, or convicted of an offense by any federal~ state, or local law 
enforcement organization or regulatory agency; 
b. to provide written notification to the Division, within five days, ifhe has 
been questioned, a  formal or infonnat complaint has been made against him, or 
disciplinary action has been taken against him by any self-regulatory organization or 
professional licensing hoard; 
c. 
to pay disgorgement obtained or retained as a result of the violations 
alleged 
in Paragraph 1 in the amount of$48,000, together with prejudgment interest in 
the amount of$2,290, within 30 days by delivering payment into the Fair Fund created in 
SEC v. Hochfeld, et al., 12-CV-8202 (S.D.N.Y.), along with a letter identifying the 
Respondent 
and specifying that the payment is made pursuant to a deferred prosecution 
agreement entered into with the Commission on November 8, 2013, and sending an 
additional copy of the letter and check in accordance with the service requirements of 
Paragraph 11. Respondent shall send an additiona1 copy ofthe letter and check to Nancy 
Chase Burton, Esq., Plan Administrator for the Heppelwhite Fund Fair Fund, Securities 
and Exchange Commission, 100 F Street N~E., Washington, DC, 20549-5628. 
s 

d. to provide the Division with a written certification ofcompliance with the 
prohibitions and undertakings 
in this Agreement between forty-five and sixty days before 
the end of the Deferred Period. 
PUBLIC STATEMENTS 
9. After the Deferred Period begins, on November 8, 2013, the Respondent agrees 
not to 
take any action or to make or penn it any public statement through present or future 
attorneys; employees, agents, or other persons authorized to speak 
for him, except in 
legal proceedings in which the Commission is not a party, denying, directly or indirectly, 
any aspect ofthis Agreement or creating the impression that the statements in Paragraph 
6 ofthis Agreement are without factual basis. If it is determined by the Commission that 
a public statement by the Respondent or any related person contradicts 
in whole or in part 
this Agreement, at 
its sole discretion, the Commission may bring an enforcement action 
in accordance with Paragraphs .12 through 14. 
10. Prior to issuing a press release concerning this Agreement, the .Respondent agrees 
to have the text ofthe release approved by the staff ofthe Division. 
SERVICE 
ll. The Respondent agrees to serve by hand delivery or by next-day mail all written 
notices and correspondence required 
by or related to this Agreement to Brian 0. Quinn, 
Assistant Director, 100 F Street N.E., Washington, DC 20549-5030, (202) 551-4982, 
unless otherwise directed 
in writjng by the staff ofthe Division. 
VIOLATION OF AGREEMENT 
12. The Respondent understands and agrees that it shall be a violation of this 
Agreement if he knowingly provides false or misleading information or materials in 
connection with the .Proceedings or Other Proceedings. Jn the event of such misconduct, 
the Division will advise the Commission of the Respondent's misconduct andmay make 
a criminal referral fbr providing talse informotion·(J 8 U.S.C. 
§ 1001), perjury (18 U.S.C. 
§ 1621), making false statements or declarations. in court proceedings{l8 u.s~c. § 1623)~ 
contempt (18 U.S.C. §§ 401-402) and/or obstructing justice (18 U.S.C. § 1503 et seq.). 
13. The Respondent understands and agrees that it shall be a violation of this 
Agreement ifhe violates the federal securities laws after enterillg into this agreement It 
is further understood and agreed that 
should. the Division determine that the Respondent 
has failed to comply with any term or condition of this.Agreem~nt, the Division wi11 
notify the Respondent or his counsel of this fact and provide an opportunity fo.r the 
Respondent 
to make a submission consistent with the procedures set forth in the 
Securities Act 
of 1933 Release No. 5310. Under these circumstances, the Division may, 
in its sole discretion and not subject to judicial review, recommend to the Commission an 
enforcement action against the Respondent for any securities law violations, including, 
6 


but not limited to, the substantive offenses relating to the Investigation. Nothing in this 
agreement limits the Division's discretion to recommend to the Commission an 
enforcement action against the Respondent for future violations ofthe federal securities 
laws, without notice, to protect the public interest. 
14. The Respondent understands and agrees that in any future enforcement actjon 
resulting from his violation ofthe Agreement, any documents, statements, information, 
testimony, or evidence provided 
by him during the Proceedings or Other Proceedings, 
and any leads derived there from, may be used against him in future legal proceedings. 
15. In the event he breaches this Agreement, the Respondent agrees to admit in any 
ft1ture Commission enforcement action the factual statements contained in Paragraph 6 
above pursuant to Federal Rule 
of Evidence 801(d)(2). 
COMPLIANCE WTTH AGREEMENT 
J
6. Subject to the full, truthful, and continuing cooperation of the Responden~ as 
described 
in Paragraph 4, and compliance by Respondent with all obligations, 
prohibitions 
and undertakings in the Agreement during the Deferred Period, the 
Commission 
agree.~ not to bring any enforcement action or proceeding against the 
Respondent arising from the Investigation, after the conclusion ofthe Defen·ed Period. 
17. The Respondent understands and agrees that this Agreement does not bjnd other 
federal, state or self-regulatory organizations, but the Division 
may, at its discretion, issue 
a letter to these organizations detailing the fact, 
manner, and extent of his cooperation 
during the Proceedings or Other Proceedings, upon the written request of the Respondent. 
18. The Respondent understands and agrees that the Agreement only provides 
protection agajnst enforcement actions arising 
from the Investigation and does not relate 
to any other violations or any indivjdua] or entity othel' than the Respondent. 
VOLUNTARY AGREEMENT 
19. The Respondent's decision to enter into this Agreement is treely and voluntarily 
made 
and is not the result of force, threats, assurances, promises, or representations other 
than those contained in this Agreement. 
20. The Respondent has read and understands this Agreement. Furthermore, he has 
reviewed all legal and factual aspects ofthis matter with his attorney and is fully satisfied 
with his attorney's legal representation. The Respondent has thoroughly reviewed this 
Agreement 
with his attorney and has received satisfactory expJanations concerning each 
paragraph of the Agreement. After conferring with his attorney and considering all 
available alternatives, the Respondent has made a knowing decision to enter into the 
Agreement. 
7 


ENTIRETY OF AGREEMENT 

21. This Agreement constitutes the entire agreement between the Commission and the 
Respondent, and supersedes all prior understandings, if any, whether oral or written, 
relating to the subject matter 
herein. 
22. This Agreement cannot be modified except in writing, signed by the Respondent 
and a representative 
of the Commission. 
23. In the event an ambiguity or a question of intent or interpretation arises, this 
Agreement shall be construed as if drafted jointly by the parties hereto, and no 
presumption or burden of proof shall arise favoring or disfavoring the Commission or the 
Respondent by virtue ofthe authorship ofany ofthe provisions ofthe Agreement. 
The signatories below acknowledge acceptance 
of the foregoing terms and conditions. 
RESPONDENT 
The foregoing instrument was acknowledged before me this f.~· day of t\!<\'<:or.<:-•; 2013, 
by \'f\·\flaYhV, .,.,._(. , who _Lis a personally known to me or ...Lwho has 
produced a valid driver's license as identification and who did take an oath. 
Notary ublic 
State: 
Commission number: 
Commission expiration: 
............... ..-. ......
_________ 
MEliNA ANN PALMER ~· 
Notary PUbnc ~ 
COnnecticut • 
My Commission Expires Aug 31. 2018 • 
8 


RESPONDENT'S COUNSEL 
Appro:ved as to form: 
II-r-!3 
B~~tre{!'~
Date 
Baker Botts LLP. 

1299 Pennsylvania Ave., N.W. 

Washington, D.C. 20004 

(202) 639-7740 
SECURITIES AND EXCHANGE COMMISSION 
DIVISION OF ENFORCEMENT 
9 

UNITED STATES OF AMERICA 

SECURITIES AND EXCHANGE CO.MMISSION 


DEFERRED-PROSECUTION AGREEMENT 

1. In connection with an investigation, the Division of Enforcement ("Division") of 
the United States Securities and Exchange Commission ("Commission") alleges that 
Scott Jonathan Herckis ("Respondent"), the former Fund Administrator for the 
Heppelwhite Fund, LP (the ''Fund"), in 2011 and 2012, aided and abetted violations of 
Section 17(a) ofthe Securities Act of 1933 {"Securities Act"), Section 1 O(b) of the 
Securltjcs Exchange Act of 1934 ("EJ:(cbangc Act''), and Rule 1 Ob-5 thereunder, and 
Sections 206( I), (2) and (4) of the Investment Advisers Act of 1940 ("Advisers Act") and 
Rule 206(4)-8 thereWlder, by improperly transferring Fund assets to the Fund's manager, 
and by preparing and providing materia1ly overstated account statements to Fund 
investors ("Investigation"). Prior to a publ.ic·enforcemenl action being brought by the 
Commission against him, Respondent has offered to accept responsibility for his conduct 
and to admit the factual statements contained in Paragraph 6 in any future Commission 
enforcement action in the event he breaches this Agreement. According1y, the 
Commission and the .Respondent enter into this deferred prosecution agreement 
("Agreement,') on the following terms and conditions: 

ELl G1.8 ILITY 

2. The Respondent certifies that he has never been charged or found guilty of 
violating the federal securities laws, or a party to a civil action or administrative 
proceeding concerning allegations or findings ofviolations of the federal securities laws. 

TERM 

3. The Respondent understands and agrees that the provisions ofthis Agreement are 
in full force and effect from November 8, 2013 to November 8, 20 J8 (the "Deferred 
Period"), unless expressly stated otherwise. 

COOPERATION 

4. The Respondent agrees to cooperate fu11y and truthfully in the Investigation and 
any.other related enforcement litigation or proceedings to which the Commission is a 
party (the "Proceedings'~). regardless of the time period in which the cooperation is 
required. Jn addition, the Respondent agrees to cooperate fully and truthfully, when 
directed by the Division's staff1 in an official investigation or proceeding by any federal, 
state, or self-regulatory organization ("'ther Proceedings',). The fulJ, truthful, and 
continuing cooperation ofthe Respondent shall include, but not be limited to: 

a. producing aiJ non-privileged documents and other materials to the 
Commission as requested. by the Division's staff, wherever located, in the possession, 
custody, or control of the Respondent; 

.~ 



b. appearing for interviews, at such times and places, as requested by the 
Division's staff; 

c. responding fully and truthfulJy to all inquiries, when requested to do so by 
the Division's staff: in connection with the Proceedings or Other Proceedings; 

d. testifying at trial and other judicial proceedings, when requested to do so 
by the Division's staff, in connection with the Proceedings or Other Proceedings; 

e. accepting service by mail or· facsimile transmission of notices or 
subpoenas for documents or testimony at depositions, hearings, trials or in connection 
with Lhe Proceedings or Other Proceedings; 

f. appointing his undersigned attorney as agent to receive service ofsuch 
notices and subpoenas; 

g. waiving the territorial limits on service contained in Rule 45 of the Federal 
Rules of Civil Procedure and any applicable local rules, when requested to appear by the 
Division's staff; and 

h. entering into tolling agreements, when requested to do so by the 
Division's staff, during the period of cooperation. 

STATUTE OF LIMITATlONS 

5. The Respondent agrees that the running ofany statute of limitations applicable to 
any action or proceeding against him authorized, instituted, or brought by or on behalfof 
the Commission arising out of the Investigation ("Proceeding"), inc1uding any sanctions 
or relief that may be imposed therein, is tolled and suspended during the Deferred Period. 

a. The Resp~ndent and any ofhis attorneys or agents shall not include the 
Deferred Period in the calculation of the running of any statute of limitations ot· for any 
other time-related defense applicable to the Proceeding, including any sanctions or relief 
that may be imposed therein, in asserting or relying upon any such time-related defense. 

b. This agreement shall not affect any appHcabl.e statute of limitations 
defense or any other time-related defense that may be available to Respondent before the 
commencement of tbe Deferred Period or be construed to revive a Proceeding that may 
be barred by any applicable statute of limitations or any other time-related defense before 
the commencement of the Deferred Period. 

c. The running ofany statute of limitations applicable to the Proceeding sha11 
commence again after the end ofthe Deferred Period, unless there is an extension of the 
Deferred Period executed in writing by or on behalf of the parties hereto. 

2 

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d. This agreement shalt not be construed as an admission by the Commission 
relating to the applicability of any statute of limitations to the Proceeding, including any 
sanctions or reliefthat may be imposed therein, or to the length of any limitations period 
that may apply, or to the applicability of any other time-related defense. 

STATEMENT OF FACTS 

6. If this case had gone to trial, the Commission would have presented evidence 
sufficient to prove the following facts: 

a. Herclds, age 42, is a certified public accountant who resides in Stamford, 
Connecticut. Herckis is the owner and managing member ofSJH Financial, LLC, a 
financial and accounting services ·t1rm in Stamford, Connecticut. 

b. From December 20 I 0 through September 2012, Herckis, through his firm 
SJH, was the Fund Administrator for Heppelwhite Fund, LP, a Delaware limited 
partnership. During the relevant time period, 1-leppelwhite operated as a hedge fund with 
offices in Stamford, Connecticut. The Fund had approximately twenty-tive investors and 
at least six mi11ion dollars in assets. 

c. Berton M. Hochfeld, age 66, is the sole shareholder and manager of 
Hochfeld Capital Management, L.L.C. ("HCM"), a Delaware corporation. HCM is the 
General Partner of the Fund. Hochfeld, through HCM, managed the Fund during the 
relevant time period. Hochfeld was charged with securities fraud by the Commission and 
consented to a judgment ordering an injunction. an asset freeze. and other relief in 
November 2012. See S.E.C. v. flochfeld et tll., 12-CV-8202 (S.D.N.Y.). Hochfeld also 
pled guilty to securities fraud and wire fraud in a related criminal case in January 2013. 
See U.S.A. v. Hochfeld, "l3-CR.00021 (S.D.N.Y.). 

d. In December 2010, Hochfeld hired Herckis as the Fund Administrator tor 
the Fund. Herckis was paid a fixed tee of $4,000 per month. Herclds' responsibilities for 
the Fund included, among other things, calculating the performance of the Fund's 
investments, preparing monthly account statements for Fund investors, managing and 
accounting tor contributions to, and withdrawals from, investor accounts at the Fund, 
paying Fund expenses, and corresponding with potential investors. Herckis had no prior 
experience as a fund administrator. 

e. l-ICM, as the General Pat·tner, and each of the Fund's limited partners 
("investors"), had capital accounts at the Fund. Pursuant to a Limited Partnership 
Agreement, HCM was required to maintain a balance in its capjta( account equal" to at 
least 1% of the Fund's total assets. The Fund was prohibited from making loaqs to HCM 
or Hochfeld, and was prohibited from com~ingling Fund assets with funds from any 
other source. · 

f. When Herckis becam~ the Fund Administrator in late 2010, HCM's 
capital account at the Fund had a positive balance. Throughout his tenure as the Fund 
Aaministrator, when instructed by Hochfeld. Herckis would arrange transfers of money 

3 




from the Fund to accounts owned or controlled by Hochfeld. Herckis accounted for these 
transfers as withdrawals from HCM's capital account at the Fund. By April or May 
2011, Herckis realized that as a result of these transfers, HCM's capital account at the 
Fund was overdrawn and had a negative balance. 

g. Notwithstanding this negative balance, Herckis continued to transfer 
money from the Fund to Hochfeld when instructed. 'For example, in March 2012, 
Herckis authorized a transfer of$64,000 from the Fund's bank account to Hochfeld. At 
the time, HCM's capital account already was overdrawn by approximately $600,000. 

h. Over time, Herckis began to question Hochteld about these transfers and 
the negative balance in HCM's capital account. Hochfeld repeatedly assured Herckis that 
he would repay the Fund. Ultimately, through these improper transfers that Herckis 
authorized, Hochteld misappropriated more than $1.5 million from the Fund. Herckis 
knew, or was reckless in not knowing, that these transfers were improper. 

i. As the Fund Administrator at Heppelwhite, Herckis was responsible for 
calculating the Fund's monthly rate of return, and preparing and providing investors with 
monthly account statements. I-lerckis also p.rovided potential investors with marketing 
materials that included the Fund's current and historic monthly and annual rates ofreturn. 

j. Throughout his tenure as the Fund Administrator, the monthly account 
statements that Herckis prepared and provided to investo~, and the rate of return 
information he provided to potential investors. were materially overstated. These 
documents and infonnation were materially overstated as a result of several factors, 
including historical inaccuracies in the Fund's books and records., Hochfeld's 
misappropriation of assets from the Fund, and Herckis' use of unsupported and 
inaccurate rates of return on the Fund's investments. Herckis knew, or was reckless in 
not knowing, of these material misstatements. 

k. In addition, over time Herckis knew that there was a growing discrepancy 
between the Fund's net asset value ("NAV") that he calculated using the fund's internal 
records (which Herckis used to create the monthly account statements for investors), and 
the NAV reported by the Fund's prime broker, which was materially lower. After 
Herckis was unable to resolve the djscrcpancy on his own, he eventually persuaded 
Hochfeld to hire an outside consultant. Throughout 2012, .Her.ck.is worked with the 
outside cons~ltant, and the Fund's prime broker. to resolve the NAV discrepancy, which 
by June 2012, had grown to approximately $1.5 million. 

I. In September 2012, as a result ofHerckis' growing concerns about HCM's 
overdrawn capital account and the material NAV discrepancy, Herckis resigned as the 
Fund Administrator and contacted government authorities. Het·ckis vo1untarily provided 
immediate and complete cooperation in the resulting SEC investigation, including 
producing voluminous documents and helping SEC staff understand how Hochfeld was 
able to perpetrate his fraud. As a result, the SEC was able to file an emergency action 
and freeze mo1-e than $6 million in assets of the Fund, HCM. and Hochfeld which, subject 
to court approval~ will be distributed to the Fund's investors. 

4 




PROHIBITIONS 


7. During the Deferred Period, the Respondent understands and agrees to comply 
with the following prohibitions: 

a. to refrain from vjoJating the federal and state securities laws; and 

b. to refrain from violating the applicable rules promulgated by any self-
regulatory organjzation or professional licensing board; 

c. to refrain fi·om association with any broker, dealer, investment adviser, 
municipal securities dealer, municipal advisor, transfer agent, or nationally recognized 
statistical rating organization; 

d. to refrain from serving or acting as an employee, officer, director, member 
ofan advisory board, investment adviser or depositor of, or principal underwriter for, a 
registered investment company or affiliated person of such investment adviser, depositor, 
or principal underwriter; and 

e. to refrain from acting or serving as a fund administrator for, or providing 
any other services to, any hedge fund or registered investment company. 

UNDERTAKINGS 

8. During the Deferred Period, the Respondent understands and agrees to perform 
the following undertakings: 

a. to provide written notification to the Division, within five days, if he has 
been questioned, charged, or convicted of an offense by any federal~ state, or local law 
enforcement organization or regulatory agency; 

b. to provide written notification to the Division, within five days, ifhe has 
been questioned, a formal or infonnat complaint has been made against him, or 
disciplinary action has been taken against him by any self-regulatory organization or 
professional licensing hoard; 

c. to pay disgorgement obtained or retained as a result of the violations 
alleged in Paragraph 1 in the amount of$48,000, together with prejudgment interest in 
the amount of$2,290, within 30 days by delivering payment into the Fair Fund created in 
SEC v. Hochfeld, et al., 12-CV-8202 (S.D.N.Y.), along with a letter identifying the 
Respondent and specifying that the payment is made pursuant to a deferred prosecution 
agreement entered into with the Commission on November 8, 2013, and sending an 
additional copy of the letter and check in accordance with the service requirements of 
Paragraph 11. Respondent shall send an additiona1 copy ofthe letter and check to Nancy 
Chase Burton, Esq., Plan Administrator for the Heppelwhite Fund Fair Fund, Securities 
and Exchange Commission, 100 F Street N~E., Washington, DC, 20549-5628. 

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d. to provide the Division with a written certification ofcompliance with the 
prohibitions and undertakings in this Agreement between forty-five and sixty days before 
the end of the Deferred Period. 

PUBLIC STATEMENTS 

9. After the Deferred Period begins, on November 8, 2013, the Respondent agrees 
not to take any action or to make or penn it any public statement through present or future 
attorneys; employees, agents, or other persons authorized to speak for him, except in 
legal proceedings in which the Commission is not a party, denying, directly or indirectly, 
any aspect of this Agreement or creating the impression that the statements in Paragraph 
6 ofthis Agreement are without factual basis. If it is determined by the Commission that 
a public statement by the Respondent or any related person contradicts in whole or in part 
this Agreement, at its sole discretion, the Commission may bring an enforcement action 
in accordance with Paragraphs .12 through 14. 

10. Prior to issuing a press release concerning this Agreement, the .Respondent agrees 
to have the text of the release approved by the staff ofthe Division. 

SERVICE 

ll. The Respondent agrees to serve by hand delivery or by next-day mail all written 
notices and correspondence required by or related to this Agreement to Brian 0. Quinn, 
Assistant Director, 100 F Street N.E., Washington, DC 20549-5030, (202) 551-4982, 
unless otherwise directed in writjng by the staff ofthe Division. 

VIOLATION OF AGREEMENT 

12. The Respondent understands and agrees that it shall be a violation of this 
Agreement if he knowingly provides false or misleading information or materials in 
connection with the .Proceedings or Other Proceedings. Jn the event of such misconduct, 
the Division will advise the Commission of the Respondent's misconduct andmay make 
a criminal referral fbr providing talse informotion·(J 8 U.S.C. § 1001), perjury (18 U.S.C. 
§ 1621), making false statements or declarations. in court proceedings{l8 u.s~c. § 1623)~ 
contempt (18 U.S.C. §§ 401-402) and/or obstructing justice (18 U.S.C. § 1503 et seq.). 

13. The Respondent understands and agrees that it shall be a violation of this 
Agreement ifhe violates the federal securities laws after enterillg into this agreement It 
is further understood and agreed that should. the Division determine that the Respondent 
has failed to comply with any term or condition of this.Agreem~nt, the Division wi11 
notify the Respondent or his counsel of this fact and provide an opportunity fo.r the 
Respondent to make a submission consistent with the procedures set forth in the 
Securities Act of 1933 Release No. 5310. Under these circumstances, the Division may, 
in its sole discretion and not subject to judicial review, recommend to the Commission an 
enforcement action against the Respondent for any securities law violations, including, 

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but not limited to, the substantive offenses relating to the Investigation. Nothing in this 
agreement limits the Division's discretion to recommend to the Commission an 
enforcement action against the Respondent for future violations ofthe federal securities 
laws, without notice, to protect the public interest. 

14. The Respondent understands and agrees that in any future enforcement actjon 
resulting from his violation of the Agreement, any documents, statements, information, 
testimony, or evidence provided by him during the Proceedings or Other Proceedings, 
and any leads derived there from, may be used against him in future legal proceedings. 

15. In the event he breaches this Agreement, the Respondent agrees to admit in any 
ft1ture Commission enforcement action the factual statements contained in Paragraph 6 
above pursuant to Federal Rule of Evidence 801(d)(2). 

COMPLIANCE WTTH AGREEMENT 

J6. Subject to the full, truthful, and continuing cooperation of the Responden~ as 
described in Paragraph 4, and compliance by Respondent with all obligations, 
prohibitions and undertakings in the Agreement during the Deferred Period, the 
Commission agree.~ not to bring any enforcement action or proceeding against the 
Respondent arising from the Investigation, after the conclusion ofthe Defen·ed Period. 

17. The Respondent understands and agrees that this Agreement does not bjnd other 
federal, state or self-regulatory organizations, but the Division may, at its discretion, issue 
a letter to these organizations detailing the fact, manner, and extent of his cooperation 
during the Proceedings or Other Proceedings, upon the written request of the Respondent. 

18. The Respondent understands and agrees that the Agreement only provides 
protection agajnst enforcement actions arising from the Investigation and does not relate 
to any other violations or any indivjdua] or entity othel' than the Respondent. 

VOLUNTARY AGREEMENT 

19. The Respondent's decision to enter into this Agreement is treely and voluntarily 
made and is not the result of force, threats, assurances, promises, or representations other 
than those contained in this Agreement. 

20. The Respondent has read and understands this Agreement. Furthermore, he has 
reviewed all legal and factual aspects of this matter with his attorney and is fully satisfied 
with his attorney's legal representation. The Respondent has thoroughly reviewed this 
Agreement with his attorney and has received satisfactory expJanations concerning each 
paragraph of the Agreement. After conferring with his attorney and considering all 
available alternatives, the Respondent has made a knowing decision to enter into the 
Agreement. 

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ENTIRETY OF AGREEMENT 


21. This Agreement constitutes the entire agreement between the Commission and the 
Respondent, and supersedes all prior understandings, if any, whether oral or written, 
relating to the subject matter herein. 

22. This Agreement cannot be modified except in writing, signed by the Respondent 
and a representative of the Commission. 

23. In the event an ambiguity or a question of intent or interpretation arises, this 
Agreement shall be construed as if drafted jointly by the parties hereto, and no 
presumption or burden of proof shall arise favoring or disfavoring the Commission or the 
Respondent by virtue of the authorship ofany ofthe provisions of the Agreement. 

The signatories below acknowledge acceptance of the foregoing terms and conditions. 

RESPONDENT 

The foregoing instrument was acknowledged before me this f.~· day of t\!<\'<:or.<:-•; 2013, 
by \'f\·\flaYhV, .,.,._(. , who _Lis a personally known to me or ...Lwho has 
produced a valid driver's license as identification and who did take an oath. 

Notary ublic 
State: 
Commission number: 
Commission expiration: 

............... ..-. ......
_________ 
MEliNA ANN PALMER ~· 

Notary PUbnc ~ 
COnnecticut • 

My Commission Expires Aug 31. 2018 • 

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RESPONDENT'S COUNSEL 

Appro:ved as to form: 

II- r-!3 B~~tre{!'~Date 
Baker Botts LLP. 

1299 Pennsylvania Ave., N.W. 

Washington, D.C. 20004 

(202) 639-7740 

SECURITIES AND EXCHANGE COMMISSION 
DIVISION OF ENFORCEMENT 

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