Investment adviser Hauke agrees to plead guilty in $7M fraud

Former Fishers investment manager Keenan Hauke has agreed to plead guilty to one count of securities fraud, a charge that carries a maximum penalty of 25 years in prison.

Federal prosecutors on Tuesday afternoon charged Hauke with masking huge losses in his hedge fund for years as part of a scheme that ultimately resulted in 67 investors losing more than $7 million.

Immediately after filing the criminal information in U.S. District Court in Indianapolis, the U.S. Attorney’s Office submitted a plea agreement signed by Hauke in which he admitted guilt. The plea agreement, which requires court approval, would prevent the government from recommending a prison sentence of more than 17 years.

The Securities Division of the Secretary of State’s Office began investigating Hauke early this year after a co-worker notified the state about irregularities he said he had discovered. The FBI soon joined the probe.

In an investigative story in August, IBJ reported that Hauke’s hedge fund had invested millions of dollars into Michigan real estate seven years ago without telling clients and that the holdings ended up nearly worthless. Rather than fess up, he created fake account statements for clients and used money from new investors to pay off earlier ones.

In court papers, prosecutors alleged that Hauke diverted some investor funds for personal use, including paying off the mortgage on his home.

Hauke, who is in his early 40s, wrote a regular investing column for IBJ for nine years. The newspaper discontinued the column when the investigation  began.