In a shocking development, earlier today a highly reputable executive with a just as reputable private equity firm was arrested and charged with securities fraud. Andrew Caspersen, a Harvard Law School graduate and a partner at the Park Hill Group, an advisory firm that up until last fall had been a part of the Blackstone Group and was recently spun off as Paul J. Taubman's PJT Partners, was accused of defrauding numerous institutional investors out of $95 million through fake private equity investments.
According to the NYT, one investor duped by Caspersen was a charitable foundation affiliated with an unidentified New York hedge fund that had sunk nearly $25 million in the scheme. An employee at the hedge fund firm invested $400,000 with Mr. Caspersen.
"As alleged, Caspersen engaged in a brazen fraud by raising money under false pretenses and simply stealing the funds,” said Andrew M. Calamari, director of the Securities and Exchange Commission’s New York office. “This action amply demonstrates that even sophisticated institutional investors are not immune to financial scams.”
According to the SEC charge, "since at least October 2015 and continuing until the present, Caspersen, a securities professional associated with a registered broker-dealer, has solicited approximately $95 million in investments from two investors, offering promissory notes issued by defendant Irving Place III SPV and carrying a 15% annual interest rate. Irving Place III SPV, however, is nothing more than a shell entity formed and solely owned and controlled by Caspersen. It appears to have no legitimate business. By false and misleading statements, in November 2015, Caspersen obtained a $25 million investment, which was wired to Irving Place III SPV's bank account. Caspersen then simply took control of the funds for his personal use. Using false and misleading statements, Caspersen has since (so far unsuccessfully) solicited, and has continued to solicit, at least an additional $70 million."
This is something one would find in the wild, wild east of China's brazen fraudulent boiler rooms, not at a firm located on 280 Park Avenue, right next to JPM's midtown headquarters.
What is most surprising about this theft is the complete lack of internal controls at Caspersen's firm.
PJT Partners, the firm run by the investment banker Paul J. Taubman that now owns Park Hill, said in a statement that it had “terminated” Mr. Caspersen and was cooperating with authorities. The firm said that after learning of potential improper behavior by Mr. Caspersen, it conducted an internal investigation and reported the matter to federal prosecutors in Manhattan.
“Since the inception of our firm, an unconditional principle of integrity has been a core value as we build a lasting franchise,” said the statement from PJT Partners. “Our commitment to clients begins and ends with honesty and transparency, and strict adherence to these values is the absolute cornerstone of our firm.”
What is also ironic is that in this case the apple did not fall too far from the tree. As the NYT writes, "Mr. Caspersen is a son of Finn M. W. Caspersen, a Wall Street financier and philanthropist who committed suicide in 2009, at a time when he was battling cancer and his name had become embroiled in an overseas tax evasion investigation."
Now it is his son's turn.
Federal authorities said the scheme began last summer and ended only a few weeks ago. The S.E.C. said in its complaint that Mr. Caspersen had raised money through a fake investment vehicle he set up that sounded similar to the name of an actual investment vehicle, which also was a client of Park Hill.
Mr. Caspersen made up email accounts and invented employees and even went as far as to create a fake domain name, the authorities said. It is unclear if www.caspersenemail.com was part of the fraud, and if Andrew was using a personal Blackberry to conduct this brazen fraud.
The SEC's full charging document is below.
http://www.scribd.com/embeds/306176609/content