Banker accused of $25 million fraud arose from gilded legacy

March 29, 2016 at 01:50 PM
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Andrew Caspersen, the banker accused of stealing $25 million, seemed to have it all, at least on paper.

Scion of a family that built and sold a finance company for billions, Caspersen went from Princeton University to Harvard Law School, where students can read rare books in the Caspersen Room or study in the Caspersen Student Center. Until Monday, he was a managing director at PJT Partners Inc. He earned more than $3 million a year, prosecutors said in court, helping private-equity funds restructure.

Now Caspersen, 39, is out of work and charged with what federal prosecutors describe as a brazen fraud. According to the Manhattan U.S. attorney's office, he invented a fake "credit facility" that promised high returns and duped a hedge-fund manager into wiring him millions last year, most of it from a charitable foundation. He gambled it away betting on stock options in just four weeks, according to the criminal complaint. In all, Caspersen is accused of scheming to defraud investors of more than $95 million. 

Caspersen's case raises questions about how PJT, an advisory firm that combined with the mergers and restructuring businesses of private-equity giant Blackstone Group LP last year, failed to notice what he was doing, and why someone in his position would allegedly run a scam that was likely to be discovered. PJT dropped 86 cents to $22.80 at 10:38 in New York Tuesday, extending its two-day decline to 14 percent.

Caspersen didn't offer any answers when he appeared in Manhattan federal court on Monday wearing a white polo shirt and gray slacks, with his wife, mother and one of his brothers looking on from the back row. Defense lawyer Dan Levy, arguing against prosecutors' request for $20 million bail, said his money was all gone. "Losses have eviscerated any assets," he said.

Assistant U.S. Attorney Christine Magdo disagreed. "He created fake identities and used the identities of real individuals," she said. "He stole from his own employer and now he says he has no assets. We wonder why would he tell the truth now, when he's lied all along?"

Private equity

Caspersen was released from custody on a $5 million bond. Levy declined to comment on the charges. Caspersen's wife Christina didn't reply to a phone call and e-mail seeking comment.

Caspersen worked for Coller Capital for about a decade before moving in 2013 to Park Hill Group, then a part of Blackstone. He specialized in secondaries — stakes in hard-to-sell private-equity funds. Park Hill was spun out of Blackstone in October and is now a unit of PJT Partners. PJT said in a statement that it had fired Caspersen and that it was "stunned and outraged" to learn of the fraud.

According to prosecutors, the fraud's roots go back to July. A month earlier, Park Hill helped private-equity firm Irving Place Capital raise $500 million to restructure a fund from 2006, the client's regulatory filing shows. Caspersen worked on that assignment, according to a person with knowledge of the matter.

Four months later, Caspersen e-mailed the manager of an international hedge fund and offered him the chance to earn a temptingly high return, according to the criminal complaint. The investment, which he claimed was related to the restructuring of the Irving Place fund, "offers private equity returns (15 percent) but without the risk," Caspersen said in an e-mail to another potential investor that was quoted in court documents.

No connection

What the investor didn't know was that the account receiving the money, Irving Place III SPV LLC, was actually controlled by Caspersen and had nothing to do with the Irving Place firm. PJT didn't authorize Caspersen to raise the funds, prosecutors said.

A spokesman for the Irving Place private-equity firm said it had no knowledge of Caspersen's scheme and was working with prosecutors.

Father's suicide

Caspersen's family history has triumph and tragedy. His father, Finn M.W. Caspersen, ran the consumer-finance company Beneficial Corp. for almost two decades, after his own father had overseen it for 18 years. In 1998, it was bought out for more than $8 billion. He acquired estates in Florida and Rhode Island and donated to the Peddie School in New Jersey, Drew University and Harvard Law, which all of his four sons attended.

Then in 2009, he killed himself. According to reports from the time in the New York Times and Vanity Fair, he was weakened by kidney cancer and fighting with the Internal Revenue Service on suspicion of evading taxes in offshore bank accounts.

At Monday's hearing, prosecutors said Andrew Caspersen was facing mental-health issues and had substance-abuse problems. Responding to questions from the court, Levy said he wanted to "be circumspect" about his client's mental health, saying, "those thoughts were quite recent." Magistrate Judge James Francis ordered Caspersen to receive counseling while he awaits trial.

Six months

Caspersen's scheme only lasted for about six months. He lost most of the money in November trading short-term options on the Standard & Poor's 500 Index, prosecutors said. Then in March, he told his investor that an opportunity had come up for the foundation to put in another $20 million. Caspersen used his family as a lure, saying they were investing $5 million. The foundation wasn't named in the charges.

That's when the fraud unraveled. On March 7, Caspersen's victim asked to speak to an executive at Coller Capital, who was listed on some of the fake investment documents. Instead, Caspersen allegedly set up a domain name similar to Coller's that morning, and sent his victim an e-mail that looked like it was from the executive. Then Caspersen impersonated the Coller executive on a conference call.

The ruse didn't work. Another employee of the victim's hedge fund spotted the discrepancy that day and discovered the domain had just been set up. The investor confronted Caspersen, who said everything was fine and the money would be returned by the end of the month, according to the government.

Didn't bite

The next day, Caspersen tried to get another firm to invest $50 million in the scheme. The company didn't bite, prosecutors said. But as recently as March 18, Caspersen was still telling his investor that he'd send the money by March 31.

PJT discovered his scheme about two weeks ago, according to people familiar with the matter. It hired the law firm Paul Weiss Rifkind Wharton & Garrison to investigate, then alerted U.S. Attorney Preet Bharara. Caspersen was arrested at an airport on March 26.

Bharara called it a "shameful charade — creating fake e-mail addresses, setting up misleading domain names, and inventing fictional financiers."

PJT, named for former Morgan Stanley banker Paul J. Taubman, said in the statement that it has insurance coverage that it believes would cover much of any potential liability it has. Representatives for PJT declined to comment beyond the statement.

Coller said it first became aware of the probe late this month.

'No accusations'

"At this stage, the firm has no reason to believe there was any wrongdoing by Mr Caspersen during his time of employment with Coller," the company said in an e-mailed statement. "No accusations have been made against Coller Capital or any current member of the firm's staff."

Caspersen and his family own Westby Corp. in Hobe Sound, Florida, which raises cattle, grows oranges and grapefruit and controls commercial real estate, according to state records and the firm's website. A recorded message at Westby's phone number says: "Westby Corporation has closed its offices. Please do not leave a message as this phone is no longer monitored."

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