(UPDATES noted below:) Federal prosecutors in Manhattan have charged Andrew W.W. Caspersen, a managing director at Park Hill Group in New York, an investment "placement agency" that sells private investment firms access to major investors like the Pennsylvania state and public school pension plans, with criminal fraud "in a scheme to defraud investors of over $95 million." U.S. statement here.
UPDATE: Proclaiming itself "stunned and outraged," Caspersen's firm fired him; statement here.
Caspersen, a Princeton and Harvard Law graduate who joined Park Hill when it was part of the Blackstone investment group in 2013, last year took $25 million from an unnamed foundation tied to a "multinational hedge fund based in New York" by fooling the hedge fund about what he was going to do with it, according to prosecutors.
Park Hill was later spun off and became part of Peter J. Taubman's publicly-traded PJT Partners Inc., whose largest investor is Blackstone founder Stephen Schwarzman; PJT shares "fell sharply" after Caspsersen was charged, Wall St. Journal reports; more from Bloomberg here.
Caspersen set up a "shameful charade" of investing the money in "sham private equity" deals -- but actually used the millions "to trade securities in his personal brokerage account" -- and lost most of it through "aggressive options trading," prosecutors said. Caspersen then tried to raise another $20 million from the same hedge fund and $50 million "from another multinational private equity firm headquartered in New York."
Dan Levy, a former New York federal prosecutor who is representing Caspersen, did not return calls seeking comment. Prosecutor Preet Bharara's office declined to identify which of Park Hill's clients Caspersen targeted.
A spokeswoman for Park Hill said the firm had no comment beyond its statement (linked at the end of the first paragraph above.) Caspersen was one of three Managing Directors in the firm's Secondary Advisory group, which helps investors reorganize or dispose of troubled investments.
Caspersen in his fraud invented fund names that were "deceptively similar" to those of actual investment funds, according to the Securities and Exchange Commission.
He created a "shell" company "with no legitimate business operations" and called it "Irving Place III SPV LLC," in an effort to confuse investors with similarly-named Irving Place Capital Partners III LP, a real fund whose investors included the $50 billion asset, underfunded Pennsylvania Public School Employees' Retirement System.
("As of September 2015, PSERS committed $150 million to the (Irving) fund. We have received $102.3 million in distributions" from the then-nine-year-old investment, and estimate the value of the remaining investment at a potential $98.5 million, says PSERS spokeswoman Evelyn Tatkovski.)
In documents, PSERS has named Park Hill, Caspersen's firm, as a paid "placement agent" which introduces private investment funds to PSERS officials and helps them get hired, in return for the private funds paying Park Hill a cut of the fees promised by the state.
UPDATE: Park Hill collects more than $100 million a year in placement agent fees, the company said in its most recent annual report -- even though it also noted that "state and local regulations... restrict or prohibit the use of placement agents in connection with investments by public pension funds, including regulations in New York, Illinois and California (and are being considered in other states)."
Those fees are typically booked by Park Hill when it "places" investor funds with a private fund manager, but are only actually collected over a several-year period, the company added, noting the fees are sometimes cancelled before they are ever paid.
PJT also provides investment-banking advisory services to client companies. Placement fees declined from $138 million in 2011 to just $114 million last year, while advisory fees rose from $245 million in 2011 to $286 million last year.
EARLIER: Placement agents are not allowed by Philadelphia city pension managers, but they have often been employed by managers seeking to sell their services to Pennsylvania state pension funds. More on Pa. placement agents like former Phillies pitcher Larry Christensen here.
Caspersen's firm was a placement agent for managers who won PSERS contracts at Blackstone's own Strategic Partners fund group, and for New York-based Searchlight Capital, among others.
As CEO and chairman, Caspersen sold Beneficial to the former Household International for $8.6 billion in 1998. Caspersen, an avid horseman and political donor (his friends and neighbors included New Jersey Govs. Tom Kean and Christine Todd Whitman), gave large sums to Harvard and other colleges. He shot himself to death in 2009. The New York Times reported the dead man, who was suffering from cancer, also faced an extensive federal tax investigation.