Arrest Made In $25 Million Foundation Alleged Fraud

March 30, 2016       Mark Hrywna      

The Moore Charitable Foundation (MCF), founded by hedge fund billionaire Louis Bacon in 1992 to protect land, water and wildlife, is the apparent victim of an investment fraud to the tune of $25 million.

It was alleged via a prepared statement that foundation officials were lied to by Andrew Caspersen about a potential investment related to the publicly announced restructuring of a private equity fund. The foundation put approximately $25 million of its endowed funds toward the investment, made into an account that appeared to be “for an Irving Place vehicle involved in the transaction,” but actually under the control of Caspersen.

The 39-year-old former managing director at investment bank PJT PartnersPark Hill Group was arrested this past Saturday and charged with one count of securities fraud and one count of wire fraud in connection with a scheme to defraud investors of more than $95 million, according to statement released Monday by Preet Bharara, the U.S. Attorney for the Southern District of New York. He was released on $5 million bond on Monday.

Each count carries a maximum term of 20 years in prison. The maximum find on those counts is $5 million or twice the gross gain or loss from the offense. The Securities and Exchange Commission (SEC) also filed civil charges against Caspersen.

Based in Midtown Manhattan, MCF had total assets valued at almost $189 million at the end of 2014. It’s not to be confused with the Palo Alto, Calif.-based Gordon and Betty Moore Foundation, which has assets of $4.6 billion.

“When the foundation detected irregularities in a proposed follow-on deal, it notified PJT Partners’ general counsel’s office and cooperated with PJT in their investigation of the issue. The foundation did not wait to recover its investment before contacting PJT Partners, which it said could have subjected some other innocent victim to Caspersen’s fraud,” the statement continued.

After PJT informed the foundation that it had contacted the U.S. Attorney’s Office for the Southern District of New York, the foundation separately called the U.S. attorney to inform on how it initially discovered the allegedly fraudulent activities. The foundation has since cooperated with the U.S. Attorney’s Office and the SEC “helping to bring this massive fraud to light, protecting future victims and ensuring that the perpetrators are brought to justice,” the statement said.

The foundation will continue to aid PJT Partners and the government in their investigations, including efforts to be made whole on its investment.

In November, the foundation wired $24.6 million into an account designated by Caspersen to invest in the special purpose vehicle he created in connection with the proposed transaction. He claimed to an investor who put up $400,000 that he had already raised $30 million but had only received $2.51 million. The next day, Caspersen allegedly wired $17.6 million from the account into his own personal brokerage account and began using it to “engage in largely unprofitable securities transactions.” By year’s end, his brokerage account had a net loss of about $25 million for 2015 and by March 18, the balance was $40,000.

Since at least July, Caspersen fraudulently solicited investments in securities by falsely representing that he had authority to conduct deals on behalf of his employer with another private equity fund, and that investors’ funds would be invested in a secured loan to an investment firm. No such security existed and no such investments were made, according to authorities, and Caspersen converted funds to his own use without authorization of his investors, including $24.6 million from the Moore Charitable Foundation.

Caspersen used a portion of the $25 million to trade securities in his personal brokerage account, which he largely lost as a result of aggressive options trading, Bharara said.

Shortly before his arrest, Caspersen fraudulently attempted to solicit another $20 million investment from the foundation and a $50 million investment from another private equity firm.

Caspersen created fake email addresses, set up misleading website domain names, and invented fictional financiers to advance his fraud, Bharara said. “When confronted by a suspicious client who had invested $25 million, Caspersen had no good answers. He will now have to answer to federal securities and wire fraud charges,” he said.