Andrew W.W. Caspersen : The Unravelling of a Wall Street Scion

 

BN-NL372_0407ca_P_20160407135231

Mr. Caspersen came from a privileged background. His father, Finn M.W. Caspersen, ran consumer-finance company Beneficial Corp. for nearly two decades, and he pocketed a fortune when it was sold for $8.6 billion in 1998. The family owned seaside estates in Rhode Island and Florida, and the elder Mr. Caspersen was a prominent philanthropist and contributor to Republican politicians.

Andrew Caspersen and his brothers attended elite private schools. At Groton, a boarding school in Massachusetts, friends remember him as a talented athlete in football and crew. “He was successful, did well in school and was very social,” a former classmate recalls.

Mr. Caspersen went on to Princeton University, where he struck some classmates as reserved and enigmatic. He walked with a stiff gait and kept his pressed shirts neatly tucked in, but he also drove a beat-up, used car. He joined the Ivy Club, one of Princeton’s exclusive “eating clubs” where students take meals and fraternize. . . . .

Armed with diplomas from Princeton and Harvard Law School, Mr. Caspersen landed a job at Coller Capital, one of the biggest players in the obscure but growing world of trading stakes in private-equity funds. Over the next nine years, he rose to become a principal at the company, one of its higher ranks. . . . .

In January 2013, Mr. Caspersen joined Park Hill Group, which at the time was part of private-equity giant Blackstone Group LP. He worked in a division known as the “secondaries” group, which helped persuade pension funds, hedge funds and other investors to buy stakes in private-equity funds. As a partner at Park Hill, Mr. Caspersen collected millions of dollars in annual compensation. A Caspersen family company also distributed large sums each year to Mr. Caspersen and his siblings.

Although he thrived at work and struck colleagues as strait-laced, Mr. Caspersen harbored a secret: He had developed what he would later describe to acquaintances as an unhealthy fixation on placing big wagers on the market. Among his instruments of choice were stock options, which allowed him to make high-stakes bets with limited capital.

Unbeknown to his family and close friends, Mr. Caspersen’s speculative trading had largely depleted his personal fortune by last summer—and put him on an even more self-destructive path. . . . .

Last fall, Mr. Caspersen reached out to friends, family members and professional contacts to invite them to invest. He told them that he had been involved in the prior Irving Place transaction and that this was a similar deal. He said the money was going to finance a $50 million credit line, secured by Irving Place’s assets, and that their investments would churn out a 15% annual interest rate. . . . .

A Princeton classmate, James McIntyre, who worked at hedge fund Moore Capital, took the bait. Two weeks after Mr. Caspersen contacted him, telling him there was a short window to get into the deal, Mr. McIntyre arranged for the giant fund’s charitable arm to kick in $24.6 million. Moore’s founder, Mr. Bacon, was informed. Mr. McIntyre, who didn’t respond to requests for comment, invested $400,000 of his own money, too.

One of Mr. Caspersen’s closest friends, Princeton alumnus William Krusen, threw in money. So did at least two of Mr. Caspersen’s brothers and his mother Barbara. The family, under the impression that Mr. Caspersen was excelling at work, figured it was a safe investment and collectively put in a total of more than $3 million.

“Imagine if your brother or your best friend approached asking for a relatively small investment into something he did every day,” said one acquaintance. “This is a guy who had established himself as a respected and sophisticated investor for more than 10 years at some of the most respected [private-equity] firms. Why wouldn’t you put your money in?”. . . . .

A Princeton classmate, James McIntyre, who worked at hedge fund Moore Capital, took the bait. Two weeks after Mr. Caspersen contacted him, telling him there was a short window to get into the deal, Mr. McIntyre arranged for the giant fund’s charitable arm to kick in $24.6 million. Moore’s founder, Mr. Bacon, was informed. Mr. McIntyre, who didn’t respond to requests for comment, invested $400,000 of his own money, too.

One of Mr. Caspersen’s closest friends, Princeton alumnus William Krusen, threw in money. So did at least two of Mr. Caspersen’s brothers and his mother Barbara. The family, under the impression that Mr. Caspersen was excelling at work, figured it was a safe investment and collectively put in a total of more than $3 million. “Imagine if your brother or your best friend approached asking for a relatively small investment into something he did every day,” said one acquaintance. “This is a guy who had established himself as a respected and sophisticated investor for more than 10 years at some of the most respected [private-equity] firms. Why wouldn’t you put your money in?”

Not everyone was lured.

On two occasions, Mr. Caspersen tried to solicit money from private-equity firm KKR & Co., people familiar with the matter say. . . . .

KKR, which was asked for as much as $50 million, decided against it, in part because Mr. Caspersen couldn’t answer detailed questions from the firm’s legal team. . . . .

Despite that setback, Mr. Caspersen received tens of millions of dollars from other sources. He plowed some of the money he received from Moore Capital into options contracts based on the S&P 500 index, according to the criminal complaint. The trades amounted to a $17 million bet that the market would go up, traders say.

But the market went down. Mr. Caspersen lost about $14.5 million on the trades, prosecutors say.

If Mr. Caspersen was stressed, he didn’t show it. At a dinner last October at a Harvard event in Cambridge, Mass., he seemed his normal self, low-key and buttoned-up.

In early March, Mr. Caspersen approached Moore Capital’s Mr. McIntyre about making another $20 million investment. Mr. McIntyre by then was getting nervous. . . . .

That is “strange,” Mr. Caspersen told Mr. McIntyre after he noted the sequence, the criminal complaint says.

Mr. McIntyre told Mr. Caspersen the foundation wanted its $25 million back. And Moore Capital contacted Park Hill executives.

On the morning of March 16, Park Hill enlisted a law firm, Paul Weiss Rifkind Wharton & Garrison LLP, to investigate. By that evening, Paul Weiss had uncovered Mr. Caspersen’s alleged scheme. Lawyers promptly informed the Manhattan U.S. attorney’s office. . . . .

On Saturday, March 26, Mr. Caspersen and his wife and two young children flew into New York’s LaGuardia Airport, returning from a vacation in Florida. When the family entered the airport terminal, a team of federal agents intercepted Mr. Caspersen and placed him under arrest. He said little to challenge the agents and quickly acquiesced to the arrest. His wife Christina appeared to be in a state of shock as her husband was escorted away. . . . .

That night, Christina took her husband from their home in Bronxville, N.Y., a New York City suburb, and checked him into a Manhattan hospital. He has since been released.

His friends and family felt betrayed, shocked, embarrassed and sad. “He has had a lot of tragedy in his life, but we’re all stunned by what’s happened,” said a friend from Princeton. “We would never have guessed it would come to this.”. . . . .

Prosecutors suspect Mr. Caspersen may have taken in tens of millions of dollars more than they have stated publicly, but they have yet to determine the full scope of the alleged fraud.

—from the Wall Street Journal, April 7, 2016

 

Comment: This story, lifted from today’s Wall Street Journal, doesn’t even come as a surprise, we have read it so often before. On the face of it we do not even feel sorry for the victims since they come from the same well-to-do class as the perpetrator. But on closer examination we are forced to the realization that those who ultimately pay for the the losses of this high-stakes gambling spree by an irresponsible financier are the same people who paid for the housing crash of 2008 with the loss of their homes, those who can least afford it.

Why are those whom we entrust with our money (yes, it is our money as much as theirs – it is part of the national wealth of which they have been entrusted a lion’s share) given such license to handle it with so few controls? As an architect, I would never have been allowed to imperil my public to this extent. I had to work within a clear set of safety regulations while the investment banker operates in a world free of handrails, meanwhile still complaining of government restriction!

 

 

 

 

 

 

 

 

 

 

 

 

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