PJT Partners, the parent company of placement agent Park Hill Group, incurred a legal expense of $8.9 million in dealing with the alleged fraud conducted by former Park Hill employee Andrew Caspersen, according to PJT’s March 10Q filing with the US Securities and Exchange Commission.
Back in March, Caspersen was arrested and charged by federal prosecutors of attempting to defraud two institutional investors of more than $95 million. He allegedly carried out his scheme by offering the investors promissory notes issued by Irving Place III SPV, a shell entity he had created to resemble the legitimate private equity fund that was undergoing a restructuring.
As a result of the scheme, SEC documents indicated Caspersen defrauded investors of $25 million, and Caspersen’s employment at Park Hill was terminated on 28 March.
PJT noted in its 10Q that the nearly $9 million legal burden is probable and reasonably estimable, and that it’s also probable PJT will receive $5.6 million in related insurance reimbursement.
It also said it will “vigorously defend” any future claims related to the funds that Caspersen allegedly fraudulently obtained, and that the total potential amount of those claims would be less than $30 million, and without merit.
News of Caspersen’s alleged fraud has spurred debate in the private markets, with the SEC co-head of private funds unit Igor Rozenblit putting part of the blame on the complexity of the fund restructuring industry for potentially allowing such schemes to take place. On the other hand, many, including private fund lawyers and secondaries investors, have said, if true, this fraud would have been a play on relationship manipulation that could have happened in any sector.
Reports said Caspersen is expected to settle the case by 13 June.