Oppenheimer Advisors Charged with Misleading Investors About Valuation
and Performance of New York-based private equity fund: Oppenheimer Global
Resource Private Equity Fund I L.P
Two investment advisers at Oppenheimer & Co. were charged this week
with misleading investors about the valuation policies and performance
of a New York-based private equity fund.
According to the SEC, Oppenheimer Asset Management and Oppenheimer Alternative
Investment Management made a variety of
misrepresentations to investors in the marketing of Oppenheimer Global Resource Private Equity
Fund I L.P.
Specifically, the SEC alleged that the advisors' representatives misled
potential investors about the valuation and performance of the private
equity fund's largest investment, Cartesian Investors-A LLC.
“Oppenheimer Asset Management and Oppenheimer Alternative Investment
Management disseminated misleading quarterly reports and marketing materials
stating that the fund’s holdings of other private equity funds [including
Cartesian Investors-A LLC] were valued ‘based on the underlying
managers’ estimated values,’” stated the SEC in a recent
press release. “However, the portfolio manager of the Oppenheimer
fund actually valued the fund’s largest investment at a significant
markup to the underlying manager’s estimated value.”
That markup resulted in a 907% increase in Oppenheimer Global Resource’s
internal rate of return, alleged the SEC, which caused investors to believe
the fund was performing significantly better than it was.
Though Oppenheimer neither admitted nor denied the SEC’s allegations,
the advisors did agree to pay $2.8 million to settle the charges. Of that,
approximately $2.2 million will be returned to the fund’s investors.
Oppenheimer must make changes to its valuation policies and internal controls.