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Oppenheimer Investment Advisors Charged In Private Equity Fund Case

Meyer Wilson

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. In addition, Oppenheimer must make changes to its valuation policies and internal controls.