Is Oppenheimer now misleading itself on fraud?August 21, 2013: 11:26 AM ET
Oppenheimer retains ties with controversial private equity executive.
FORTUNE -- More than a year ago, we reported on how a private equity unit of Oppenheimer & Co. had inflated the valuation of one of its investments, in order to help market a new fund. The SEC later charged Oppenheimer with misleading investors, and the firm agreed to pay a penalty, return money to investors and be censured.
What it didn't do, however, was cut ties with Brian Williamson, the private equity executive who allegedly sat at the center of the scandal.
Instead, Oppenheimer continued to let him manage Oppenheimer assets through an independent platform. Moreover, it does not appear to have severed its many financial ties to an independent private equity group (Roc Resources) than Williamson formed after spinning out of Oppenheimer.
The SEC yesterday charged Williamson with "misleading investors about the valuation and performance" of a fund-of-funds, but there was no simultaneous settlement. Williamson seems intent on fighting the allegations. In a statement, Williamson's attorney said:
"In its zeal to pursue cases in the private equity space, the SEC has alleged fraud where none exists. Brian Williamson has worked tirelessly for his investors and the asset in question not only has a current NAV that exceeds Mr. Williamson's earlier valuations but also—only 5 years into a minimum 10-year fund—already reflects an approximate 61% gain in the asset's local currency, and an approximate 28% gain, converting to U.S. dollars, for OGR's investors. Mr. Williamson will vigorously defend against these charges and looks forward to vindicating his good name and reputation in the industry."
Two quick caveats to the statement: (1) Where the asset is currently valued seems largely irrelevant, since this is about where it should have been valued at the time, and (2) The underlying asset is currently trading at nearly a 40% discount to NAV.
But even leaving all of that aside: What on earth is Oppenheimer thinking letting the guy manage client assets? Williamson might be proclaiming his innocence – as is his right – but Oppenheimer copped to the fraud in its earlier settlement. Does Oppenheimer believe that magical fairies in its desk drawers misled investors? Or that it was some weird computer glitch?
In a statement, Oppenheimer said: "In light of this complaint and its allegations, Oppenheimer will conduct a full review of the allegations as well as the active management structure of the fund."
Given that Oppenheimer also adds that its prior "settlement covered many the same issues recited in the [Williamson] complaint, it seems unclear to me why such a review wasn't conducted months ago…
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