[ by Melanie Gretchen ]

Oppenheimer & Company reached a monetary settlement with the SEC and state regulators on charges the firm misled investors about the performance of one of its private equity funds.

SEC Findings and Allegations.  The New York-based investment firm allegedly inflated the value of the largest investment in its Oppenheimer Global Resource Private Equity Fund, a $100 million fund that focused on investments in the energy sector.  The so-called manipulation resulted in an erroneous rate of return of 38%, rather than the actual return of 3.8%. 

In 2009, when the firm sought to raise additional funds from prospective investors, Oppenheimer managers allegedly propped up the value of its stake in the Cartesian Investors fund.  Public pension funds, school endowments and other investors were assured that the financial figures were correct - having been vetted by outside auditors, as well as by a 3rd-party valuation firm engaged by Cartesian.

Fact is, Cartesian was comprised of a single holding - S. C. Fondul Proprietatea - which the Romanian government had set up to compensate its citizens for property seized by the Communist government. 

SEC Sanctions.   Oppenheimer agreed to pay almost $3 million, consisting of a $620K fine and $2,3mn in restitutions to investors.  The firm also resolved a parallel action brought by the Massachusetts attorney general’s office, agreeing to pay an additional penalty of $132K.

"Honest disclosure about how investments are valued and how performance is measured is vital to private equity investors.  This action against Oppenheimer for misleadingly writing up the value of illiquid investments is clear warning that the S.E.C. will not tolerate lax disclosure practices in the marketing of private equity funds." -- George S. Canellos, SEC acting director of enforcement.

For further details, go to [Dealbook, 3/11/13].