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Ex-Wall Street executive sentenced to 4 years in fraud case

A federal judge on Friday sentenced a former Wall Street executive who defrauded friends and family members of US$38.5 million to four years in prison.

[NEW YORK] A federal judge on Friday sentenced a former Wall Street executive who defrauded friends and family members of US$38.5 million to four years in prison.

Andrew Caspersen, an Ivy League-educated financier charged in a Ponzi scheme-like fraud, received a punishment much below the maximum 15.7 years in sentencing guidelines after US District Judge Jed Rakoff concluded his actions were mitigated by a gambling addiction that led to irrational bets on the stock market.

Caspersen's conduct, while "egregious," should be treated differently from instances when someone makes a rational decision to violate the law, Judge Rakoff said.

The law distinguishes between those who "would rather do something harmful to others" and "those who act with diminished authority and are to some extent not operating with a full deck," the judge added at the hearing.

"No purpose will be served by letting him rot in prison for years on end."

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The sentencing followed a 2.5-hour hearing that included an emotional plea from the defendant, as well as testimony from a compulsive gambling expert, providing a window into how addiction can wreak havoc on even the most privileged lives.

Defence attorneys said Caspersen had long suffered from a compulsive gambling addiction that he kept hidden from family and friends, beginning in college, when he lost US$2.7 million in a distribution from a family trust in badly-timed stock market bets.

Things came to a head in March 2016 following a series of high-risk trades that saw Caspersen's balance tumble from more than US$127 million on February 11 to almost nothing, according to Bruce Rosen, a managing partner at Tiger Ventures Capital who examined the trades on behalf of the defence.

"No matter how well or how poorly he was doing, it was always all in, all the time," Mr Rosen said in a letter to the court.

"When you continually purchase at-the-money options with all of your capital in a gyrating market, there is only one possible outcome: the complete loss of your capital."

Mark Potenza, an expert in compulsive gambling at the Yale University School of Medicine, testified Friday that addicts like Caspersen reach a stage where they no longer view a "good day" at the casino as one in which they win US$100.

Rather, a "good day" is when they lose US$100, but over eight or 10 hours, instead of all at once, he said.

"There's something about gambling behaviour that brings them to a different state," Mr Potenza said, adding that Caspersen's condition was complicated by severe depression and alcoholism.

Caspersen, formerly of the Park Hill Group, was arrested in March and charged with setting up fake accounts as he promised friends and families risk-free investments that would earn 15 to 20 per cent annually.

"I chose gambling over everything that I cherish, over my career, my family and eventually the law," Caspersen, 40, told the court, fighting tears.

"I do know for the rest of my life, regardless of the sentence, I will be making amends."

Assistant US Attorney Christine Magdo, while not contesting that Caspersen's addiction was a factor in the crime, argued for a tough sentence in light of the losses suffered by the victims, including reputational damage.

"When they know someone as well as Mr Caspersen, they make million-dollar decisions on the basis of a handshake," she said.

Ms Magdo also said that Caspersen had avoided taking serious action to address his addiction after he was exposed in 2012 for defrauding his mother and brother of US$2.25 million. Caspersen sought counseling, but his relatives did not press charges.

"He had the resources, the means and the family support that few addicts have," Ms Magdo said. "He had a moment of intervention and he completely refused."

Judge Rakoff also imposed three years of supervised release plus millions of dollars of restitution to victims following a hearing that featured testimony from a Yale University expert in compulsive gambling and addiction.

The judge is due to set a final figure for damages within 90 days. Prosecutors spoke of about US$36 million ahead of formal filings.

Caspersen is scheduled to report to prison on January 4.


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