ap.google.com | 2/26/09 | $900 million | suspects: James Nicholson/Paul Greenwood/Stephen Walsh
Federal authorities brought charges in two major securities fraud investigations Wednesday, saying one scheme fell apart because of publicity about the Bernard Madoff scandal. In that case, New Jersey fund manager James Nicholson, 42, was accused of defrauding investors of as much as $900 million since 2004.
In the second case, Paul Greenwood, 61, of North Salem, and Stephen Walsh, 64, of Sands Point, were charged with conspiracy, securities fraud and wire fraud.
Greenwood and Walsh ran Greenwich, Conn.-based WG Trading Company LP and Westridge Capital Management Inc., based in Santa Barbara, Calif. They also had offices in Manhattan and Jersey City, N.J.
According to the criminal complaint, their clients included “charitable and university foundations, retirement and pension plans and other institutions.”
Investors were told the money would be invested using a conservative strategy called “enhanced stock indexing” that would outperform the S&P 500.
The probe began with an audit earlier this month by the National Futures Association, a Chicago-based regulatory agency for the U.S. futures industry.
The group suspended the pairs’ membership after they refused to answer questions about their books.
Records showed that of the $812 million in assets held by their operation, $794 million were in promissory notes saying Greenwood and Walsh owned their own fund money.
Prosecutors allege that since the summer of 2007, $1.3 million in illegal wire transfers were made to bank accounts held by Greenwood and Walsh’s wife.
An unidentified WG Trading employee told the FBI the money was used for “the purchase of expensive collectible items by Greenwood, the purchase of horses by Greenwood, transfer of cash to Walsh’s then-wife and … the purchase of an apartment for Walsh’s ex-wife pursuant to a divorce settlement.” The Securities and Exchange Commission said the collectibles included expensive Steiff teddy bears.
Last week, the University of Pittsburgh and Carnegie Mellon University sued Westridge, Greenwood and Walsh, seeking the immediate return of more than $114 million they invested.
Greenwood was elected last year as a supervisor in North Salem, where press accounts say he raises horses on a 300-acre farm. He once owned Old Salem Farm, a 54-acre riding school and horse farm bought from Paul Newman and Joanne Woodward.
He and Walsh also were once partial owners of the New York Islanders hockey team.
Bail was set at $7 million each, and they were ordered to post $1 million in cash or property that was not derived from the alleged fraud. Richard D. Weinberg, a lawyer for Walsh, and Robert J. Jossen, a lawyer for Greenwood, declined to comment.
Defense attorney Ira Sorkin, who also represents Madoff, asked that Nicholson receive house arrest, confined to his Saddle River, N.J., home and monitored with an ankle bracelet -- conditions similar to Madoff’s bail.
