"A fund of hedge funds...."
A Fund of Funds?
SUCKERS!
But the FBI is finally getting busy:
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UPDATE 3-U.S. money managers accused in $550 mln fraud
Wed Feb 25, 2009 2:25pm EST
* Two money managers charged with conspiracy and fraud
* Charges filed by federal prosecutors, SEC, CFTC
* SEC says men used client funds as 'personal piggy-bank'
(Recasts first sentence, adds details from court complaints,
other background)
By Martha Graybow
reuters.com
NEW YORK, Feb 25 (Reuters) - Two money managers who oversaw
investments for Carnegie-Mellon University and other
institutions were arrested on Wednesday on charges of running an
estimated $550 million, decade-long swindle, the latest in a
wave of big financial fraud cases.
Paul Greenwood, 61, and Stephen Walsh, 64, managing general
partners of WG Trading Co with main offices in Greenwich,
Connecticut, were charged by federal prosecutors with
conspiracy, securities fraud and wire fraud.
The two, both former part-owners of the New York Islanders
National Hockey League team, are accused of using client money
as "their personal piggy-bank" to fund lavish lifestyles,
according to the U.S. Securities and Exchange Commission.
The SEC and Commodity Futures Trading Commission brought
civil charges against the men, WG Trading and an affiliated
firm, investment adviser Westridge Capital Management Inc of
Santa Barbara, California.
The charges, filed in U.S. District Court in Manhattan,
come amid a wave of fraud cases involving money managers. The
biggest case involves former Nasdaq chairman Bernard Madoff,
arrested in December and charged with fraud after authorities
said he confessed to running a Ponzi scheme with losses of up to
$50 billion over many years.
Greenwood and Walsh were arrested by the FBI on Wednesday
morning, two weeks after their suspension by the National
Futures Association for not complying with an audit.
Attorneys for the two men were not immediately available.
A woman who answered the phone at a WG Trading office in
North Hills, New York, declined to comment. There was no answer
at the firm's main office in Greenwich.
The alleged scheme was long-running, beginning in 1996 and
operating through this month, according to authorities.
Of the $667 million that clients invested, Greenwood and
Walsh misused as much as $554 million, the SEC said.
Greenwood, of North Salem, New York, was accused of using
investor funds to buy items including horses and expensive
collectibles, while Walsh, of Sands Point, New York, was
accused of using client money for himself and to make large
payments to his ex-wife.
The SEC complaint said other spending included
multimillion-dollar homes, cars and collectibles, all part of a
scheme to use client money "as their personal piggy-bank to
furnish lavish and luxurious lifestyles."
The SEC said the men solicited numerous institutional
investors, including educational institutions and public
pension and retirement plans, by promising to invest their
money in an "enhanced equity index" strategy. Instead of
investing the money as promised, they stole investor funds for
their personal use, the commission said.
Greenwood and Walsh had been suspended by the National
Futures Association on Feb. 12 for not disclosing financial
records and failing to answer questions on numerous promissory
notes "totaling hundreds of millions of dollars" that they
executed, the association said.
The SEC said that as recently as Feb. 6, Greenwood and
Walsh had gotten a $21 million investment from the University
of Pittsburgh, which had been a client of Westridge since 2002
and has about $65 million invested with the money managers.
Another person, former WG Trading employee Mark Bloom, was
arrested on Wednesday and charged separately in U.S. District
Court in Manhattan with fraud related to his activities at his
North Hills Management LLC financial firm in New York.
Bloom stopped working for WG Trading in 2001, according to
the court papers. The SEC also brought civil charges against
Bloom, saying he misused more than $13.2 million of investor
funds in part to support a lavish lifestyle.
A telephone number for North Hills Management could not
immediately be located.
(Reporting by Martha Graybow; editing by Jeffrey Benkoe and
Matthew Lewis) |
