Owners of investment firms face securities fraud charges
The owners of companies that managed hundreds of millions of dollars for universities and charities were arrested Wednesday on suspicion of looting their investment funds.
Paul Greenwood, 61, of North Salem, N.Y., and Stephen Walsh, 64, of Sands Point, N.Y., appeared in U.S. District Court in Manhattan on charges of conspiracy, securities fraud and wire fraud.
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.
The charges were disclosed on the same day that authorities announced an arrest in an unrelated investigation of James Nicholson, president and general partner of Westgate Capital, a New York investment fund.
Authorities said Nicholson, 42, of Saddle River, N.J., defrauded investors who had put at least $100 million into his funds since 2004. They said the fraud came to light after several investors sought to redeem their money after hearing about a more than $50-billion fraud blamed on former Nasdaq Chairman Bernard Madoff.
Greenwood and Walsh were identified in court papers as the owners of WG Trading Co. in Greenwich, Conn., and Westridge Capital Management Inc. in Santa Barbara. Their operation also had offices in Manhattan and Jersey City, N.J.
The firms’ clients included “charitable and university foundations, retirement and pension plans and other institutions,” according to the criminal complaint.
Prosecutors allege that $1.3 billion in illegal wire transfers had been made since summer 2007 to bank accounts held by Greenwood and Walsh’s wife.
The criminal investigation of Greenwood and Walsh sprang from an audit launched this month by the National Futures Assn., a Chicago-based regulatory agency for the U.S. futures industry.
The association suspended the pair after they refused to answer questions about a series of loans between their various entities that involved more than $500 million in transfers, spokesman Larry Dyekman said Tuesday.
