More Pension Funds Frozen In Westridge Capital Management Case; San Diego County Was Pulling Out Of Fund As University of Pittsburgh Was Increasing Stake

Paul Greenwood.

Paul Greenwood.

Westridge Capital Management (WCM) and affiliate WG Trading appear to have been trolling for cash to sustain the deception until the bitter end. Even as one public retirement system was pulling out and demanding a return of invested funds, another one was increasing its stake.

In January, just weeks before the firms were exposed as frauds, they asked the San Diego County Employees Retirement Association (SDCERA) to change its mind about pulling out,  SDCERA said.

SDCERA said its fears were heightened in October 2008 when an analyst from Albourne Partners, an SDCERA consultant, “found [Paul] Greenwood to be uncooperative and evasive” during a due-diligence examination. The association had about $78 million in the fund, after having taken a $75 million redemption in October 2007.

Greenwood and Stephen Walsh, two principals in the firms, were arrested by the FBI last week. They are accused of orchestrating a fraud involving hundreds of millions of dollars.

“In addition to a general lack of operational transparency, Greenwood [in October 2008] refused to provide access to key references such as third party brokers,” SDCERA said. “SDCERA also followed up with WG Trading by requesting additional information, but was not provided with a sufficient response.”

The association ended its contract with WG Trading on Dec. 31, 2008. Within days, WG Trading asked it to reconsider — after its earlier refusal to disclose information.

“On January 8, 2009, WG Trading contacted SDCERA and requested their termination be reconsidered and offered to provide additional information, which SDCERA deemed insufficient,” SDCERA said.  “On January 15, 2009, the SDCERA Board of Trustees rejected WG Trading’s request to be reinstated, and approved staff’s decision to terminate WG Trading and demand a return of all monies invested.”

SDCERA said it did not suspect fraud at the time, which might not be good news to the University of Pittsburgh. Only weeks after SDCERA’s termination, Pitt increased its stake in WCM by more than $21 million.

More WCM Fallout

More than $135 million in pension funds for North Dakota public retirees have been frozen as a result of the WCM fraud probe.

The North Dakota State Investment Board has terminated its investment management relationship with WCM and WG Trading.

Last week, the Iowa Public Employees’ Retirement System ended its contract with WCM. Iowa public retirees have $339 million at risk in the fund. The University of Pittsburgh and Carnegie Mellon University, with a combined $114 million in the fund, also have exposure. So does the SDCERA, which may have $78 million in exposure. The Sacramento County Employees’ Retirement System also has exposure.

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