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Tag: CMU

  • Fallout Continues In Westridge Capital Management Case

    Paul Greenwood
    Paul Greenwood

    UPDATE 5:23 P.M. EST (Feb. 25, U.S.A.) The story below is from Feb. 24, the day before Greenwood and Walsh were arrested. See our Feb. 25 story to read about the arrests.

    Two principals of Westridge Capital Management (WCM) are mum about the controversy swirling around the firm and affiliated companies. Neither Paul Greenwood nor Stephen Walsh are responding to media inquiries about the whereabouts of hundreds of millions of dollars entrusted to WCM by universities and public-employee retirement funds.

    Greenwood has a secondary problem: He is the town supervisor of North Salem, N.Y., a Westchester County community on the Connecticut border. A local newspaper, The Journal News, has tried unsuccessfully to contact Greenwood. The paper reports that an administrative assistant for the town of North Salem relayed a message from Greenwood that he could not comment on advice of counsel.

    On its website, North Salem’s did not mention the firestorm surrounding its town manager.

    WCM is based in Santa Barbara, Calif.  Greenwood and Walsh control an arm of the company — WG Trading Investors — in Greenwich, Conn., according to court documents. Another arm known as Westridge Capital Management Enhanced Funds is registered in the British Virgin Islands and also was named a defendant in a lawsuit filed Friday by two Pennsylvania universities.

    No attorneys have entered appearance notices for Walsh or Greenwood in a lawsuit filed in U.S. District Court for the Western District of Pennsylvania by Carnegie Mellon University and the University of Pittsburgh. The schools filed the lawsuit under emergency circumstances. They alleged that money was “converted” and that they were denied answers when they inquired about the whereabouts of their investments, which total a combined $114 million.

    A federal judge placed severe restrictions on WCM’s ability to spend money as a result of the lawsuit.

    Pitt directed a fresh $21.3 million to the company earlier this month, as an audit by the National Futures Association was getting under way. NFA suspended Greenwood and Walsh for stonewalling during the audit. Neither the company nor Greenwood and Walsh answered questions from the schools.

    From the CMU/Pitt lawsuit filed Friday.
    From the CMU/Pitt lawsuit filed Friday.

    CMU, according to the lawsuit, sent an administrator to New York, New Jersey and Connecticut to make personal contact with the WCM and affiliated companies controlled by Greenwood and Walsh. The school got no answers, and joined with Pitt — which also reported stonewalling — in filing the lawsuit.

    How much WCH and affiliates have under management is unclear. Documents suggest as many as 16 public pension funds have stakes in the company or affiliates.

    A large fund for Pennsylvania educators recently approved up to $1 billion for investment with the firms, but the Pennsylvania School Employees Retirement System did not execute the contract, the Pittsburgh Post-Gazette reports.

    Yesterday the Iowa Public Employees Retirement System (IPERS) canceled its contract with WCM and sought the return of $339 million.

    Reporters in Iowa, Pennsylvania, Connecticut and New York are working on the WCM story now. It hasn’t gained national traction yet, but that may be coming. NFA’s documentation of its bid to audit Greenwood and Walsh raises troubling questions about the whereabouts of hundreds of millions of dollars, and there have been no answers so far.

  • BREAKING NEWS: IPERS Terminates Westridge Capital Management Contract; Says $339 Million May Be At Risk

    Paul Greenwood
    Paul Greenwood

    UPDATE 5:41 P.M. EST (U.S.A.) The Iowa Public Employees’ Retirement System (IPERS) has terminated its investment-management contract with Westridge Capital Management (WCM) of Santa Barbara, Calif.

    IPERS’ move comes on the heels of a lawsuit filed Friday by two Pennsylvania universities that sued WCM amid concerns that they potentially had lost $114 million in an investment scheme.

    Iowa public retirees have $339 million potentially at risk with WCM. The organization said the Securities and Exchange Commission and the Commodity Futures Trading Commission have opened investigations.

    Documents filed in the case suggest as many as 16 universities or public-employee pension funds used WCM as investment advisers. WCM’s name is cited, for example, in publications put out by pension funds in Pennsylvania, Iowa, North Dakota and California.

    WCM also was involved in litigation in Nebraska that ultimately made its way to the Nebraska Supreme Court. At issue in the Nebraska case was the prudence and legality of putting state assets at risk in highly speculative futures and commodities.

    Litigants claimed WCM effectively had lost more than $40 million investing funds for state pensioners, but the state was made whole when the fund showed a profit and the matter largely disappeared.

    WCM, its principals and various entities associated with the firm were named Friday in a federal lawsuit filed by Carnegie Mellon University and the University of Pittsburgh in Pennsylvania.

    The National Futures Association suspended two WCM principals — Paul Greenwood and Stephen Walsh — for stonewalling during an audit earlier this month. Auditors said they found what amounts to personal IOUs from Greenwood and Walsh for loans taken from the fund and placed with an investment arm Greenwood and Walsh control in Connecticut.

    Greenwood is the town supervisor of North Salem, N.Y., a Westchester County community on the Connecticut border.

    NFA’s auditors said the “note[s] receivable” [are] actually comprised of several individual notes, executed by Greenwood and Walsh over the years, each totaling millions of dollars.

    “These notes are almost identical in their terms and indicate that the respective ‘sum is representative of the general partner’s share of losses, withdrawals and payments,” NFA said.

    Auditors also said “the financial record indicates $8.2 million of the assets [are] ’employee advances.’”

    IPERS said WCM managed about 2 percent of the its portfolio. A spokesperson told the Des Moines Register that $339 million in pension funds — its entire WCM stake — had been frozen as a result of the federal probe. IPERS stressed that WCM held only a small part of the pension fund’s assets and that retirees payments are not at stake.

    “The U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission . . .  are now investigating WG Trading,” IPERS said. “These agencies cannot release information during an active investigation. Their involvement provides IPERS added protection as the commissions have the authority to act in ways that will protect investors.”

    Here’s what IPERS said it has done:

    • Terminated Westridge Capital Management’s contract.
    • Demanded the return of all IPERS’ assets, which had an estimated market value of $339 million on Jan. 31, 2009.
    • Filed a claim with the NFA for a release from the trading ban so holdings can be liquidated and IPERS’ assets returned.
    • Began aiding the Commodity Futures Trading Commission and the Securities and Exchange Commission in their investigations.

    “The IPERS Investment Board and staff continue to follow developments and will take further action, including legal action, if necessary to protect IPERS’ assets,” IPERS said.  “The Investment Board’s policy is to vigorously seek recovery of losses through legal action should losses occur because of fraud. However, IPERS cautions investigations are still underway, and there have been no findings against the company previously under contract to IPERS.”

    See this post from Saturday, which includes a link to the CMU/Pitt lawsuit. And see this post from Sunday.

  • Read The National Futures Association Report On Paul Greenwood And Stephen Walsh; Association Asserts Hundreds Of Millions Of Dollars Unaccounted For Amid Suspensions

    We’ve previously pointed out that, in recent times, some of the actions filed against financiers and fund managers — and the findings of investigators — have read like works of fiction. On Friday, for example, Irving Picard, the trustee in the Bernard Madoff case, asserted that Madoff appears not to have purchased securities for customers in at least 13 years.

    It’s an incredible assertion that suggests Madoff was running a virtually pure Ponzi: money in, money out, with no attempt even to try to make it work in a legitimate way.

    Now comes incredible assertions by the National Futures Association against Paul Greenwood and Stephen Walsh, who’ve been suspended from NFA for stonewalling on an audit.

    On Friday, Carnegie Mellon University and the University of Pittsburgh sued Greenwood, Walsh, Westridge Capital Management (WCM) and related entities for the return of $114 million feared lost in an investment swindle.

    At least 16 public entities invested with WCM, including universities and retirement funds for educators, police officers and firefighters. It is possible than $2 billion or more is at risk.

    CMU and Pitt sued in the aftermath of the NFA audit. NFA’s documentation of its attempts to audit Greenwood and Walsh — its recounting of the stonewalling and its partial findings based on what it what it was able to uncover despite the stonewalling — is yet another example of nonfiction that reads like fiction.

    Big money is involved here, and the facts are not all known. But NFA’s document can only be described as jaw-dropping. It really makes one wonder how many other shoes will drop and how many more times the public will be asked to suspend its disbelief before these almost unbelievable financial tales come to an end.

    Read NFA’s report on Greenwood and Walsh, including the sworn declaration of an NFA compliance director, Jennifer Sunu, who supervised the audit.

    See our earlier post.

  • BREAKING NEWS: Another Major Probe Imminent Amid Extraordinary Assertion That Fund Managers Took Hundreds Of Millions Of Higher-Education Client Dollars And Left IOUs

    UPDATE 10:55 P.M. EST (Feb. 22, U.S.A.) We’ve added to the bottom of this post some information about Westridge Capital’s website, which appears to consist of a single page and is amateur by any modern standard. We’ve also associated a second domain to the company.  It, too, appears to consist of a single page — a page that appears to be just a holding page from the company’s hosting provider.

    We’ve also added some links to public employee retirement funds that list Westridge Capital Management in their financial reports.

    Here, below, our earlier post . . .

    It could be the maximum case of brains getting drained by fraudulent investment advisers.

    Two universities in Pennsylvania known for producing top thinkers in computer science and medicine fear they have lost at least $114 million in an investment swindle and have filed an emergency lawsuit to recover the money.

    Because the investment fund in question has as many as 16 participants, including university foundations and retirement and pension plans — and perhaps $1.8 billion or more under management — the losses could be enormous.

    Carnegie Mellon University and the University of Pittsburgh seek the immediate return of money they invested with Westridge Capital Management (WCM) of Santa Barbara, Calif. Also named in the complaint are company principals and various affiliates, including WG Trading Investors LP of Greenwich, Conn.

    The universites said they contacted the Securities and Exchange Commission and the Commodity Futures Trading Commission this week and requested an emergency investigation. Attorneys for the universities filed a lawsuit in U.S. District Court for the Western District of Pennsylvania.

    In an extraordinary assertion made after a panicked trip Monday by a university administrator to New York, New Jersey and Connecticut to speak with WCM executives, CMU and Pitt said the money might have been “converted” and IOUs left in its place.

    “The Defendants named herein have converted investor funds to their own use,” the universities charged.

    Lawsuit claims managers left IOUs for hundreds of millions of dollars.
    Lawsuit claims managers left IOUs for hundreds of millions of dollars.

    Two of WCM’s principals — Paul Greenwood and Stephen Walsh — were suspended by the National Futures Association (NFA) last week in a little-publicized emergency action.

    The universities, in their lawsuit, said “personal promissory notes” for “hundreds of millions of dollars” from Greenwood and Walsh made payable to WG Trading Investors were uncovered in an NFA audit last week.

    Greenwood and Walsh control WG Trading Investors, also known as WGTI.

    NFA said Greenwood and Walsh stonewalled and refused to participate in the audit in any material way.  One of the excuses Walsh used, despite the obvious importance of the audit, was that he “would be in a meeting all day” and unavailable to speak with NFA, the universities said in the lawsuit.

    Greenwood and Walsh are sole proprietor Commodity Pool Operator (CPO) Members of NFA in Greenwich, NFA said.

    “Additionally,” NFA said, “Greenwood and Walsh have failed and refused to respond to NFA’s inquiries regarding numerous promissory notes totaling hundreds of millions of dollars executed by them individually in favor of an investment vehicle to which two NFA listed commodity pools have loaned a total of over half a billion dollars.”

    Read the CMU/Pitt lawsuit against Westridge Capital Management, WG Trading Co. Limited Partnership,Westridge Capital Management Enhanced Funds Inc., WG Trading Investors LP, Paul Greenwood, Stephen Walsh, Jack Eldred Reynolds, James Carder and Deborah Duffy.

    Read about NFA’s emergency suspension of Greenwood and Walsh.

    Updates: We typed Westridge Capital Management’s street address as listed in the lawsuit into Google. Several businesses are listed at the same address — 222 E Carrillo St, Santa Barbara, Calif. 93101. The busineses list “suite” numbers. Westridge Capital’s suite number is 300.

    Westridge Capital’s URL is:

    http://westridgecap.com

    Its site basically is a blue page that lists only Westridge Capital’s name, Santa Barbara street address, phone and fax numbers, and an email address. There is no content on the landing page beyond that.

    We associated a second domain using registration data for the westridgecap.com domain. Here is the second domain:

    http://wgtrading.com

    The wgtrading.com domain resolves to a holding page that says:

    “Welcome wgi6 to Your New Virtual Private Server !

    “We would like to welcome you to your new Virtual Private Server. We are committed to bringing you the best service and finest Internet hosting solutions available. To help you get acquainted with your Virtual Private Server we have prepared “Getting Started” pages on our Web site. We encourage you to visit these pages and add them to your list of bookmarks.

    “Best wishes in using your new Virtual Private Server!”

    The wgtrading.com domain has been registered since July 12, 2000, when Bill Clinton was president. Meanwhile, the westridgecap.com domain has been registered since Oct. 22, 2003.

    Update: Here is a pdf from the Iowa Public Employees Retirement System that references WCM.

    Here is one from the Commonwealth of Pennsylvania Public School Employees Retirement System.

    Here is one from the North Dakota Retirement and Investment Office.