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Tag: Lev. L. Dassin

  • BREAKING NEWS: Arrests Made In Westridge Capital Management Case; FBI Alleges Massive Fraud

    Paul Greenwood
    Paul Greenwood

    UPDATED 7:18 P.M. EST (U.S.A.) The FBI has made arrests in the Westridge Capital Management case.

    Paul Greenwood and Stephen Walsh, principals in WCM and an arm known as WG Trading of Greenwich, Conn., both were arrested. WCM is headquartered in Santa Barbara, Calif.

    Greenwood and Walsh were arraigned this afternoon in New York. Bail was set at $7 million each.  They were freed pending a March 11 hearing before which they’ll need to demonstrate that they have at least $1 million in cash or property not connected to fraud.

    Authorities said they ran a huge financial scheme, converting tens of millions of client dollars to their own use.

    Included in the purchases were $80,000 Steiff Teddy bears at various auctions, including auctions at Sotheby’s, authorities said. A $3 million home also was purchased for Walsh’s ex-wife.

    Greenwood is the town supervisor of North Salem, N.Y., on the Connecticut border. He did not attend the community’s regular council meeting last night and has ducked media and financial investigators for days.

    Greenwood and Walsh were accused of securities fraud, wire fraud and conspiracy. They were sued last week by Carnegie Mellon University and the University of Pittsburgh amid fears that $114 million had been lost as a result of massive fraud.

    The Iowa Public Employees Retirement System (IPERS) severed its contract with WCM earlier this week, on the heels of the action by CMU and Pitt and in the wake of the suspension of Greenwood and Walsh from the National Futures Association for stonewalling during an audit.

    IPERS entrusted $339 million to WCM.

    Below are snippets from the federal criminal complaint, which accuses Greenwood and Walsh of using clients’ money to make personal purchases and transferring clients’ money to family members. Walsh, according to the complaint, made at least two transfers of $500,000 each to a bank account in the name of his wife.

    “From time to time, PAUL GREENWOOD and STEPHEN WALSH, the defendants, directed [an] Employee to wire funds from the Account to their own bank accounts, bank accounts in the name of their family members, and bank accounts of other persons and entities to pay for personal expenditures of GREENWOOD and WALSH that were unrelated to the business of WG Investors.

    “The Employee recalled effecting transfers to pay for, among other things, the following: (a) the purchase of expensive collectible items by GREENWOOD; (b) the purchase of horses by GREENWOOD; (c) transfers of cash to WALSH’s then-wife; and (d) transfers of cash for the purchase of an apartment for WALSH’s ex-wife pursuant to a divorce settlement,” said FBI agent James C. Barnacle Jr., in the complaint.

    Greenwood converted a farm once owned by the late actor Paul Newman into a horse-show center and was credited by North Salem residents as a responsible public steward.

    In secret, according to the FBI, Greenwood and Walsh were running a criminal financial enterprise.

    “At the beginning of each calendar year,” Barnacle said, “the Employee added up the transfers that GREENWOOD and WALSH had directed for their personal benefit and prepared a promissory note for GREENWOOD and WALSH to sign that included the amounts of money that GREENWOOD and WALSH had taken from the Account.

    “From time to time,” Barnacle said, “GREENWOOD directed the Employee to understate the losses reported to investors and include a portion of the losses in the promissory notes executed by GREENWOOD and WALSH. Thus, the GREENWOOD Notes and the WALSH Notes include amounts reflecting funds misappropriated for the personal benefit of GREENWOOD and WALSH and losses fraudulently hidden from investors.”

    Hundreds of millions of dollars cannot be accounted for.

    Invesigators called it a $1.3 billion scam. In a separate action, the Commodity Futures Trading Commission charged Greenwood, Walsh and others with fraud.

    “[The] Defendants treated investor money — some of which came from a public pension fund — as their own piggy bank to lavish themselves with expensive gifts,” said Stephen J. Obie, CFTC’s acting director of enforcement.

    Read the statement by the FBI and Acting U.S. Attorney Lev Dassin of the Southern District of New York.

    See this Bedford Magazine article in which Greenwood declares he has the largest collection of Steiff stuffed animals in the world.

    “Noah had nothing on us,” Greenwood told the publication. He claimed to own 1,350 Steiffs.

  • Prosecutors Turn Up The Heat On Madoff

    Ponzi schemes almost always have insiders, and sometimes the insiders may not even know they’re insiders.

    In an extraordinary revelation, federal prosecutors said this afternoon that Bernard Madoff took overt steps to distribute bonuses to preferred family,  friends and employees after he realized the Ponzi he created was crashing down around him

    “[When] the defendant’s office desk was searched, investigators found approximately 100 signed checks totaling more than approximately $173 million, ready to be sent out,” said prosecutors Marc Litt and Lisa A. Baroni.

    The assertions were made in a letter to Judge Ronald L. Ellis.

    “The only thing that prevented the defendant from executing his plan to dissipate these assets was his arrest by the FBI on December 11,” Litt and Baroni said. The letter was signed by Litt, under the authority of  Acting U.S. Attorney Lev. L. Dassin of the Southern District of New York.

    Today’s letter by prosecutors marked the first public disclosure that Madoff already had drafted and signed checks, a situation that could have led to an even greater calamity had the checks been mailed and cashed.

    Prosecutors earlier had said only that Madoff had discussed distributing up to $300 million to preferred individuals.

    Here is the  letter from prosecutors.

    Had the preferred parties received and deposited the checks, Madoff’s assets would have been depleted by $173 million, putting family members, friends and employees in the position of getting sued to disgorge illegal profits.

    Prosecutors said earlier this week that Madoff and his wife, Ruth, sent more than $1 million in jewelry and other items to friends and family after his arrest. The government viewed it as a bail violation, saying Madoff should be jailed.

    Madoff’s attorney, Ira Sorkin, explained Madoff’s behavior as an innocent mistake.

    Today’s filing by prosecutors makes it clear that the government believes home-detention with electronic monitoring weren’t enough to keep Madoff in line while awaiting trial. The gloves are off, and prosecutors now are playing hardball.

    “The nature and circumstances of the offense charged are unprecedented,” prosecutors told the judge. “The defendant has admitted to perpetrating one of the largest, if not the largest, Ponzi schemes in history — a scheme that required the defendant to lie routinely to thousands of people and a scheme which has caused extraordinary damage to individuals, families and institutions all over the world.”