2 Money Managers Held in New Wall St. Fraud Case

[Liberal_in_LA]

2 Money Managers Held in New Wall St. Fraud Case

http://www.nytimes.com/2009/02/26/business/26scam.html?_r=1&ref=business

By ZACHERY KOUWE
Published: February 25, 2009
For two decades, Paul Greenwood and Stephen Walsh looked like Wall Street wizards.

Their supposed investment prowess lured hundreds of millions of dollars from public pension funds and universities and earned the two lavish trappings of success: stately homes, a stake in the New York Islanders and, for Mr. Greenwood, a horse farm that once belonged to Paul Newman.

But on Wednesday morning, federal agents arrested the two money managers on accusations filed by the United States attorney for the Southern District of New York in what has become all too familiar on Wall Street: Their investment fund was in fact a $667 million fraud — a small-scale version of the $50 billion fraud that Bernard L. Madoff is suspected of orchestrating.

But unlike Mr. Madoff, who is accused of masterminding a global Ponzi scheme, Mr. Greenwood and Mr. Walsh simply stole their investors’ money, the authorities said.

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It is unclear when their apparent scheme began. According to the F.B.I., things began to fall apart in December when, alarmed by the market plunge and Mr. Madoff’s exposure, investors asked for their money back.

It was too late. According to the F.B.I., Mr. Greenwood, 61, and Mr. Walsh, 64, over the years had siphoned off most of the money and used it to finance high lifestyles and cover the costs of recent divorces.

Mr. Greenwood’s extravagances included an $80,000 collection of Steiff teddy bears and Old Salem Farm, a 54-acre riding school and horse farm in the Westchester County town of North Salem that he had bought from Mr. Newman and Joanne Woodward. He has since sold Old Salem.