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(Corrects first sentence to reflect when Walsh was charged, not when he was indicted, and paragraph nine to say that only Greenwood had pleaded guilty previously.)
By Nate Raymond
NEW YORK, April 25 (Reuters) - More than five years after being charged, a U.S. money manager and one-time part owner of the New York Islanders hockey team pleaded guilty Friday to engaging in a massive securities fraud.
Stephen Walsh, the former chief executive of WG Trading Co in Greenwich, Connecticut, pleaded guilty in Manhattan federal court to one count of securities fraud.
As part of a plea agreement, Walsh, 69, agreed to forfeit more than $50.7 million, the amount prosecutors say he misappropriated and profited from the fraud.
Prosecutors said that from 1996 to 2009, Walsh and Paul Greenwood, who was WG Trading Co's chief operating and chief financial officer, solicited investments in what they marketed as a conservative trading program called "enhanced stock indexing."
The government said university foundations, retirement plans, pension funds and others invested more than $7.6 billion, becoming either limited partners in WG Trading or receiving promissory notes.
Prosecutors had accused the men of misappropriating $131 million in investor funds. Walsh used some of that money to make payments to his ex-wife, the indictment said.
To hide the misappropriation and the fact that WG Trading was not profitable, prosecutors said Walsh and Greenwood, 67, issued $554 million in promissory notes to investors.
"Stephen Walsh and his partner Paul Greenwood ran an investment operation that was a veritable money-making machine - for them," the U.S. Attorney for Manhattan, Preet Bharara, said in a statement.
Walsh, of Sands Point, New York, had been scheduled to go to trial in July, about four years after Greenwood pleaded guilty to charges including securities and commodities fraud and agreed to cooperate with prosecutors.
At Friday's hearing, Walsh admitted to issuing promissory notes that "fraudulently stated I owed and would pay tens of millions of dollars." He said he operated the scheme primarily out of his office on Long Island.
Prosecutors in 2009 also secured a guilty plea from Deborah Duffy, 58, WG Trading's former chief compliance officer, who admitted to illegally transferring more than $100 million to Greenwood and Walsh.
Both Walsh and Greenwood are former part owners of the New York Islanders National Hockey League team.
WG Trading Co and a related entity, WG Trading Investors, have been under the control of a court-appointed receiver after the U.S. Securities and Exchange Commission and U.S. Commodity Futures Trading Commission sought an asset freeze in 2009.
The receiver, Robb Evans, has to date distributed about $854.3 million to investors, Brick Kane, a deputy to the receiver, said Friday. Total allowed claims by investors are $958.8 million, according to court filings.
Lawyers for Walsh declined comment after the hearing. He faces a maximum of 20 years in prison when he is sentenced on July 29.
The case is U.S. v. Greenwood, U.S. District Court, Southern District of New York, No. 09-cr-722. (Reporting by Nate Raymond in New York; Editing by Noeleen Walder, Jan Paschal and Meredith Mazzilli)