(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 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
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
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
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)