U.S. court vacates ex-NY Islanders owner's 10-year fraud sentence

NEW YORK (Reuters) - A federal appeals court on Thursday vacated the 10-year prison sentence of a former money manager who co-owned the New York Islanders hockey team and ordered that he be resentenced for what prosecutors said was a $554 million fraud.

The 2nd U.S. Circuit Court of Appeals in Manhattan said Paul Greenwood, a former executive at WG Trading Co in Greenwich, Connecticut, must be resentenced because the record did not support U.S. District Judge Miriam Goldman Cedarbaum’s finding that specific individuals were harmed by his fraud.

Greenwood, 68, had cooperated with prosecutors after he and business partner Stephen Walsh were accused of bilking investors from 1996 to 2009.

Authorities said the men issued $554 million of promissory notes to cover up misappropriations that helped fund lavish lifestyles, including a horse farm and collection of stuffed teddy bears for Greenwood.

Walsh, 71, is serving a 20-year prison term.

“We are very gratified with the decision, and are hoping for a better result on the resentencing,” Greenwood’s lawyer, Fred Hafetz, told Reuters in a phone interview.

In sentencing Greenwood in December 2014, Cedarbaum said “a number of people” had lost money because of Greenwood’s fraud, and the losses were “very devastating” for many of them.

But the appeals court said that while Greenwood’s investors included pension and retirement plans, “nothing in the record expressly supports the conclusion that the actual losses that remained outstanding at the time of Greenwood’s sentence had devastated any specific victim.”

The 2nd Circuit also said that Cedarbaum may reimpose the 10-year term, but not on the basis of factual errors.

Greenwood and Walsh were part of a group that controlled the Islanders in the 1990s.

Greenwood is housed in the same Butner, North Carolina, medium-security prison as swindler Bernard Madoff, and is eligible for release in November 2023.

The case is U.S. v. Greenwood, 2nd U.S. Circuit Court of Appeals, No. 14-4654.

Reporting by Jonathan Stempel; Additional reporting by Nate Raymond; Editing by Dan Grebler