Two charged with securities fraud, looting funds to buy horses

NEW YORK -- The owners of a company that managed hundreds of millions of dollars for universities and charities were arrested Wednesday on charges of looting their investment funds for over a decade to buy horses, collectibles and other personal items.

Paul Greenwood, 61, and Stephen Walsh, 64, appeared in U.S. District Court in Manhattan on charges of conspiracy, securities fraud and wire fraud. Greenwood is also a horse breeder and elected official in suburban New York.

Bail was set at $7 million each, and they were ordered to post $1 million in cash or property that was not derived from the alleged fraud. Richard D. Weinberg, a lawyer for Walsh, and Robert J. Jossen, a lawyer for Greenwood, declined to comment.

The charges were disclosed on the same day authorities announced an arrest in an unrelated investigation of James Nicholson, president and general partner of Westgate Capital, a New York City investment fund.

Authorities said Nicholson, 42, defrauded investors who had put at least $100 million into his funds since 2004. They said the fraud came to light after several investors sought to redeem their money after hearing about a more than $50 billion fraud blamed on former Nasdaq chairman Bernard Madoff.

The charges were just the latest in a series of high-profile securities fraud scandals to rock Wall Street.

Madoff is under house arrest after authorities said he confessed to his sons in early December that he ran a $50 billion pyramid scheme.

Other cases include that of Florida hedge fund Arthur Nadel, accused of bilking investors of up to $350 million, and Mark Dreier, a prominent lawyer charged with stealing $400 million in a hedge fund scam. Dreier has pleaded not guilty.

Greenwood and Walsh were identified in court papers as the owners of Greenwich, Conn.-based WG Trading Company and of Westridge Capital Management, based in Santa Barbara, California. Their operation also had offices in Manhattan and Jersey City, N.J.

The firms' clients included "charitable and university foundations, retirement and pension plans and other institutions," according to the criminal complaint.