Ex-NY Islanders co-owner gets 10 years prison for securities fraud

Reuters News
Posted: Dec 03, 2014 3:31 PM

By Nate Raymond

NEW YORK (Reuters) - A former money manager who once co-owned the New York Islanders hockey team was sentenced on Wednesday to 10 years in prison for participating in a fraud valued at roughly $554 million that lasted more than a decade.

Paul Greenwood, a former executive at WG Trading Co in Greenwich, Connecticut, had sought less than five years in prison during his sentencing in New York federal court, citing his cooperation with authorities.

But U.S. District Judge Miriam Goldman Cedarbaum instead imposed the lengthier term, citing "devastating" losses to investors. She ordered him to forfeit $83.5 million and said she would later impose restitution.

"You really did want a lot of money," she said. "There's no other reason to engage in the fraud that you engaged in which you cheated people out of a lot of money."

The proceedings followed the earlier sentencing last month of Stephen Walsh, Greenwood's partner and WG's chief executive, to 20 years in prison.

Frederick Hafetz, Greenwood's lawyer, said his client would likely appeal.

Prosecutors accused Walsh and Greenwood, its chief operating and chief financial officer, of from 1996 to 2009 bilking university foundations, charities and other investors through WG Trading.

Authorities said Walsh and Greenwood misappropriated $131 million in investor funds. To hide the misappropriation and WG's lack of profitability, Walsh and Greenwood issued $554 million in promissory notes to investors, prosecutors said.

The men used investor funds to help Walsh's children run businesses, cover payments to Walsh's ex-wife, and enable Greenwood to operate a horse farm and buy a stuffed teddy bear collection, prosecutors said.

"I've lied, I've cheated and I've stolen," Greenwood said in court Wednesday. "Words can't express my sorrow and remorse for what I have done."

Investors also were not told when Walsh and Greenwood used $2.6 million of their money to buy a stake in the New York Islanders National Hockey League team in 1992, prosecutors said last month.

The team, though, became a favorable investment and was sold in 1996, prosecutors said.

Greenwood, who lives in North Carolina, pleaded guilty in 2010 to charges including securities fraud and conspiracy and began cooperating with prosecutors and WG's court-appointed receiver.

The receiver has to date recovered about $900 million, close to 90 percent of investor claims, prosecutors said in court filings.

The case is U.S. v. Greenwood et al, U.S. District Court, Southern District of New York, No. 09-cr-00722.

(Reporting by Nate Raymond in New York; Editing by Chris Reese)