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Who Sucks Today? Guys who steal $533 million from charities

October 25, 2009

Two ex-Islanders bosses nabbed for stealing $533 million – to buy horses and teddy bears
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BY THOMAS ZAMBITO
DAILY NEWS STAFF WRITER

Updated Thursday, February 26th 2009, 10:02 AM

Hermann for News
Paul Greenwood (l.) and Stephen Walsh are escorted by FBI agents into a Manhattan courthouse.

Pitarakis/AP/AP

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Two rare Steiff teddy bears

Giancarli for News
Horse farm belonging to Paul Greenwood.

Two members of the Islanders’ “Gang of Four” ownership group stole $553 million from charities and pension plans to buy horses, mohair teddy bears and a $3 million home, the feds say.

Paul Greenwood, 61, and Stephen Walsh, 64, were arrested on securities and wire fraud charges on Wednesday and hauled into Manhattan Federal Court wearing cashmere V-neck sweaters.

The FBI says they promised investors, including the University of Pittsburgh and Pittsburgh’s Carnegie Mellon University, huge returns with bogus claims of a trading strategy that outperformed the S&P 500 Index for a decade.

“Trading is all we do, and our success has been due to the fact that we trade very well,” they promised one investor.

The feds say Greenwood and Walsh produced results as bleak as their four-year run – which began in 1992 – at the helm of the once-great Long Island hockey club.

The feds say the swindle dates to 1996, but was uncovered by the National Futures Association this month. The association found $812 million on the books of the duo’s Greenwich, Conn., WG Investors, with $794 million due from Greenwood and Walsh.

Prosecutors say the group took in $1.3 billion from institutional investors across the country, including employee pension plans in California, Nebraska and North Dakota. What wasn’t spent on goodies went to cover up losses.

The futures association suspended both men last week after they ducked phone calls and refused to cooperate with an audit.

The move prevented them from placing trades or soliciting investors. The Pittsburgh universities sued to recover some $114 million they say they lost.

Greenwood is a longtime horseman who raises ponies on a 300-acre farm in North Salem, Westchester County, which he bought from Paul Newman and Joanne Woodward for $2.1 million in 1984. He also is a town supervisor.

Outside the gates of the plantation-style estate on Wheeler Road, two large stone pigs stand sentry.

Walsh lives in an opulent multilevel mansion in Sands Point, L.I., with stunning views of the Long Island Sound from his back deck.

Greenwood and Walsh both refused to comment after being released on $7 million bond each. Each faces 45 years in prison if convicted. They join a growing list of greedy financiers the feds say used other people’s hard-earned money to bankroll a lifestyle of excess.

Also arrested Wednesday was James Nicholson, 42, of Saddle River, N.J., who prosecutors say duped investors out of $900 million since 2004. Nicholson’s scheme was uncovered after several investors tried to recoup their money following reports of Bernie Madoff’s $50 billion Ponzi scheme.

In a suit filed Wednesday, federal officials say Greenwood and Walsh spent $168 million of their ill-gotten gains on rare books bought at auction, horses and a $3 million home for Walsh’s ex-wife Janet. They spent as much as $80,000 on mohair Steiff teddy bears, which are German-made.

“So many of these guys pop up,” said Jean Lebris, 54, who owns Vox restaurant in North Salem. “Something strange is happening lately. It’s frustrating because I work hard and don’t make money and these guys make millions with fraud.”

tzambito@nydailynews.com

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