A former hedge-fund manager has pleaded guilty to criminal charges in an investment scam in which he bilked as much as $900-million from investors, including four university endowments.
In his plea, Paul R. Greenwood said on Wednesday that he and his partner, Steven Walsh, had spent money from the investment accounts on themselves and their family members. According to investigators, the two spent at least $160-million on mansions, horses, rare books, and an $80,000 collectible teddy bear. Mr. Walsh has pleaded not guilty, and Mr. Greenwood will testify against him at trial.
The two promised low risks and high returns to investors in what was essentially a Ponzi scheme. Their 16 institutional investors included the University of Pittsburgh ($65-million invested), Carnegie Mellon University ($49-million), Bowling Green State University ($15-million), and Ohio Northern University ($10-million).
The universities realized something was wrong last year, when they discovered that much of their assets had been signed out as promissory notes attributed to Mr. Walsh and Mr. Greenwood. Carnegie Mellon's treasurer traveled to the firm's offices in New Jersey and Connecticut in an unsuccessful quest to find out what had happened to the university's investment.
After the two money managers were arrested, an investment adviser who works with university endowments said that background checks should have spotted problems with the fund, and that he had advised colleges to pull out of it.
A court-appointed receiver is pursuing the pair's assets in an attempt to recoup some of the losses for investors. Mr. Greenwood's assets will be auctioned off, including, presumably, his collection of rare stuffed animals. He faces a prison sentence of as long as 85 years and hundreds of millions of dollars in fines at his December sentencing, according to news reports.