By David Voreacos, Patricia Hurtado and David Scheer
Feb. 26 (Bloomberg) -- Money managers Paul Greenwood and Stephen Walsh said they outperformed the Standard & Poor’s 500 Index for a decade, while prosecutors and regulators claim they misappropriated $554 million from investors for luxury homes, cars, horses and collectible teddy bears.
Greenwood, 61, and Walsh, 64, were charged yesterday with using WG Trading Investors and related companies as a “personal piggy bank” from 1996 to this year. Investors who lost money include public pension funds in Iowa and California, and the University of Pittsburgh and Carnegie Mellon University.
The men, who touted a conservative “enhanced stock indexing” strategy, had the majority of investor funds sent to themselves, according to the Justice Department and Securities and Exchange Commission. Greenwood signed promissory notes promising to repay $291 million, while Walsh promised to repay $261 million, authorities said.
The Commodities Futures Trading Commission also sued Greenwood and Walsh yesterday, saying they misappropriated $553 million of $1.3 billion in funds from commodity pool investors. They used funds from new participants to cover prior losses, while spending $160 million on personal expenses, the CFTC said in the complaint filed in federal court in Manhattan.
The expenses included rare books bought at auctions, Steiff teddy bears bought for $80,000 at auctions, and a $3 million home for Walsh’s ex-wife Janet, according to the CFTC.
Greenwood and his wife, Robin, 57, live in a North Salem home on 9.1 acres valued in 2007 at $9.5 million, property records show. Greenwood is the town supervisor in North Salem, where 5,200 people live about 50 miles northeast of New York City.