Feds Allege Three New Investment Frauds



Two men at Greenwich, Conn.-based WG Trading were charged in a $550 million fraud that allegedly went back to 1996. Paul Greenwood and Stephen Walsh are accused to bilking institutions like university foundations and charities, including a $21 million investment made Feb. 6 by the University of Pittsburgh.

Pitt and Carnegie Mellon sued the two individuals earlier this month, saying they had $114 million in investment losses. Greenwood and Walsh are accused of misappropriating customer funds, Greenwood for horses, rare books and other collectibles, and Walsh for making large cash payments to an ex-wife.

A third person, Mark Bloom, who was once connected with Greenwood and Walsh, was also arrested Wednesday and charged with running his own scheme since July 2001. He is accused of using millions of dollars of customer money for personal items, like a Manhattan apartment.

Meanwhile, James Nicholson, founder of Pearl River, N.Y.-based Westgate Capital, was arrested at his New Jersey home Wednesday and charged with one count of securities fraud and one count of bank fraud. He allegedly took in more than $100 million of customer money over the last four years but misrepresented the size of his firm and the performance of his funds over those years.

He even allegedly set up a fake "virtual" office for the accountant that purportedly audited the funds.

Investors, spooked by the mid-December arrest of Bernard Madoff and his alleged confession to orchestrating the multibillion-dollar Ponzi scheme, figured out all was not right with Westgate when they went to redeem their investments. The checks from Nicholson all bounced.

One connection between Westgate's Nicholson and Madoff: They share the same attorney, Ira Lee Sorkin, who wasn't immediately available Wednesday.

And if they haven't beaten the investing public over the head with it enough in the last few weeks, the Securities and Exchange Commission wants to warn people to steer clear of investments that are too good to be true. The Nicholson case "should be a warning to anyone trying to hide a fraudulent scheme dressed up as a hedge fund," said Cheryl Scarboro, the agency's associate director of enforcement. "Investors should always be wary when they are offered deals that pay significantly better than the prevailing rates of return."
