The AP writes that yet two more fraudulent investment schemes have been discovered and resulted in charges in response to publicity of the Bernard Madoff Ponzi scheme.New Jersey fund manager James Nicholson, 42, has been accused of defrauding investors of nearly $900 million over the past four years, and Paul Greenwood, 61, and Stephen Walsh, 64, of Sands Point have been charged with conspiracy, securities fraud and wire fraud.
A federal investigation into Nicholson’s activities ensued after clients became concerned and tried to recoup their investments from his Westgate Capital fund due to reports outlining the $50 billion fraud in the Madoff case.
Nicholson is accused of claiming the holdings of his funds totaled $600 to $900 million when they were actually materially much less, convincing investors to hand over their hard-earned dollars.He also advertised that the funds were audited by a third-party firm in New York which was actually a virtual office space that he leased himself.
When two dozen investors requested refunds on their investments, they received nearly $5 million total in checks which were returned for insufficient funds.Others have unsuccessfully sought returns of more than $10 million from Nicholson.
Nicholson faces federal charges of one count of securities fraud and once count of bank fraud.If convicted, he faces up to 20 years and $5 million or more in fines for the securities charge, and up to 30 years in prison and $1 million or more in fines for the bank fraud charge.It is estimated that more than 350 victims are involved in Nicholson’s alleged scheme, and the court has been asked to hold him without bail.
In the second case, Greenwood and Walsh ran WG Trading Company LP and Westridge Capital management Inc. of Connecticut and California, respectively.Investors with the pair were informed their funds would be placed using a conservative strategy called “enhanced stock indexing”, aiming to outperform the S&P 500.These clients consisted mostly of charitable and university foundations, and retirement and pension plans.
After an audit by the National Futures Association was not complied with, Greenwood and Walsh’s membership with the regulatory group was suspended.Investigations revealed that of the $812 million in assets held by Westridge, a total of $794 million were promissory notes claiming the two owned their own fund money.
The federal case against them outlines charges that $1.3 million had been illegally transferred to accounts held by Greenwood and Walsh’s wife.In addition, an unidentified employee of Westridge claims that this money was used to fund expensive collectibles, horses and apartment purchases.
Two investors with Westridge, the University of Pittsburgh and Carnegie Mellon University, have sued the defendants seeking to recoup the $114 million they invested in the funds.
Bail for each of the defendants has been set at $7 million, requiring $1 million to be posted that is not related to the alleged fraud and investment money from clients.The Securities and Exchange Commission has commented that the Westridge case ranks among the largest investment frauds to date.
About the Author
Jamie Simpson is a legal researcher and journalist based in Indianapolis, Indiana with more than ten years of legal writing experience.She earned her B.S. in Animal Science from Purdue University, and more recently a Master of Public Affairs-Certificate in Public Management from Indiana University.As a prospective law student and current author, Jamie regularly reports on recent court rulings and legal challenges of public interest through various publications online.
