Hedge Fund Manager Heads to Prison Without Teddy BearsPatricia Hurtado
Hedge fund manager and teddy bear collector Paul Greenwood was sentenced to 10 years in prison after pleading guilty to swindling investors out of $554 million, some of which he used to buy the stuffed toys.
Greenwood, 67, the general partner of WG Trading Co., pleaded guilty in 2010, telling a federal judge that he and his former partner, Steven Walsh, had “sort of” conducted a Ponzi scheme over 13 years.
He also admitted spending at least $75 million of investor money in the commodities-trading and advisory firm to pursue his fascination with museum-grade teddy bears and other soft toys.
After his plea, Christie’s International held a 2010 auction of more than 1,000 stuffed animals from Greenwood’s collection which generated more than 1.1 million pounds ($1.72 million) in sales, including a rare 1904 Steiff “white rod” teddy bear with a gutta percha nose that sold for $21,000, according to the auction house’s website.
“I’d like to apologize to the court for my serious criminal conduct,” Greenwood told U.S. District Judge Miriam Goldman Cedarbaum in Manhattan today before she imposed the sentence. “I’ve lied, I’ve cheated, I’ve stolen,” he said. “Words cannot express my sorrow and remorse for what I’ve done.”
Cedarbaum ordered Greenwood to forfeit at least $83.5 million and said he can surrender to federal prison by Feb. 9.
“I hope Mr. Greenwood that you really do feel the remorse,” Cedarbaum said. The judge told Greenwood she hoped he would spend time ruminating on his crimes and the harm they caused his victims, adding “I hope that you will come out of prison recognizing that you do not want to live this life again.”
Cedarbaum said she thought Greenwood was motivated to commit the fraud by greed.
“You really did want to have a lot of money,” she said. “There’s no other reason for cheating people out of their money.”
Greenwood and Walsh were also former minority owners of the New York Islanders professional hockey team in the 1990s. Ownership of the team was an example of investments the two made which weren’t consistent with their arbitrage strategy pitched to investors, prosecutors said.
Greenwood, who agreed to cooperate with the U.S., was set to testify against Walsh, according to Assistant U.S. Attorneys Jessica Masella and Benjamin Naftalis.
Prosecutors said in a letter to Cedarbaum that Greenwood provided substantial assistance and helped a court-appointed receiver find about $900 million of investor claims.
“Individuals like Greenwood, who come in to proffer with the government, admit their criminal activities without promise or guarantee that it will ever impact their sentence and plead guilty to criminal conduct, are a crucial part of the government’s law enforcement efforts,” Masella and Naftalis wrote.
Walsh last month lost a bid to withdraw his guilty plea after Cedarbaum said she intended to sentence him to the maximum 20-year prison term.
“We are going to discuss appealing the sentence,” Greenwood’s lawyer, Fred Hafetz, said. “I think the probability is that we will appeal.”
Hafetz sought a prison term of no more than five years for Greenwood, citing his client’s volunteer work as a tutor, his assistance to the receiver and his acceptance of responsibility and guilty plea.
Greenwood had pleaded guilty to six charges, including conspiracy and securities fraud, which carries a term of as long as 20 years in prison.
When he pleaded guilty, Cedarbaum quizzed Greenwood about the scheme in a series of questions:
“You treated these investments as your own personal bank accounts?” she asked.
“Correct,” said Greenwood.
“So this was a Ponzi scheme?” Cedarbaum asked.
“Sort of,” said Greenwood, who told the judge that he took out “in excess of $75 million,” spending the money on “a house, a horse farm and antiques.”
In 1984, Greenwood bought Old Salem Farm, a 54-acre riding school and horse farm, from actor Paul Newman and his wife, Joanne Woodward. Greenwood later sold the farm.
As part of his plea agreement Greenwood also agreed to forfeit at least $331 million to the government, representing the money he and Walsh allegedly obtained as a result of their securities and wire fraud.
The U.S. Securities and Exchange Commission also sued the men, and described WG Trading Investors as an unregistered investment vehicle.
The case is U.S. v. Greenwood, 09-cr-722, U.S. District Court, Southern District of New York (Manhattan).
(An earlier version of this story corrected the name of the man sentenced.)