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January 10, 2013

Pitt to recover more lost endowment funds

A federal judge has approved the release of $40 million to investors, including Pitt, who were defrauded by investment company operators Stephen Walsh and Paul Greenwood.

The money will be distributed pro rata to investors in WG Trading Co. and WG Trading Investors, which were among the entities operated by Greenwood and Walsh.

Combined with an earlier distribution, that means Pitt will have recovered about 89 percent of the $52.32 million lost in the scheme, according to John Fedele, Pitt’s senior associate director of News.

In 2009 the assets of Greenwood, Walsh and their entities were frozen following fraud complaints by the Commodity Futures Trading Commission and the Securities and Exchange Commission. Greenwood pleaded guilty to securities fraud and related charges in July 2010 and is awaiting sentencing; Walsh has pleaded not guilty.

According to court papers filed by the receiver, between 1996 and 2009, WGTC and WGTI had net earnings of $331 million, but paid or promised to pay earnings of $982 million to investors, creating a shortfall of about $651 million. When the scheme collapsed in 2009, investors lost millions of dollars.

Fedele told the University Times that unless certain investors are successful in challenging the Jan. 31 distribution ordered by U.S. District Judge George B. Daniels, Pitt expects to receive approximately $2.18 million.

Investors shared $792.5 million in the receiver’s initial distribution, made in April 2011, which returned nearly 85 percent of investors’ net principal investments. California-based receiver Robb Evans & Associates estimated that the Jan. 31 distribution will return an additional 4.17 percent of investors’ approved claims, based on total claims of $959.55 million.

Fedele said: “Following this distribution, the University’s outstanding net investment claim will be reduced to approximately $5.7 million. We do anticipate future distributions from the receiver but the actual amount and anticipated timing is unknown.”

—Kimberly K. Barlow

Filed under: Feature,Volume 45 Issue 9

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