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April 2, 2009

University to review process for selecting investment managers

Pitt has initiated a review of its process for choosing investment managers as a pair of fund operators accused of misappropriating investors’ dollars await trial on fraud and conspiracy charges.

Some $65 million in University endowment money may have been lost in the apparent fraud, according to figures cited in a Feb. 20 complaint filed in federal court by Pitt and Carnegie Mellon University, which had invested $49 million with firms operated by Paul Greenwood and Stephen Walsh (See March 5 University Times).

The FBI arrested the two last month on federal charges of conspiracy, securities fraud and wire fraud. In addition to the criminal charges, Greenwood, Walsh and their related business entities also face civil actions filed in federal court in New York by the Securities and Exchange Commission and the Commodity Futures Trading Commission. The two men responded by exercising their Fifth Amendment right against self-incrimination.

In a March 23 University Update, Chancellor Mark A. Nordenberg announced that the review will begin with an examination of the University’s dealings with Greenwood and Walsh and will extend to Pitt’s investment manager selection and due diligence practices.

Nordenberg defended Pitt’s existing practices, stating, “…from what we now know, we believe that our selection and due diligence processes have been thorough and would fare favorably if measured against either the processes employed by our peers or a best-practices standard. Further, it may be impossible, as often is said, to construct any system that provides complete protection against criminal behavior, including cleverly conceived fraud — and, though not yet proven, acts of fraud have been charged here. However, one of our key goals is to determine whether there are any ways that we might improve our processes to ensure that we have achieved the highest practicable levels of asset protection.”

Without citing dollar figures, the chancellor offered a brief overview of the apparent investment fraud in which the University may have lost the investments it entrusted to Greenwood and Walsh’s Westridge Capital Management.

The full text of Nordenberg’s update can be found online at

In a March 26 email response to University Times questions, Vice Chancellor for Public Affairs Robert Hill referred to the chancellor’s update. He stated, “We are unable to forward answers to these questions. When the chancellor communicated directly with the University community earlier this week, he indicated that he would share as much information as he could.  He also made clear that, because of our own incomplete knowledge and because lawsuits are pending, there are limits to what he can responsibly say.”

The Pitt/CMU legal action has been put on hold while the actions in the New York federal court proceed.

—Kimberly K. Barlow

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