Iowa recovers more than $215 million in IPERS investment fraud case

Iowa Attorney General Tom Miller announced Thursday that a court-appointed receiver has transferred more than $215.2 million to the state treasury as a partial recovery in the Westridge Capital Management fraud case.

The recovered $215 million represents about 85 percent of the principal investment the Iowa Public Employees Retirement System (IPERS) made investments in Westridge in 2007 and 2008, according to a statement issued by Miller's office.

“This is a significant portion of IPERS' investment,” said Miller, who assigned Deputy Attorney General Jeffrey Thompson to represent IPERS in the claims process. “Considering the scope of this alleged investment scheme, it's good news that we were successful in recovering this amount.”

Miller noted that state attorneys continues to attempt to recover additional funds.

In 2009, the two principals of WG Trading Co. and Westridge Capital Management were indicted in federal court and charged with misappropriating institutional investor capital. One has pleaded guilty and awaits sentencing, while the other awaits trial.

Paul Greenwood and Stephen Walsh, former partners in WG Trading, were indicted after federal regulators took emergency action to halt their trading operations and froze the assets of their investment entities. The two were accused in what was described as "a brazen investment fraud" that misappropriated up to $554 million from 1996 until their arrests in February 2009.

U.S. District Judge George Daniels of the Southern District of New York previously ordered a court-appointed receiver, Robb Evans & Associates, of Sun Valley, California, to collect and distribute $815 million of the recovered assets to dozens of institutional investors, including those made by IPERS officials. IPERS terminated its investment contract with Westridge, of Santa Barbara, Calif. in February 2009.

Last December, Jeffrey Thompson, a deputy Iowa attorney general, said a federal-court-appointed receiver has determined that at least $800 million to $850 million once controlled by WG Trading Co. and Westridge Capital Management is available for redistribution among about 40 affected investors -- including $254.3 million invested by IPERS.

According to the U.S. Securities and Exchange Commission, Greenwood and Walsh promised investors that their money would be invested in a stock index arbitrage strategy, but instead they "essentially treated their clients' investments as their personal piggy bank to purchase multimillion dollar homes, a horse farm and horses, luxury cars, and rare collectibles such as Steiff teddy bears."

Thompson previously said IPERS had invested nearly $500 million with WG Trading and Westridge. Market losses in the 2008 slump had reduced the value of the investment to $291.2 million by the time of the asset freeze.

IPERS has more than 300,000 members and overall assets totaling $18 billion in fiscal 2009. Westridge and WG Trading had managed about 2 percent of IPERS' investment portfolio since 2007.