Chief Compliance Officer Of WG Trading Company, LP, Sentenced In Manhattan Federal Court For Several Hundred Million-Dollar Fraud Scheme
Preet Bharara, the United States Attorney for the Southern District of New York, announced that DEBORAH DUFFY, the former Chief Compliance Officer of WG Trading Company, LP (“WG Trading”), was sentenced in Manhattan federal court to time served in prison for conspiracy, securities fraud, and money laundering. DUFFY maintained the books and records for WG Trading, a fraudulent commodities trading and investment advisory scheme run by principals Stephen Walsh and Paul Greenwood, which raised billions of dollars, misappropriated hundreds of millions of those dollars for their own personal benefit, and then created false promissory notes and account statements to conceal their theft. DUFFY pled guilty on July 21, 2009, and was sentenced on January 8, 2015, by United States District Judge Naomi Reice Buchwald.
Manhattan U.S. Attorney Preet Bharara said: “Deborah Duffy abdicated her oversight responsibility at WG Trading, enabling Walsh and Greenwood to perpetuate their massive investment fraud scheme. But she not only admitted her conduct, she assisted the government’s investigation. Her sentence today reflects both her acknowledgment of her guilt and the value of her cooperation.”
According to the Information, other documents filed in Manhattan federal court, and statements made during court proceedings:
From at least 1996 through February 2009, Walsh and Greenwood solicited $7.6 billion in investor funds on the understanding that they would invest the funds in a program called “equity index arbitrage,” which they represented was a conservative trading strategy that had outperformed the results of the S&P 500 Index for more than ten years. As a result, several institutional investors – including charitable and university foundations, retirement and pension plans, and other institutions – invested billions of dollars. Contrary to their representations to investors, Walsh and Greenwood misappropriated hundreds of millions of dollars in investor funds for their own personal use and to satisfy obligations on investments that were unrelated to the “equity index arbitrage” trading business. Walsh and Greenwood executed promissory notes to, among other things, conceal trading losses and their misappropriation of investor funds. These promissory notes totaled approximately $554 million, and these notes materially misstated the financial condition of WG Trading and misled investors. Walsh and Greenwood also created and caused others to create false account statements that were sent to clients to reflect fictitious returns consistent with the returns that had been promised to those clients.
During this time period, DUFFY was the Chief Compliance Officer of WG Trading. Among other duties, she maintained the books and records of WG Trading, communicated with WG Trading’s regulators and auditors, and prepared and maintained the promissory notes signed by Walsh and Greenwood.
In addition time served, DUFFY, 59, of Mahwah, New Jersey, was sentenced to one year of supervised release and ordered to forfeit $1,272,841. The Court further ordered restitution to be paid by DUFFY in an amount to be determined.
Walsh pled guilty on April 25, 2014, and was sentenced on October 29, 2014, by United States District Judge Miriam Goldman Cedarbaum to 20 years in prison. Greenwood pled guilty on July 28, 2010, and was sentenced on December 3, 2014, by Judge Cedarbaum to 10 years in prison.
Mr. Bharara praised the work of the Federal Bureau of Investigation, and thanked the United States Securities and Exchange Commission, the United States Commodity Futures Trading Commission, and the National Futures Association, for their assistance.
Today’s announcement is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF) which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations. Since the inception of FFETF in November 2009, the Justice Department has filed more than 12,841 financial fraud cases against nearly 18,737 defendants including nearly 3,500 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Jessica A. Masella is in charge of the prosecution.