How did the University of Pittsburgh end up making a $65 million investment that blew up in its face?

The consultant whose firm introduced Pitt to the fund manager accused of misappropriating more than $500 million of investors' money said Wilshire Associates properly vetted Westridge Capital Management and found no reason to steer clear.

"I do know that Wilshire did due diligence with Westridge and met with them at their facilities," said David T. Jack.

Mr. Jack, 60, was managing director at Wilshire's Pittsburgh office from 1996 to 2006 and the former lead consultant for Pitt's stock and bond portfolio. He earned an M.B.A. at Pitt in 1972.

"There weren't any red flags or [Westridge] wouldn't have been someone either Wilshire or Pitt would have been involved with."

Last month, Pitt and Carnegie Mellon University sued Westridge and its principals, Paul Greenwood and Stephen Walsh, in federal court in an attempt to get back $114 million.

Pitt has invested $65 million with Westridge since November 2002. Carnegie Mellon, which got involved with Westridge in April, valued its investment at $49 million.

The universities' case is on hold while criminal and civil actions play out in New York.

The FBI arrested the partners last week. And federal regulators have filed their own suits claiming that the pair used $553 million of investors' money to cover up trading losses and spend lavishly on themselves.

The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission claim Mr. Greenwood, 62, of North Salem, N.Y., and Mr. Walsh, 64, of Sands Point, N.Y., spent $160 million on extravagances, including horses, cars, rare books and collectible teddy bears.

While Westridge and an affiliated group, WG Trading Co., were federally regulated, two other entities controlled by Mr. Greenwood and Mr. Walsh were not.

Authorities claim that investors' money was funneled to the unregulated entities -- one is described as an "unregistered investment vehicle" and the other is an offshore fund with an address in the British Virgin Islands -- and then siphoned off by the partners.

Wilshire, a global investment advisory firm started in 1972, advises both Pitt and Carnegie Mellon. A spokeswoman said the firm does not discuss money managers or clients without their permission.

Mr. Jack said he could not recall how Westridge first came to Wilshire's attention but said staff would have researched the corporation extensively.

"What Wilshire said was they had an effective investment strategy that had a record of success and made sense. It wasn't just good numbers. There was some reason for believing it should have worked. They did have a long record," Mr. Jack said. "What happened here is not the failure of an investment strategy. It's someone stealing your money."

Although many consider some of Westridge's products to be hedge funds, Mr. Jack and others said the strategy marketed to Pitt was not exotic or high-risk.

Mr. Jack said no one involved in the deal pushed Pitt toward Westridge or exerted any improper influence.

"I'm absolutely certain there was no pressure, there was no influence from the board, the staff at Pitt, anybody at Wilshire," Mr. Jack said. "Westridge was simply a vendor, one of many that would have been presented for a similar role."

Mr. Jack and other experts said institutional investors such as Pitt face a potential pitfall when sending money to unregulated private partnerships and hedge funds instead of regulated mutual funds.

"Mutual funds typically have more oversight and are subject to the regulations of the Investment Advisors Act of 1940. As a result, it would be more difficult for mutual fund managers to simply misappropriate money for their own use versus unregulated entities," said David Rosenfeld, associate regional director of the SEC's New York Regional office.

"There really isn't much you can do if these folks decide to steal your money," Mr. Jack said.