Partners were known for acumen, community involvement until now
Paul Greenwood exits Manhattan Federal court after being released on bail Wednesday in New York.
Stephen Walsh is seen outside Manhattan Federal court after being released on bail Wednesday.
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Until yesterday, Paul Greenwood and Stephen Walsh were known as much for their civic and community involvement as for their business acumen and financial largess.
The men were arrested on federal charges that they misappropriated at least half a billion dollars, including more than $160 million for their personal use, with Mr. Greenwood buying horses, rare books and unimaginably high-end teddy bears and Mr. Walsh spending millions of dollars on a condominium for his ex-wife.
The two men have been in business together since 1979, when they founded the brokerage firm Walsh, Greenwood & Co.
Mr. Walsh, 64, and Mr. Greenwood, 61, made their most public investment decision in 1991, when they and two other investors bought a minority stake in the New York Islanders professional hockey team.
The investment group which became known as the "Gang of Four" received 100 percent operating control over the team, and made controversial decisions that to this day still irk Islanders fans.
Among their most notorious decisions was changing the team's logo to an emblem of a cartoon fisherman in 1995. The logo was roundly mocked for its resemblance to the Gorton's fisherman, even drawing jeers of "fish sticks" from fans of the Islanders and their opponents. As soon as the National Hockey League would allow, the team reverted back to its old logo.
Writing on his blog "My Point Blank" yesterday, former Islanders media relations Vice President Chris Botta described Mr. Walsh as "leading the charge" for the new logo and Mr. Greenwood as "the quiet one."
So controversial was that decision that the first comment to Mr. Botta's post was: "He should have been arrested just for the logo issue."
The Gang of Four also received criticism for its hiring of general manager Don Maloney, but won credit from some in the local media for the Islanders' "miracle" 1993 playoff win over the much-favored Pittsburgh Penguins and for ultimately keeping the team in New York.
With the team losing millions of dollars per year, the group sold the Islanders in late 1996. In that same year, the federal criminal complaint filed yesterday alleges, the partners conspired to commit securities and wire fraud that continued through this month.
Mr. Walsh grew up in New York, graduating from East Rockaway High School and the State University of New York at Buffalo. Mr. Greenwood earned a bachelor's degree in psychology, an M.B.A. and a doctorate in finance from the University of California at Los Angeles.
In addition to the Islanders, Mr. Walsh and Mr. Greenwood also invested in the Champion athletic wear company and served on the board of trustees of Signal Apparel Co., a Chattanooga, Tenn.-based clothing manufacturer. In 2000, both men stepped down from the board and Mr. Walsh stepped down as chief executive officer. The next day the company filed for Chapter 11 bankruptcy.
In 1990, they led a group of investors in an unsuccessful $900 million takeover bid of the Stride Rite shoe company.
For more than 25 years, Mr. Greenwood has lived in North Salem, N.Y., an affluent Westchester County community on the border with Connecticut that counts David Letterman and music executive Tommy Mottola among its 5,000 residents. A North Salem Lions Club Web site said the nearly 300-year-old community 50 miles north of Manhattan features "open fields and rugged hills surrounding Titicus Reservoir; horseback riding is popular, as is the raising of horses for hunting and jumping."
The area accommodated the lifestyle of Mr. Greenwood, a horse breeder, who once owned the 120-acre Old Salem Farm, a riding school and horse farm he purchased from Paul Newman and Joanne Woodward. News reports said Mr. Greenwood and his wife, Robin, now own the state-of-the-art Grand Central Farm not far from their sprawling, three-story brick home overlooking the Titicus Reservoir.
Among items Mr. Greenwood is accused of illegally purchasing are Steiff teddy bears, some for as much as $80,000. In an August article in Bedford magazine, the Greenwoods discussed their passion for collecting Steiff animals, the fine German-made toys of mohair and plush that date back to the 1880s.
"According to the gurus in this esoteric field, we've assembled what now seems to be the world's largest private collection of Steiffs," Mr. Greenwood is quoted in the article. "At last count, we've given shelter to more than 1,350 Steiff toys, and there's no way our collecting days are over."
Mr. Greenwood was involved in the community as treasurer of the Episcopal church and the local library and an avid supporter of the ambulance service and fire department. In 2007, frustrated with the way the town government was operating, he entered the race for town supervisor, a position somewhat akin to mayor.
Mr. Greenwood, a Republican, bucked his party and defeated the endorsed candidate to win the post. He does not accept the post's $85,000 salary. His two-year term expires at the end of the year.
The night before his arrest, Mr. Greenwood was conspicuous by his absence at the regular meeting of the North Salem Town Board, where the agenda items included new septic regulations and parking permits.
The local newspaper, The Journal News, reported on its Web site yesterday that North Salem Councilman Christopher Brockmeyer said he expected Mr. Greenwood would resign.
That would be a disappointment to longtime resident Robert Treadway, 59, a floral designer and a trustee of the town historical society.
"I've known him for 20 years and worked hard to get him elected," Mr. Treadway said. "I don't know anything about his private business dealings, but I can tell you this much, what he's done in this town is absolutely legendary. He's done a lot of philanthropic things no one knows about."
He said Mr. Greenwood had made good on his campaign promise to remove partisan politics that was preventing the town from addressing issues such as septic problems.
"He's solving problems and the spirit of the town has very much improved. He's well thought of in town. This took everybody by surprise but we don't know the facts yet. In America, you're innocent until proven guilty.
"When this is done and over I will not think any less of the man because of his civic contributions and who he is as a person."
John Steele Gordon, 64, another longtime resident and a friend of Mr. Greenwood, agreed that the news had shaken the quiet community.
"Everybody is in absolutely slack-jawed astonishment," Mr. Gordon said. "I can't think of anybody in North Salem who would surprise me more for this to happen to. ... It's like someone had arrested Abraham Lincoln.
"I just pray it's going to turn out not to be as bad as it looks right now. I'm certainly presuming his innocence," said Mr. Gordon, a financial historian and writer.
Mr. Gordon said the last time he spoke with Mr. Greenwood was at a party in December when they discussed the just-breaking news of the scandal involving New York investment manager Bernie Madoff, accused of operating a $50 billion Ponzi scheme. Mr. Gordon would not reveal what was said but acknowledged the irony.
Mr. Walsh lives in Sands Point, N.Y., and has been involved for decades with the Long Island Alzheimer's Foundation, a group founded in 1987 by his ex-wife Janet Walsh.
Ms. Walsh was named as a "relief defendant" in a complaint filed yesterday by the Commodity Futures Trading Commission because she "received funds as a result of defendants' fraudulent conduct." According to the complaint, Mr. Walsh misappropriated funds to buy her a $3 million condominium as part of their divorce settlement.
She is now listed as Janet B. Schaberg on the foundation's Web site. A woman answered the phone at her home yesterday but immediately hung up.
A receptionist at the Long Island Alzheimer's Foundation said that the group knew nothing about Mr. Walsh's arrest or any mention of Ms. Schaberg in the complaint.
"We're shocked," she said. "We knew nothing about it."
First Published February 26, 2009 12:00 am