Teddy bear collector admits $331 million fraud

/ Source: msnbc.com staff and news service reports

A former money manager pleaded guilty Wednesday to securities fraud, admitting that he cheated charities, schools, pension funds and others out of at least $331 million, using a portion of the funds to buy collectible teddy bears and to invest in $100,000 horses.

Paul Greenwood, 63, entered the plea in U.S. District Court in Manhattan in a cooperation deal that could win him leniency at sentencing, which was tentatively set for Dec. 1. He would otherwise face up to 85 years in prison.

Greenwood lives in North Salem, N.Y., which is about 45 miles north of New York City on the Connecticut line. Its 5,100 residents also include David Letterman, actor Stanley Tucci and Oscar-winning composer Alan Menken.

Greenwood told Judge Miriam Goldman Cedarbaum that he conspired with others from at least 1996 through last year to divert funds that were supposed to be invested into personal accounts that he used to operate a horse farm, improve his home and buy antiques and collectibles.

Prosecutors said Greenwood's victims included charitable and university foundations as well as retirement plans.

The institutional investors entrusted Greenwood and his partners with $7.6 billion that was supposed to be invested conservatively. Instead, Greenwood said, the partners invested a portion of the money in a company that failed.

"We ended up losing a lot of money," Greenwood said.

'The hole got bigger and bigger'
He said he initially thought the partners could make back the lost money through other investments but later realized that was not possible "and we continued to do it" for a long time.

"As time went on the hole got bigger and bigger," Greenwood said.

He said that he spent more than $75 million of stolen money on his house, antiques and the horse farm while he concealed the fraud by using money that had not been lost to pay off investors who sought to redeem their investments.

Greenwood said he worked out of the company's Greenwich, Conn., offices while others worked at offices of WG Trading Co. on New York's Long Island or in Jersey City, N.J.

He said his antiques were auctioned earlier this year, the North Salem horse farm is on the market and the collectibles are scheduled to be sold later this year.

According to a 2008 magazine article, Greenwood's collection of teddy bears included more than 1,350 Steiff toys. Among them were 74 bears plus birds, cats, insects, dinosaurs, kangaroos, seals, squirrels and many other types of stuffed animals.

The New York Post reported that Greenwood, who was a part owner of the New York Islanders hockey team during the 1990s, amassed the world's largest collection of Steiff toys.