San Diego County Employees Retirement Association and its consultant Albourne Partners detected problems at WG Trading Co. as early as last fall and terminated the firm because of them Dec. 31.
WG Trading was one of the companies associated with Paul Greenwood and Stephen Walsh, who were charged last week with fraud.
The $7.3 billion association had allocated $150 million to WG Trading for an S&P 500 index arbitrage strategy in 2004. The portfolio had $78 million as of Dec. 31, according to a news release from the fund about the situation.
An Albourne analysts due diligence visit to WG Trading on Oct. 7 found (Mr.) Greenwood to be uncooperative and evasive and the company reluctant to provide operational transparency and third-party broker references, according to the news release. System staff requested more information, but the response from the company was insufficient.
Fraud was not suspected at the time of termination, according to the release. The assets have not been returned to the association.
The San Diego County fund and its staff are cooperating fully with law enforcement and regulatory agencies in their investigations, according to the news release. SDCERA CEO Brian White was not available for comment as of press time.
Messrs. Greenwood and Walsh, WG Trading and Westridge Capital Management, and affiliated companies and employees also face civil lawsuits filed by the SEC and the CFTC over the fraud allegations.