Updated with correction.
Kern County Employees' Retirement Association sued Wilshire Associates for breach of fiduciary duty and negligence over the alleged loss of “millions of dollars” from investing with Westridge Capital Management.
“Wilshire failed to conduct appropriate due diligence and to provide necessary and appropriate investment consulting advice with respect to KCERA's investment with Westridge Capital Management,” according to the suit, filed by the $2.7 billion association on Tuesday in the Los Angeles Superior Court.
The complaint further contends that Wilshire failed to conduct appropriate due diligence or properly monitor Westridge/WG Trading despite “numerous red flags that Wilshire either failed to identify or failed to take seriously,” the suit said.
The suit claims that Steven Walsh and Paul Greenwood plus their affiliates at Westridge/WG Trading Investors lost hundreds of millions of dollars through unpermitted investments and misappropriation of money for personal use.
According to a Wilshire statement, Kern County originally invested $115 million with Westridge. It received $72 million after withdrawals and after anticipated distributions, Wilshire expects the loss to Kern County to be $4 million.
A court-appointed receiver has been collecting investments and assets of Westridge Capital Management, WG Trading Co. and Messrs. Walsh and Greenwood since February 2009 due to the allegedly fraudulent investment schemes.
Kern County board members had no comment on the litigation, said Anne Holdren, executive director for the Bakersfield, Calif.-based fund in an e-mail.
In its statement, Wilshire claimed it was not responsible for the loss. “Wilshire Associates did everything it was retained to do and did it well. As KCERA's complaint correctly states, Westridge's management committed a massive fraud on KCERA and other fund investors, and deceived regulators.”