Pitt could lost $35 million in Westridge investments

By Michael Macagnone / Senior Staff Writer

published: Wed, 4 Nov, 2009

University officials say Pitt students won’t be affected by a drop in endowment funds and its $35 million loss in investments, at least not this year.

Pitt spokesman John Fedele said that while the University’s endowment dropped by about 20 percent and an alleged fraud scheme involving Westridge Capital Management, Inc., could cost the University millions more, Pitt will not cut funding for many programs, particularly those outside the classroom.

“All programs depending on endowment funding will receive their funding this year,” he said.

The amount of its endowment that Pitt spends every year is determined by a formula. Pitt calculates the average market value of the endowment over the past three years, then allows 4.25 percent of that value to be spent, Fedele said.

The University also follows another policy, called a “floor policy,” and won’t spend less of its endowment than it did the previous year.

“This is going to have a negligible effect on students,” Fedele said.

Fedele also said students will remain, for now, fairly untouched by an alleged fraud scheme involving Westridge Capital Management, Inc., a company that’s executives, Paul Greenwood and Stephen Walsh, have been accused of misappropriating approximately $553 million.

Fedele said the University invested about $65 million in funds with Westridge, and that Pitt’s assets had grown to be worth about $70 million before the alleged fraud scheme. The University expects to recover about $35 million of the money it had invested with Westridge, he said. That number is based on a report filed by a court-appointed receiver who is responsible for evaluating Westridge’s assets.

“The loss here is exceptional because of the situation,” Fedele said.

Fedele said Pitt would not comment further on how much of the investment it might recover or on the status of the federal investigation of Greenwood and Walsh.

“At this time, there is insufficient information to confirm the timing or amount of the University’s ultimate recovery relative to this investment,” the University’s Board of Trustees wrote in notes on its audited financial statements, which it approved last week.

Pitt, in conjunction with Carnegie Mellon, filed a civil law suit against Westridge in February in an attempt to recover its investment.

The Securities and Exchange Commission froze Westridge’s assets this past February and took the company to court, alleging in court documents that Greenwood and Walsh used investors money as a “personal piggy bank,” buying “multimillion-dollar homes, a horse farm, cars, horses and rare collectibles such as Steiff teddy bears,” which can cost as much as $80,000.