For four Long Island businessmen, the cost of buying a mere 10 percent of the Islanders was very steep: four years, several million dollars, a ton of confusion, eternal humiliation and a dash of disappointment.
The group that would conveniently, and perhaps derisively, come to be known as the "Gang of Four" were long-time season ticket holders and successful entrepreneurs before becoming owners. Stephen Walsh, Paul Greenwood, Robert Rosenthal and Ralph Palleschi were installed as the team's day-to-day management group in 1992 by then-owner John Pickett and finally purchased a combined 10 percent of the team in 1994. The sale, though small, necessitated some financial hoop-jumping and wishful thinking which would prove to be ironic many, many years later.
"Our group had previously made a loan to the team," said Stephen Walsh, co-chairman and chief executive officer of the committee, which invested in the Islanders when Pickett put them up for sale two years ago. "In exchange for that, we converted the loan to equity, which makes the team a lot stronger financially."
(Between the loan and the completed purchase is the tangled, enticing and aggravating tale of a different almost-sale of the Islanders. But that's another story for another time.)
In fairness to all parties, the sale appears to have come with the best of intentions. Pickett, already a well-established absentee owner for the previous half dozen or so years, realized that he had lost touch with Long Island and that the team should have ownership that was closer to the ground than he was from his home in Florida. For the investors, it was an opportunity that is astronomically rare, the kind of thing that only happens in the movies: To own a part of your favorite team and have managerial control and a chance to rebuild the franchise after years of just watching.
Unfortunately for the Gang of Four, the Hollywood scenario quickly faded away. Strong argument can be made that it was during this short era that the Islanders dissolved from "downtrodden former dynasty" to "global laughingstock/contraction candidate/relocation project/free agent poison."
Here's a short list of some notable events that happened to the Islanders under the Gang of Four's watch:
- Dynasty architect Bill Torrey is forced to retire and is replaced with assistant GM Don Maloney.
- The team makes a surprising run to the conference finals in 1992-93. This is the lone positive thing to happen during this era.
- Al Arbour, one of the greatest NHL coaches of all time, retires and is replaced by Lorne Henning, one of the nicest NHL coaches of all time.
- Pierre Turgeon and Vladimir Malakhov are sent to Montreal for Mathieu Schneider and a sentient computer virus construct code-named "K.I.R.K. M.U.L.L.E.R."
- Henning is fired and Mike Milbury is named coach.
- Maloney is fired and replaced by Milbury, who crashes on the Islanders' couch like a deadbeat roommate that just won't leave for the next 11 years.
- And then there are these.
Those involved include the Iowa Public Employees' Retirement System, which invested $339 million with the pair; the University of Pittsburgh, which had invested $65 million; and Carnegie Mellon, which had invested $49 million. It was the universities that first alerted the Securities and Exchange Commission that something was amiss.
WG Trading also received nearly $90 million from the Sacramento Employees' Retirement System. The Pennsylvania Employees' Retirement System was readying a $1 billion investment in WG Trading when it learned this month that the National Futures Association, which oversees futures brokers, was auditing the firm.
A 2009 audit by the independent National Futures Association uncovered where the money at WG Trading was really going. Walsh and Greenwood made off with over $550 million in funds that were supposed to have been invested for their clients as well as expenses that were also billed to the customers.
In July of that year, the pair were indicted. And in the grand tradition of other partners in crime, it took little time for one to roll over on the other. In July of 2010, Greenwood pleaded guilty and elected to cooperate with the feds on the case against the not-guilty-pleading Walsh.
Greenwood faced up to 85 years in prison for his misdeeds, but his sentencing was placed on the backburner until the conclusion of Walsh's trial which was postponed last summer. The investors who got soaked are being paid back from the sales of the duo's many assets, and the total restitution being redistributed is over $800 million or about 85% of what was taken from them.
Late in 2014, each finally learned their fate. Walsh switched to a guilty plea and his lawyers argued for leniency but he was sentenced to 20 years in prison beginning in January 2015. A month later, Greenwood was sentenced to 10 years.
Still, like Fisherman jerseys at Islanders games, the two just keep popping up. Walsh went to appeals court again in 2016, but was once again rebuffed and his 20 stint continues. And in June of that year, Greenwood got his sentence reduced to five years with the district judge citing his prior charity work, cooperation with authorities in convicting Walsh and that old stand-by "good behavior" as reasons to overturn the original sentence.
Walsh and Greenwood sold investors the same lies they sold Islanders fans: that their financial expertise and acumen would lead to future wealth. Considering how much they swindled from those that trusted them, getting stuck with some ugly jerseys and the comedy stylings of Tommy Söderström doesn't really seem like a bad deal.
NEXT TIME ON LAW & OWNERS SPECIAL ISLANDERS UNIT: "The Strange Case of Dr. J and Mister Islander."
Updated on 6/30/16.
Part Two of a series. Read the rest of the series here.
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