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Millions of Dollars in Assets Frozen in New York Divorce Case

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In New York State, Janet Schaberg is finding out that a $7.61 million divorce settlement doesn’t go as far as it used to. After a recent ruling by U.S. District Judge George B. Daniels, that money isn’t going anywhere.

Schaberg is the ex-wife of Stephen Walsh, a partner at WG Trading Co., an investment business that has collapsed under accusations of embezzlement and doctored financial reports. Walsh and his business partner, Paul Greenwood, were indicted on July 24; they face charges of misappropriating $554 million dollars from investors in the Greenwich, Connecticut-based investment company.

Prosecutors accuse Walsh and Greenwood of stealing $130 million from college foundations and pension funds and using the remainder as "earnings" with which to pay off investors or cover up losses at WG Trading and other businesses.

Walsh and Janet Schaberg married in 1982 and divorced in 2007. As a part of their divorce, a court-appointed receiver found that Schaberg personally received nearly $20 million from WG Trading Co. over a ten year period.

Before the couple separated, Walsh gave Schaberg $3 million to use in the purchase of a co-op apartment in New York, which was sold in April 2008 for $3.5 million dollars. Those funds were used to pay off mortgages on her current home in Florida.

Schaberg’s attorney, Steven Kessler, tells Jerry Gleason of the Lower Hudson Valley newspaper that his client is running out of money. Kessler says he will ask Judge Daniels to reconsider the order to freeze Schaberg’s assets based on her current circumstances: Schaberg has remarried.

Kessler says the contested money was obtained legitimately during the divorce process.

"She has a court order giving her the money. … No one claims she knew (it) was tainted," he says.

Daniels disagreed with this position in his ruling, stating that the divorce proceedings alone were not sufficient to allow Schaberg to keep funds that may have been obtained illegally. Were those funds still in the possession of her ex-husband, they likely would have been seized.

"The divorce court may have been in a position to determine property rights as between a husband and wife; however it could not validate a former spouse's retention of monies fraudulently obtained during the marriage," Judge Daniels wrote in his ruling.

Daniels has also approved the prosecutors' request to delay discovery proceedings in a civil case being brought against Greenwood and Walsh by federal regulators. Prosecutors hope to determine what funds were illegally obtained and to redistribute them to rightful owners where possible, leaving the civil courts access only to whatever monies are legitimately the property of the two indicted investors.

Schaberg herself has not been accused of any wrongdoing.

Source: Lower Hudson Valley Newspaper


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