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Stephen Walsh, Islanders former co-owner, sentenced to 20 years in $50M fraud

Former New York Islanders executive Stephen Walsh leaves

Former New York Islanders executive Stephen Walsh leaves federal court in Manhattan on Oct. 29, 2014, after being sentenced to 20 years in prison on a guilty plea to a $50 million fraud. Photo Credit: Bryan Smith

Onetime New York Islanders part-owner Stephen Walsh was hit with a maximum 20-year sentence Wednesday for a $50 million fraud, but in an unusual move, the judge delayed imposing it to let stunned defense lawyers consider trying to void Walsh's guilty plea.

Walsh, 70, of Sands Point, an Islanders executive and co-owner from 1991 to 2000, was accused in 2009 of bilking investors in his WG Trading Co. to finance a lavish lifestyle. He pleaded guilty in April, after a 2010 plea from partner Paul Greenwood.

At the sentencing in federal court in Manhattan, Walsh told  U.S. District Judge Miriam Cedarbaum that he was "deeply sorry." His lawyer argued most investors were made whole, and Walsh deserved credit for aiding charities such as the Long Island Alzheimer's Foundation and North Shore-Long Island Jewish Health System.

Walsh and his lawyer asked for 18 to 24 months, plus community service, but the judge was unmoved, observing that the scam went on for 13 years and Walsh fought the charges for five years before pleading guilty. "The proceeds of this scheme were used for personal extravagances and high living," she said. "Lots of people lost lots of money."

The judge said she planned to send Walsh to prison for 20 years, the maximum penalty for securities fraud, a term urged by prosecutors and called for under federal sentencing guidelines. Walsh, as part of his plea, had agreed to not appeal any sentence up to 20 years.

But white-collar defendants frequently get more lenient treatment -- in part because many judges feel federal guidelines for financial crimes are too harsh -- and the sentence produced gasps from Walsh's friends and family in court.

"Oh my God!" one woman said.

Defense lawyer Michael Tremonte, who had told Cedarbaum that the maximum sentence would ensure that Walsh would die in prison, asked for time to see if there were grounds to withdraw the guilty plea. The judge gave him until Tuesday.

"I don't think anyone expected we would be at the outer range of the hypothetical guideline range," Tremonte told her. "There is not another case even remotely like it where a 20-year sentence has been imposed."

Typically, defendants are not allowed to withdraw a plea because they don't like the sentence. Tremonte and prosecutors had no comment.

Walsh and Greenwood were charged with soliciting $7.6 billion in investments from charities and other institutions, and then issuing bogus promissory notes to cover $554 million in losses and money diverted for personal use.

Prosecutors said Walsh used investor money to finance a divorce settlement and fund businesses for his children, and Greenwood purchased expensive stallions and high-priced teddy bears.

Walsh filed 62 letters of support seeking leniency, including letters from former homeland security director former state Sen. Michael Balboni, former Islanders partner Robert Rosenthal, and two former Nassau County probation officers.

Walsh agreed to forfeit $50.7 million.

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