MANHATTAN (CN) - Chucking a 10-year prison term for an ex-owner of the New York Islanders hockey team, the Second Circuit said the record did not support a finding by the sentencing court that the man's fraud "devastated" some investors.
A part-owner of the pro-hockey team in the 1990s, Paul Greenwood pleaded guilty in 2010 to defrauding investors from 1996 to 2009 through WG Trading Investors, an investment house he operated with Stephen Walsh, now 70.
Authorities said the pair solicited $7.6 billion from investors, skimmed from the top, and tried to cover up the loss of $554 million with bogus promissory notes.
The Securities and Exchange Commission noted that Greenwood had spent his loot on a stable of expensive stallions and $1.7 million in high-end collectible teddy bears.
Greenwood ultimately cooperated with investigators, helping them build a case against Walsh and recover the diverted funds, but U.S. District Judge Miriam Goldman Cedarbaum had little sympathy for the fraudster at his sentencing in December 2014.
Expressing contrition in asking for a five-year sentence, Greenwood admitted: "I've lied, I've cheated, and I've stolen," Newsday reported last year.
Cedarbaum threw the book at him, nevertheless, handing down a 10-year sentence.
In summarily vacating that sentence Thursday, a three-judge panel of the Second Circuit said the lower court made a mistake in relying "on a clearly erroneous finding of fact."
Just before announcing the sentence, Cedaraum spoke about the people "who lost many thousands of dollars as a result of [Greenwood's] fraud," according to the unsigned ruling.
"The loss of that money was very devastating for many of them," Cedarbaum had said.
In the face of Greenwood's appeal, however, the government conceded "nothing in the record expressly supports the conclusion that the ... actual losses that remained outstanding at the time of Greenwood's sentence had 'devastat[ed]' any specific victim," according to the Second Circuit's ruling.
A presentence investigation report counted pension and retirement plans among Greenwood's investors, but the report "makes no mention whatever of an individual victim, let alone a number of individual victims who lost thousands of dollars as a result of the fraud," the ruling states.
The panel ordered the lower court to resentence 68-year-old Greenwood but noted that he could still face the same 10-year term.
"We do not foreclose the possibility that on remand the district judge - an experienced and distinguished jurist who, as the government argues, may have 'drawn a reasonable inference' that many individuals lost thousands of dollars because the fraud's victims included pension and retirement plans - may impose the same sentence," the ruling states. "But we nonetheless remand for resentencing to ensure that the sentence imposed is not based on erroneous findings of fact, and to give the District Court an opportunity to clearly state the reasons for the particular sentence."
Greenwood's attorney Frederick Hafetz said in a statement that he is "hopeful for a better sentence on the resentencing."
Walsh, the co-conspirator in the scheme, had been an Islanders co-owner, as well.
The pair also owned investment advisory firm Westridge Capital Management and WGIA LLC.
A resident of Sands Point, N.Y., Walsh received a 20-year sentence two months before the Greenwood sentencing. Greenwood moved to Southern Pines, N.C., before his sentencing but was previously a resident of North Salem, N.Y.