The Universities of Pittsburgh and Carnegie Mellon could have to swallow losses of $100 million after falling victim to an alleged financial swindle.

They had investments of $65m and $49m respectively with money managers Paul Greenwood and Stephen Walsh. The pair are now under arrest on fraud charges, with the Securities and Exchange Commission alleging they misappropriated $554-million from investors (Chronicle of Higher Education, WPXI, SEC press release).

The Pittsburgh Post-Gazette says both institutions will be lucky to get their money back as the Commodity Futures Trading Commission says there is “strong probability that the defendants do not have sufficient assets to remotely cover the losses incurred by their misappropriation of investor funds”.

Both universities are now pursuing Greenwood and Walsh’s company Westridge in federal court in Pittsburgh (Pittsburgh Tribune-Review).

As the Chronicle of HE points out:

The recent scam is not the first suffered by higher education during this recession. An alleged Ponzi scheme by the investment adviser Bernard L. Madoff bilked many millions from Yeshiva University, New York University, and others. And observers say similar episodes are on the way, as the downturn exposes empty coffers of fraudulent investment managers.

Image: SEC complaint (click for PDF)