The New York Court of Appeals dealt a setback yesterday to federal agencies seeking to recover funds from Janet Schaberg, the ex-wife of Stephen Walsh, whom the government claims engaged in securities fraud, ruling that state law may allow Ms. Schaberg to keep money she got in the couple’s divorce even if it was the proceeds of fraud.
The case, Commodity Futures Trading Commission v. Walsh, 91, consolidated with Securities and Exchange Commission v. WG Trading Investors, came to the Court of Appeals from the U.S. Court of Appeals for the Second Circuit, which asked the state Court to resolve open questions of New York law that could determine whether the government could recover money from Ms. Schaberg.
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