Peregrine clients sue Wasendorf for 'theft' of more than $200 mln

CHICAGO Wed Aug 1, 2012 9:13pm IST

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CHICAGO Aug 1 (Reuters) - Several customers of Peregrine Financial Group are suing the failed futures brokerage's chief executive officer, Russell Wasendorf Sr., and other top management for allegedly stealing more than $200 million in client funds.

Peregrine clients filed three separate lawsuits in July in federal court in Chicago, each seeking class-action status. Late on Tuesday, lawyers for two of those cases filed requests to be reassigned to U.S. District Judge Rebecca Pallmeyer, who is already hearing the Commodity Futures Trading Commission's civil case against the firm and its CEO.

A judge will hear the motions on Thursday.

Wasendorf was arrested last month in Iowa after a botched suicide attempt. He had left a written confession that he had bilked customers for years, faking bank statements, lying to regulators, and spending the money on everything from a brand new office building in Cedar Falls, Iowa, to fines and fees levied against the firm.

A grand jury in Iowa earlier this week subpoenaed Wasendorf's son, Russell Jr., who was the firm's president, to testify about his father's alleged wrongdoing. Wasendorf Sr. is being held in a county jail.

The lawsuits by the clients borrow heavily from both the CFTC's lawsuit and the FBI's criminal complaint against Wasendorf Sr., but are different in that they target not only him but also Wasendorf Jr., Peregrine Vice Chairman Neil Aslin, Chief Financial Officer Brenda Cuypers, Chief Compliance Officer Susan O'Meara and auditor Jeannie Veraja-Snelling.

The lawsuits also say they target 10 "John Does" whose identities are not now known but who also allegedly helped in the fraud.

"Defendant Wasendorf Sr.'s massive fraud and theft was largely made possible by a failure of reasonable oversight, inquiry and diligence by PFG's primary regulator, the NFA (National Futures Association), and PFG's senior officers and independent auditors," Hong Kong-based Power Vanguard, a former Peregrine client, said in its lawsuit.

A Peregrine spokeswoman did not respond to a request for comment.

The cases are Power Vanguard Ltd et al. v. Russell R Wasendorf Sr. et al, 12-cv-05727; Wolinsky v. Wasendorf Sr., et al., 12-cv-05624; and LaSalvia et al. v. Wasendorf Sr. et al., 12-cv-5546, all in the U.S. District Court, Northern District of Illinois (Chicago).

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