Peregrine CEO indicted for lying to regulators
SAN FRANCISCO/CHICAGO (Reuters) - Peregrine Financial Group founder and chief executive Russell Wasendorf Sr was indicted on charges of lying to regulators, a little over a month after he botched a suicide attempt and confessed to bilking customers of his brokerage for years.
Wasendorf, 64, "overstated the value of PFG's customer segregated funds by at least tens of millions of dollars" to the Commodity Futures Exchange Commission, according to the indictment, filed in federal court in Cedar Rapids, Iowa.
The indictment carries a possible maximum sentence of 155 years in prison, a $7.75 million fine, and 93 years of supervised release following any imprisonment, the U.S. Attorney's office said.
The public defender representing Wasendorf Sr could not immediately be reached for comment.
Peregrine filed for bankruptcy protection on July 10, one day after Wasendorf Sr attempted suicide and left a note describing how he had stolen from customers for nearly 20 years.
The collapse of what was once a mid-sized futures brokerage has dealt a blow to confidence in the futures industry, coming less than a year after MF Global Holdings Ltd's MFGLQ.PK bankruptcy, which left customers with a $1.6 billion shortfall and is still being investigated.
The CFTC has said Wasendorf Sr misappropriated more than $200 million in customer funds.
His former customers are baying for blood.
"He should rot in a prison cell, like Bernie Madoff," said Ronald Riehm, a coin dealer from Johnston, Iowa, who has $51,000 tied up at the firm. "He lived for 18 and a half years a life of luxury on stolen money. I have no sympathy for him whatsoever."
Ponzi schemer Bernard Madoff, 74, pleaded guilty in March 2009 and is serving a 150-year sentence in a North Carolina federal prison.
"It just seems as though the people that own these firms feel that they're playing with monopoly money," said James Cordier, principal and founder of Liberty Trading Group, noting that MF Global CEO Jon Corzine has not been charged with any wrongdoing.
"This is people's hard-earned money that they invest. They're taking their chances in the market, but never in their wildest dreams do they think this could happen. Someone has to stop this."
The indictment does not mention Wasendorf Sr's alleged misuse of customer money, but only asserts that he misrepresented the value of customer funds from February 2010 to June 2012.
An indictment means a person has been formally charged by a grand jury. Additional charges can be added later, in superseding indictments, as the grand jury continues to weigh testimony and evidence.
Using little more than a post office box, laser printers and Photoshop software, Wasendorf Sr said in his confession that he forged and intercepted financial statements that were mailed between U.S. Bank, where some Peregrine customer money was held, and the firm's auditors at the National Futures Association.
He also said he spent most of the stolen money trying to keep his brokerage afloat.
The federal probe into Wasendorf Sr continues as the grand jury hears testimony from witnesses, including the company's president, Russell Wasendorf Jr, son of the CEO.
"He testified and answered all questions and continues to cooperate with the FBI," said Nicholas Iavarone, Wasendorf Jr's attorney.
Wasendorf Sr is being held in a county jail and his next appearance for an arraignment has not yet been set, the U.S. Attorney's office said. (Reporting by Ann Saphir in San Francisco, and Tom Polansek and P.J. Huffstutter in Chicago; Editing by Phil Berlowitz)
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