Peregrine Financial Group Inc.’s indicted founder, Russell Wasendorf Sr., who tried to kill himself in July, will be freed on bail after he pleads guilty to embezzlement on Sept. 17, a judge said.
“Following defendant’s plea of guilty, the court will review with defendant the terms of an order setting conditions of release,” U.S. Magistrate Judge Jon Scoles in Cedar Rapids, Iowa, said in a written ruling yesterday. “Defendant will be released at that time.”
Wasendorf, 64, has been jailed since his July 13 arrest on charges he lied to U.S. regulators about the amount of client funds his Cedar Falls, Iowa-based firm had on deposit at its bank. He was indicted on 31 counts last month.
His agreement to plead guilty to two false-statement counts and individual counts of mail fraud and embezzlement was disclosed by an FBI agent at Wasendorf’s bail hearing on Sept. 11. He may receive a prison sentence of as long as 50 years, according to a copy of the plea agreement posted on the court’s electronic docket yesterday.
At least $190 million in Peregrine client funds are unaccounted for, the liquidating trustee in the firm’s bankruptcy case told creditors during a meeting at the federal courthouse in Chicago on Sept. 10.
Wasendorf, in a note written before a failed suicide attempt on July 9, said he’d been stealing from the firm for almost 20 years, Scoles said in yesterday’s ruling.
Prosecutors opposed his release on bail, arguing Wasendorf was still a suicide risk as well as a flight risk. He has been on suicide watch at the Linn County Jail since his arrest, the judge said.
Wade Kisner, a spokesman for Cedar Rapids U.S. Attorney Stephanie Rose, declined to comment on the court’s decision.
Scoles said in his ruling that Wasendorf would be confined to the home of his friend and pastor, Linda Livingston, and ordered to wear an electronic monitoring device.
Livingston testified on Wasendorf’s behalf at the Sept. 11 hearing, telling the court the Peregrine chairman and chief executive officer was no longer suicidal and “glad to be alive,” Scoles said.
The court released several documents entered into evidence at the bail hearing, including notes Wasendorf had written to his son, Russell Wasendorf Jr., and new wife, Nancy Paladino, before trying to kill himself by asphyxiation in his car outside company headquarters.
“To my wonderful son, Russ,” Wasendorf wrote, “by the time you read this I will have taken my life. I beg for your forgiveness. I have written my final confession that will be discovered with my body. I know you will be shocked to discover my crimes.”
“I never wanted you to know the kind of guy I really was,” he said. “Your mistake was that you trusted your father. Nothing more.”
To Paladino, he said, “Please forgive me for typing this letter. My hands are shaking so much I cannot write. I love you so much and I so wanted to spend my final years growing old with you. I am so sorry that this will not happen.”
Paladino has filed for an annulment of their June 30 marriage in Nevada state court in Las Vegas.
Livingston testified that Paladino is still committed to Wasendorf and that the annulment petition was filed to insulate her from financial liability for crimes of which she was unaware, according to Scoles’s ruling.
In agreeing to release Wasendorf before he is sentenced, Scoles cited Livingston’s testimony as well as the confiscation of Wasendorf’s assets in a lawsuit filed against him by the U.S. Commodity Futures Trading Commission.
“Defendant’s actions, which he has admitted, are reprehensible,” Scoles wrote. “Thousands of PFG customers have lost millions of dollars as a result of defendant’s criminal activity. But the issue before me at this time is not one of punishment.”
“The court cannot detain a defendant prior to trial simply because it thinks it’s appropriate to do so,” according to the magistrate.
The case is U.S. v. Wasendorf, 12-cr-2012, U.S. District Court, Northern District of Iowa (Cedar Rapids).
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