Peregrine’s Wasendorf Gets 50 Years for Theft of Millions

Source: Linn County Sheriff's Department via Bloomberg

Russell Wasendorf Sr., founder of the bankrupt commodities firm Peregrine Financial Group Inc., stands in custody in Linn County, Iowa. Close

Russell Wasendorf Sr., founder of the bankrupt commodities firm Peregrine Financial... Read More

Close
Open
Source: Linn County Sheriff's Department via Bloomberg

Russell Wasendorf Sr., founder of the bankrupt commodities firm Peregrine Financial Group Inc., stands in custody in Linn County, Iowa.

Russell Wasendorf Sr., the founder of the bankrupt commodities firm Peregrine Financial Group Inc., was sentenced to 50 years in prison for what prosecutors said was a theft of more than $215 million from customers.

Wasendorf, 64, was sentenced today in federal court in Cedar Rapids, Iowa, Acting U.S. Attorney Sean Berry said in a statement. The financier used a printer, software and a post office box to create false bank statements and other documents and hide his 20-year embezzlement starting in the early 1990s, prosecutors said.

“By lying to investors and regulators, Wasendorf defrauded thousands of innocent investors out of a staggering $215,000,000,” Berry said in the statement. “The lengthy prison sentence imposed today is just punishment for a con man who built a business on smoke and mirrors.”

Assistant U.S. Attorney Peter Deegan told U.S. District Judge Linda Reade in court filings that Wasendorf deserved the maximum 50-year penalty because of the amount customers lost and the sophisticated nature of the crime. Wasendorf started stealing customer funds within two years of Peregrine’s original financing, using a copying machine to conceal his theft of $250,000 to keep his company afloat, the government said.

“Defendant’s entire business was used as a mechanism to gather and purloin investor funds,” Deegan said. “From that point on, as defendant well knew, PFG was never profitable.”

Peregrine’s Start

Wasendorf, a former trader, started Peregrine as a one-man firm in his basement. It eventually had 241 employees.

He pleaded guilty in September to mail fraud and two counts of lying to federal prosecutors. Reade ordered Wasendorf to make $215 million in restitution to more than 13,000 victims, according to the U.S. attorney’s statement.

Peregrine was a futures and options commodities firm that used customer money and securities to secure their trades. Wasendorf used the stolen money to bolster Peregrine’s financial position, fund outside businesses and for personal use, including a lavish headquarters, a corporate jet and business interests in Romania, prosecutors said in court filings.

Wasendorf fabricated large deposits and eliminated deductions he made from the account, prosecutors said in court filings. He established company rules mandating that he be the only one to examine company bank statements, they said.

Suicide Attempt

Wasendorf’s crimes came to light on July 9 after he tried to kill himself by piping auto exhaust into the passenger compartment of his car outside the firm’s Cedar Falls, Iowa, headquarters.

Wasendorf, who was also Peregrine’s chairman and chief executive officer, admitted his crime in a written statement.

The National Futures Association, an industry self- regulator, announced the same day as the suicide attempt that about $200 million in customer funds the firm reported was on deposit at its bank were unaccounted for. Peregrine filed for bankruptcy court liquidation in July.

Wasendorf told federal agents that “he always knew that it would catch up to him,” Jane Kelly, an attorney with the federal defender’s office in Cedar Rapids who represents Wasendorf, said in a court filing.

“I know the question remains, what did I do with the money?” Wasendorf told agents, according to Kelly’s filing. “Most of the misappropriated funds went to maintain the increasing levels of regulatory capital to keep PFG in business and to pay business” losses.

Kelly’s sentencing recommendation for her client was filed under seal and she couldn’t be reached for comment.

The case is U.S. v. Wasendorf, 12-cr-2021, U.S. District Court, Northern District of Iowa (Cedar Rapids).

To contact the reporters on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net; Edvard Pettersson in Los Angeles at epettersson@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.