Sept. 12 (Bloomberg) -- Russell Wasendorf Sr., the indicted founder of Peregrine Financial Group Inc., admitted to crimes including mail fraud in a plea agreement he reached with prosecutors, an FBI agent testified.
William Langdon, the U.S. Federal Bureau of Investigation agent whose affidavit supported the original criminal complaint against Wasendorf in July, disclosed the agreement yesterday at a bail hearing in federal court in Cedar Rapids, Iowa.
Wasendorf, who has been in custody since his arrest on July 13, was indicted last month on 31 counts of lying to U.S. regulators about how much client money his now-bankrupt commodities firm had on deposit.
The agreement, which includes admissions of embezzlement and making false statements, could result in a 50-year prison sentence for Wasendorf, Langdon said under questioning by Assistant U.S. Attorney Matthew Cole.
Wasendorf entered a plea of not guilty on Aug. 17 and hasn’t changed that plea since then. Langdon didn’t say whether the plea agreement would be brought before the court.
The Peregrine founder, who also served as firm chairman and chief executive officer, was arrested four days after trying to asphyxiate himself in his car outside Peregrine’s Cedar Falls, Iowa, headquarters.
Langdon, in his July affidavit, said Wasendorf had in his possession then a written confession that said he had stolen money from the firm for almost 20 years.
At least $190 million in client funds is unaccounted for, Peregrine’s bankruptcy trustee, Ira Bodenstein, told creditors at a meeting yesterday in federal court in Chicago, where the company filed for liquidation on July 10.
Federal officials are still trying to find Wasendorf’s assets, Langdon said yesterday.
“I have no idea where most of the $200 million has gone,” he said. “A very big piece of the pie is still out there and I don’t know where.”
U.S. Magistrate Judge Jon Scoles presided over yesterday’s hearing, which he scheduled at Wasendorf’s request, according to a Sept. 7 order posted in the court’s electronic docket.
The CEO appeared in court wearing an orange, prison-issued uniform, handcuffs and leg irons. His age was given as 64 when prosecutors announced his indictment on Aug. 13.
Wasendorf voluntarily cooperated with U.S. authorities, without receiving any assurance of consideration, defense lawyer Jane Kelly told the judge yesterday. She argued for his release to the custody of his pastor, Linda Livingston.
“In accepting the plea agreement, he did not have a whole lot of options,” Kelly said. “He could have refused to cooperate with officials. He did not.”
Livingston, an evangelical Lutheran minister, told the court that she has known Wasendorf since they were in high school and that they have met almost daily since his suicide attempt.
Livingston said Wasendorf is no longer suicidal nor a flight risk because he has accepted his fate.
“He is anticipating that he will spend the rest of his life in prison,” she said. “He knows he’s going to have to suffer the consequences of his past actions. He’s willing to accept it and move on.”
“Russ created a prison of his own, in which he has been living for the past 20 years,” Livingston said. “Now he has been released from that prison and that is a relief.”
The pastor said she and her husband are willing to house Wasendorf and his wife, Nancy, who has filed for an annulment of their marriage in a Las Vegas court.
Peter Deegan, another assistant U.S. attorney, opposed the request, telling Scoles the Peregrine chairman remains a suicide risk and might flee. Deegan called Wasendorf “unstable.”
“After 20 years of fraud, it’s a little bit much to think he has changed the way he thinks,” Deegan said. “This is too large a risk to take.”
Deegan asked Scoles to set a date when Wasendorf would change his plea to guilty. The magistrate didn’t rule on the bail request and said that if he approved it, he would probably set a date for a new plea before agreeing to let Wasendorf out.
The criminal case is U.S. v. Wasendorf, 12-cr-2021, U.S. District Court for the Northern District of Iowa (Cedar Rapids).
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