Peregrine CFTC Case Judge Declines to Hear Clients’ Suit
Nine Peregrine Financial Group Inc. clients lost a bid to have their group lawsuit heard by the same judge who is presiding over an action filed against the failed firm by the U.S. Commodity Futures Trading Commission.
U.S. District Judge Rebecca Pallmeyer in Chicago today denied the request by Hong Kong-based Power Vanguard Ltd. and other customers, who sued on July 20.
Pallmeyer rejected the argument from Claire Gorman Kenny, a Power Vanguard attorney, that while her clients’ case was procedurally different from the CFTC lawsuit, they shared a common nucleus of facts.
“I’m disinclined,” Pallmeyer said before denying the motion outright. Kenny’s request was opposed by the CFTC and by an attorney for another group of Peregrine clients who filed a similar lawsuit on July 13.
Peregrine filed for Chapter 7 liquidation in U.S. Bankruptcy Court in Chicago on July 10, hours after the CFTC filed its lawsuit accusing the firm and founder Russell Wasendorf Sr. of misappropriating more than $200 million in customer funds.
Power Vanguard and its co-plaintiffs sued Wasendorf and other Peregrine executives, including firm President and Chief Operating Officer Russell Wasendorf Jr., for allegedly commingling firm and client funds.
Their lawsuit, the third of three now pending in federal court in Chicago, seeks class status for 24,000 similarly situated businesses and individuals.
Jeffrey Salas, the attorney who filed the first of the proposed class actions, on July 31 told U.S. District Judge Sharon Johnson Coleman that all three cases should be consolidated before her. He opposed Power Vanguard’s motion.
Coleman directed Kenny and attorney Matthew Herman, who represents yet another group of clients, to file reply briefs by tomorrow.
Pallmeyer last month appointed Michael Eidelman as receiver for Wasendorf, assigning him to marshal the founder’s assets for the benefit of his creditors.
All civil actions against Wasendorf must be halted, Eidelman’s attorney, Cindy Stuyvesant, told Coleman on July 31.
“If there’s any money to be gotten, it’s the best way to do it,” Stuyvesant told Coleman and customers’ lawyers that day. Power Vanguard’s complaint acknowledges the stay of lawsuits against the elder Wasendorf.
Chicago attorney Nicholas P. Iavarone is counsel to Russell Wasendorf Jr., who is a defendant in all three customer cases.
While he hasn’t made an appearance in any of the suits pending in the Chicago federal court, Iavarone said in a telephone interview today that his client has been subpoenaed to appear before a federal grand jury in Cedar Rapids.
“He has been subpoenaed and he is cooperating,” Iavarone said. “That’s as much as I can say.”
The bankruptcy case is Peregrine Financial Group Inc., 12- 27488, U.S. Bankruptcy Court, Northern District of Illinois (Chicago). The regulatory case is U.S. Commodity Futures Trading Commission v. Peregrine Financial Group Inc., 12-cv-05383, U.S. District Court, Northern District of Illinois (Chicago). The criminal case is U.S. v. Wasendorf, 12-mj-131, U.S. District Court, Northern District of Iowa (Cedar Rapids).
The client cases are LaSalvia v. Wasendorf, 12-cv-05546; Wolinsky v. Wasendorf, 12-cv-5624; and Power Vanguard Ltd v. Wasendorf, 12cv5727, U.S. District Court, Northern District of Illinois (Chicago).
To contact the reporter on this story: Andrew Harris in Chicago at email@example.com
To contact the editor responsible for this story: Michael Hytha at firstname.lastname@example.org