Peregrine CEO Arrested, Admitted Fraud in Suicide Note
Category: Global Market
July 13 2012 / By JACOB BUNGE / WSJ
The chief executive of collapsed brokerage firm Peregrine Financial Group Inc. was arrested Friday and charged with lying to regulators, according to the U.S. Attorney's Office.
Russell Wasendorf Sr. admitted to law enforcement authorities this week that he embezzled "millions of dollars" and forged bank statements for "nearly twenty years," according to a court complaint released Friday.
The CEO and founder of Peregrine is set for an initial appearance in federal court Friday to answer charges that he lied to futures market regulators regarding customer money that was supposed to be safeguarded by his firm.
The Commodity Futures Trading Commission on Tuesday levelled civil charges on Mr. Wasendorf and Peregrine, alleging that about $215 million in customer money had gone missing.
The shortfall came to light after Mr. Wasendorf attempted suicide Monday morning, one day after agreeing to allow regulators to electronically audit his firm's accounts, according to people familiar with details of the investigation.
Peregrine filed for Chapter 7 bankruptcy protection Tuesday evening.
In a signed note discovered in Mr. Wasendorf's vehicle Monday morning he said that he had used computer software, scanners and laser printers to falsify bank documents for nearly two decades, according to court documents.
"I have committed fraud. For this I feel constant and intense guilt," the statement said.
Mr. Wasendorf also explained his motivation.
"I had no access to additional capital and I was forced into a difficult decision: Should I go out of business or cheat? I guess my ego was too big to admit failure," the statement said, according to the court filing.
Mr. Wasendorf relied on "careful concealment" and "blunt authority" to hide his fraud from his employees, he wrote in the note, as detailed in the complaint. In 2006 he opened a P.O. box that he used to correspond with auditors checking on Peregrine's accounts, the complaint said.
Authorities interviewed Mr. Wasendorf on July 9 in an Iowa City hospital, according to the complaint, at which time he acknowledged he wrote the note and confirmed that its contents were true.
Mr. Wasendorf's first appearance in federal court is set for 4 p.m. Friday in Cedar Rapids, Iowa, according to the statement.
Mr. Wasendorf has been in an Iowa City hospital this week. Earlier Friday, Randall Lending, Mr. Wasendorf's court-appointed receiver, told Dow Jones Newswires Mr. Wasendorf remained "incapacitated," but had no further details of his condition or whereabouts, following what law enforcement officials called an attempted suicide.
Mr. Lending, a senior member at Vedder Price, spoke after a judge granted a request by Peregrine's trustee to operate the company and retain and pay key staff.