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Peregrine president, son of CEO, subpoenaed to testify
CHICAGO (Reuters) - Peregrine Financial Group President Russell Wasendorf Jr. has been subpoenaed to testify before a federal grand jury considering alleged wrongdoing by his father, the chief executive of the failed brokerage.
A federal grand jury in Iowa ordered Wasendorf Jr. to testify on the matter next month, his lawyer, Nicholas Iavarone, said on Tuesday.
Peregrine CEO Russell Wasendorf Sr. was arrested on July 13 on charges of lying to federal regulators in connection with a massive fraud, and prosecutors have said they expect to expand charges in the case.
Federal prosecutors declined to comment on the subpoena. The public defender representing Wasendorf Sr. did not return a call for comment.
Peregrine, commonly known as PFGBest, filed for bankruptcy protection on July 10, one day after Wasendorf Sr. attempted suicide and left a note describing how he had bilked customers of more than $100 million over nearly 20 years.
He said he had forged bank statements and intercepted financial statements that were mailed between U.S. Bank, where customer money was held, and the firm's auditors at the National Futures Association.
Separately, the bankruptcy trustee for Peregrine Financial on Tuesday asked the bankruptcy court for the authority to require 10 financial institutions to produce information about Peregrine's current and former accounts.
The trustee asked for authority to issue subpoenas to JPMorgan Chase, U.S. Bank, Citi, Bank of New York Mellon, First Premier Bank, Commerzbank AG, Royal Bank of Scotland, Jefferies Bache LLF, Morgan Stanley and Goldman Sachs & Co. "to obtain documents relating to open and closed accounts" that Peregrine had with them.
A U.S. bank spokesman said the bank was already cooperating with law enforcement and regulators, and would cooperate with the trustee as well.
The subpoena shows the federal probe of Wasendorf Sr. is progressing as prosecutors pull together their case. The grand jury is expected to hear testimony from a range of witnesses, including other former executives at Peregrine.
If prosecutors "want to lay foundations about who had responsibilities and who didn't" for handling financial statements at Peregrine, Wasendorf Jr. "would be the person to provide that information," said Iavarone.
Wasendorf Jr., also chief operating officer of Peregrine, oversaw day-to-day operations at the brokerage and was unaware of any wrongdoing, while his father handled financial statements, Iavarone said.
Wasendorf Jr. has been cooperating with investigators since allegations against his father came to light, the lawyer said.
The subpoena could indicate that prosecutors believe Wasendorf Jr. was not involved in the scam.
As a matter of U.S. Department of Justice policy, a person who is a target of an investigation generally will not be subpoenaed, said Bob Teig, a former assistant U.S. attorney for northern district of Iowa, where Wasendorf is being prosecuted.
Teig said he expected that investigators still had a lot of work to do, given the length of Wasendorf Sr.'s alleged fraud and the numerous financial transactions it likely involved.
An obvious area of inquiry would be whether anyone else was involved in the alleged fraud, he said.
(Additional reporting by Ann Saphir.; Editing by Gerald E. McCormick, John Wallace, Steve Orlofsky, and Bob Burgdorfer)
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