Iowa seeks $14.1 million in back taxes from Peregrine Financial CEO

CHICAGO Fri Jan 4, 2013 1:41pm EST

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CHICAGO (Reuters) - Peregrine Financial Group's former chief executive, who has pleaded guilty to embezzling more than $100 million from customers of his futures brokerage, is accused of cheating Iowa out of millions in unpaid income taxes, according to court documents.

Russell Wasendorf Sr., who founded the now-defunct firm, and his ex wife, Connie, received a notice from the state in November saying they owed $14.1 million in back taxes and penalties, according to documents filed in federal court in Chicago by the receiver charged with liquidating Wasendorf Sr.'s assets.

The couple allegedly under-reported their income from 2001 to 2009, when they lived in Cedar Falls, Iowa.

The unpaid tax bill came to light after the receiver filed a motion on Thursday asking the federal court to suspend a deadline for Wasendorf Sr. to respond to the state's notice. A 60-day window for appealing the notice is set to close on Monday.

Wasendorf Sr., 64, pleaded guilty in September to embezzling from customers, lying to regulators to cover his tracks and to mail fraud. He is in jail awaiting sentencing.

Iowa tax officials have said the Wasendorfs "should have reported about $8.3 million per year more in income" from 2001 to 2009, said Randall Lending, an attorney for the receiver, in an interview. He did not know why the state tax notice did not appear to reflect all of the allegedly unpaid taxes.

A spokeswoman for the Iowa Department of Revenue had no immediate comment. The department did not object to an extension of the deadline to appeal the notice, according to court documents.

The public defender representing Wasendorf Sr. in his embezzlement case declined to comment.

Connie Wasendorf, whose divorce was finalized in 2010, could not be reached for comment.

Wasendorf Sr.'s life unraveled in July when he attempted to kill himself and confessed his crimes in a suicide note.

Peregrine Financial, known as PFGBest, quickly collapsed and thousands of former customers are still missing money.

(Reporting By Tom Polansek. Editing by Andre Grenon)

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