UPDATE 2-Peregrine boss Wasendorf starts 50-year jail term
* Wasendorf transferred to high-security Indiana prison
* Former tycoon had been isolated in Iowa cell
* Murderers, robbers, Somali pirate among fellow inmates
By Tom Polansek
Feb 28 (Reuters) - Russell Wasendorf Sr., the former chief executive of Peregrine Financial Group, has begun serving a 50-year sentence at a high-security federal prison in Indiana for bilking $215 million from customers of the failed futures brokerage.
Wasendorf, who turned 65 on Monday, arrived on Wednesday at the U.S. Penitentiary in Terre Haute, Indiana, according to the Federal Bureau of Prisons. It is the same facility at which Oklahoma City bomber Timothy McVeigh was executed in 2001.
Now known as Inmate #12191-029, Wasendorf had been locked in a county jail in Cedar Rapids, Iowa, since he confessed in July to stealing from tens of thousands of clients over a period of two decades.
A federal judge in January sentenced Wasendorf, who had tried to kill himself just before the fraud was uncovered last year, to 50 years behind bars, the maximum allowed by law.
Federal marshals transferred Wasendorf to Indiana on a private plane, according to the U.S. Marshals Service, giving him a last taste of the high-flying life he previously enjoyed.
He pleaded guilty in September to embezzling more than $100 million, used to fund a life of luxury that included a private jet, extensive wine collection and lakefront condo in Chicago. Prosecutors said the amount stolen was more than $215 million.
The jail is a "good selection" by prison officials because it is close enough to allow visits from Wasendorf's brother in Iowa, said the former CEO's pastor, Linda Livingston. The brothers had been estranged before Wasendorf's downfall.
However, Wasendorf is not a high security risk, said Livingston, one of the few people who has had regular contact with him.
"It will be better than where he has been," she said about the federal prison, noting that Wasendorf ached for more human contact after being held in isolation in the county jail.
"He would be delighted to be able to be involved in growing a garden or cooking food in a prison setting," she said.
Livingston said she last saw Wasendorf, a former restaurateur, on his birthday in the county jail and sang to him. She arrived at the jail for a visit on Wednesday and was told he was no longer there.
NO 'CLUB FED'
Wasendorf will need to watch his back in federal jail because his fellow inmates will be tough, said Larry Levine, the founder of Wall Street Prison Consultants, a firm that advises prisoners and their families.
"He's going to be rubbing shoulders with people doing life sentences, violent offenders," said Levine, who said he spent time in federal prisons for securities fraud and drug trafficking. "He's not in a Club Fed."
Other prisoners at Terre Haute include Ahmed Sala Ali Burale, a Somali who in 2011 was sentenced to life in jail after participating in a pirate attack that resulted in the death of four Americans.
Prison officials considered the severity of Wasendorf's crimes, the length of his sentence, and geography when they assigned him to the prison in Indiana, said Chris Burke, a spokesman for the Federal Bureau of Prisons.
Inmates with longer sentences are often jailed at high-security facilities because they are thought to present a greater risk for escape, he said.
The government also tries to place convicts in prisons within 500 miles of the facilities in which they were previously held.
Wasendorf's life behind bars is tightly controlled. Upon arrival, he was assigned khaki-colored pants, a khaki-colored button-up shirt, gym shoes and underwear.
He will be expected to work, with potential jobs ranging from cooking in the kitchen to sweeping floors, Burke said.
"A high-security facility is just that. It's a high-security facility," he said.
An administrator at the federal prison did not return a call seeking details about Wasendorf's living conditions.
The conditions may be harsher than those faced by Wall Street con man Bernard Madoff. Madoff, who pleaded guilty in 2009 to running a multibillion-dollar Ponzi scheme, is serving a 150-year sentence in a medium-security North Carolina federal prison.
As regulators closed in on his fraud last year, Wasendorf made a botched suicide attempt outside his $24 million headquarters in Cedar Falls, Iowa, which investigators say was financed with money siphoned from customers.
Peregrine Financial, known as PFGBest, quickly collapsed, and 24,000 former customers are still missing most of the money they had invested with the firm.