Peregrine trustee bills $3.7 mln for unwinding failed broker

Mon Mar 25, 2013 2:30pm EDT

Related Topics

* Trustee submits first bill to estate of bankrupt broker

* Seeks 3 pct of amount returned to customers

* Asks for payment periodically, instead of in lump sum

* Itemized bill includes charges for media interviews

By Tom Polansek and Ann Saphir

CHICAGO/SAN FRANCISCO, March 25 (Reuters) - The trustee unwinding Peregrine Financial Group is seeking $3.7 million as payment for his eight months of work to return money to former customers of the failed broker, court documents show.

Ira Bodenstein, the court-appointed bankruptcy trustee and a lawyer in Chicago, said he is claiming roughly three percent of the $123.3 million he has returned to former Peregrine customers, as allowed under the U.S. bankruptcy code.

His filing described the bill as "appropriate in light of the results and benefits achieved through his efforts on behalf of the estate and its creditors."

The amount returned to customers represents less than a third of the funds they had deposited at the broker just before their accounts were frozen when the futures broker collapsed in July.

Founder Russell Wasendorf Sr., 65, is serving a 50-year prison sentence for stealing close to $215 million from his customers over nearly 20 years.

Bodenstein late on Friday asked a federal bankruptcy judge in Chicago to pay him an initial installment of $1.2 million and said he will "seek the balance... at a later date."

As regulators closed in on his fraud last summer, 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.

Wasendorf pleaded guilty in September to embezzlement and other crimes and last month began serving his sentence at a high-security federal prison in Indiana.

Thousands of customers are still missing money, and a federal judge has said they will likely never be fully repaid.

The money used to pay Bodenstein will come from Peregrine's estate and would otherwise be used to pay back customers and creditors.

Bodenstein "has done a pretty good job, but seeing him bill the statutory max to fraud victims who stand to lose half their assets" is disconcerting, said James Koutoulas, a hedge fund manager who has been working to help former Peregrine clients get their money back.

Bodenstein could not immediately be reached for comment while on vacation on Monday. His lawyer did not immediately respond to a request for comment.

ITEMIZED BILLING

Bodenstein has spent 747 hours, at a rate of $475 an hour, working with former Peregrine employees, customers, regulators, and law enforcement officials to unwind the futures broker, according to court documents. That amounts to about $355,000 worth of work, the filings show.

The trustee included in his filings an itemized billing of his work, including interviews with news reporters.

He billed $475 for an hour-long interview with a Chicago Tribune reporter in September and on several occasions lumped together his charges for time spent talking with the press and former Peregrine customers.

The dates for several of the times he billed for press interviews coincide with dates on which he spoke with Reuters reporters. (Additional reporting by Nick Brown in New York; Editing by Tim Dobbyn)

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