* Wasendorf apologizes to colleagues, investors in court
* Former CEO looks gaunt, has tumor on pancreas
* Prosecutor says business built on "smoke and mirrors"
* Judge says clients unlikely to get their money back
By P.J. Huffstutter
CEDAR RAPIDS, Iowa, Jan 31 A U.S. judge on
Thursday sentenced the founder of Peregrine Financial Group to
50 years in prison for looting hundreds of millions of dollars
from the brokerage, saying his customers would probably never
recover the money they lost.
Russell Wasendorf Sr., who had tried to kill himself just
before the fraud was uncovered last year, received the maximum
sentence allowed by law and was ordered to pay $215.5 million in
restitution for his nearly 20-year scheme.
A local hero in Iowa known for his charitable work and
lavish lifestyle, Wasendorf triggered the collapse of the
brokerage through his fraud. The scam shook investors'
confidence in the U.S. futures industry, already rattled by the
failure of larger rival MF Global less than a year earlier.
"I'm very sorry for the financial and emotional damage I've
caused to investors and employees of Peregrine Financial Group,"
Wasendorf said in a feeble voice at a sentencing hearing in
Cedar Rapids, Iowa.
"I feel I fully deserve whatever sentence I am given," he
said. "My guilt is such I will accept that sentence."
Chief Judge Linda Reade of the U.S. District Court of the
Northern District of Iowa said former Peregrine customers will
probably never get all their money back.
Wasendorf, 64, admitted last July that he had bilked tens of
thousands of clients over a period of two decades. He used
little more than a rented post office box, Photoshop and inkjet
printers to fake bank statements and lie to federal regulators,
employees and his closest family members.
As regulators closed in on the fraud, 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.
Wasendorf 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
"The lengthy prison sentence imposed today is just
punishment for a con man who built a business on smoke and
mirrors," said Acting U.S. Attorney Sean Berry.
Supporters of the disgraced executive had asked Reade for
leniency, arguing that Wasendorf is in frail health and had
helped others even in the midst of his 20-year fraud.
Shackled at his wrists and ankles and wearing an orange
sweatshirt over a prison jumpsuit, Wasendorf looked gaunt in
court after spending six months in isolation in a county jail.
He has been sick in jail, and doctors found a tumor on or
near his pancreas, according to testimony from his pastor, Linda
Livingston of Ascension Lutheran Church. Wasendorf's mother died
of pancreatic cancer, but it is unknown whether Wasendorf's
tumor is cancerous, she said.
Despite his misdeeds, Wasendorf "did do some positive things
for the community," said former U.S. Congressman David Nagle
from Iowa, who spoke up for the fallen CEO in court.
Nagle, who helped Wasendorf win zoning approval for
Peregrine's environmentally-friendly headquarters, asked the
judge for leniency.
"Who wants to defend the magnitude of the crimes Mr.
Wasendorf committed?" he said. "But good people do bad things."
Wasendorf was well known for donating to local charities
before his empire came crashing down.
However, he built his reputation for generosity using money
stolen from his customers, Judge Reade said, adding that the
donations likely eased Wasendorf's feelings of guilt.
"It is easy to be generous with other people's money," she
Wasendorf's downfall shocked his family and colleagues and
shattered his image in his adopted hometown of Cedar Falls,
where he moved Peregrine's headquarters in 2009.
With an unusual empire including a Romanian property company
and a glossy magazine, Wasendorf's ego stood out even in the
rough and tumble world of the Chicago-based futures industry.
He proudly underwrote big-name guest speakers at industry
events and held private VIP receptions for them, and flashed a
jeweled pinky ring. His favorite quote, according to his
Facebook page, was, "If I wanted patience, I would buy it."
U.S. prosecutors said the large financial loss, the
sophisticated nature of the crime, and the sheer number of
victims justified Wasendorf spending the rest of his life behind
"The defendant spent like he was the richest man in the
world," Assistant U.S. Attorney Peter Deegan said in court.
Prosecutors said the government doesn't anticipate filing
further criminal charges in Peregrine's downfall. The FBI
continues to review the firm's records.
Wasendorf could trim 7.5 years off his sentence for good
behavior, which would made him at least 106 years old before he
is eligible for release.
The National Futures Association, which regulated Peregrine,
had no comment on Wasendorf's sentence.
The government has not yet decided where Wasendorf will
serve out his days or when he will be shipped to federal prison.
Judge Reade said she would try to place him in a facility
near his family.
James Koutoulas, co-founder of the Commodity Customer
Coalition which has been working to help former Peregrine
customers get their money back, welcomed the sentence. "I want
this guy sitting on a cot afraid a shiv is going to go in his
neck at night," he said.
Bernard 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.