CHICAGO Peregrine Financial Group's chief executive used company funds to pay for a $4.5 million life insurance policy, a lawyer for the failed brokerage's bankruptcy trustee said on Wednesday.
Peregrine, commonly known as PFGBest, filed for bankruptcy protection on July 10, one day after CEO Russell Wasendorf attempted suicide and left a note describing how he had stolen more than $100 million from customers' accounts over nearly 20 years.
Trustee Ira Bodenstein, whose job is to oversee the liquidation of Peregrine and return money to customers and creditors, has seen checks confirming Wasendorf used company money to pay for life insurance premiums, the trustee's lawyer Robert Fishman told reporters after a court hearing.
Wasendorf obtained the policy with a face value of $4.5 million eight years ago, according to a receiver appointed for Wasendorf's assets in the firm's bankruptcy.
Customer money may have been used to pay for the insurance, an attorney for the receiver said.
The receiver, whose court-appointed job is tracking down and selling Wasendorf's assets at the highest price, on Wednesday won approval from a federal judge to cash in the insurance policy for $1.3 million. The money will be held in a newly created segregated account for the receiver and distributed to customers and creditors upon order from the court.
A second life insurance policy, obtained by Wasendorf 14 months ago with a face amount of almost $2.2 million, will be allowed to lapse because it has no cash value.
As for other assets, the receiver plans to abandon or surrender a private jet owned by Wasendorf to a lender. Its value was recently assessed at $3.2 million and Wasendorf owed $4.3 million on it, the receiver's lawyer said.
The public defender representing Wasendorf, who is in jail, has declined to comment. Wasendorf was arrested last month for lying to federal regulators, and prosecutors have said they intend to file more charges.
A grand jury is considering the case in Iowa, where Peregrine had its headquarters.
(This story has been corrected to show in headline, first bullet point, and first and third paragraphs of August 8 story that company funds, not client funds, were used.)
(Editing by Bob Burgdorfer)