WASHINGTON The U.S. futures regulator on Monday barred Jeannie Veraja-Snelling from working as an accountant for firms it oversees after she failed to detect the massive fraud at failed brokerage Peregrine Financial Group.
Peregrine's longtime auditor Veraja-Snelling, who ran her tiny accounting firm from a Chicago suburb, lacked the expertise to audit a futures brokerage, the Commodity Futures Trading Commission said in an order.
"There is no place ... for below-standard audits or auditors who do not have a sufficient understanding of the futures industry," David Meister, the CFTC's top enforcement official, said in a statement.
Former Peregrine head Russell Wasendorf Sr. is serving a 50-year prison sentence for embezzling $215 million from clients in a fraud he hid for nearly 20 years, using the money to fund a lavish lifestyle.
Veraja-Snelling performed the 2011 audit herself, using software that was not tailored to the business, and failed to identify that Wasendorf had exclusive control over accounts containing customer money, the CFTC said.
She also sent bank confirmation forms in return envelopes provided by Peregrine's accounting staff to a post office box secretly controlled by Wasendorf, who then responded himself, forging bank employee signatures, the agency said.
As a result, Peregrine's 2011 statement that Veraja-Snelling had certified were fraudulently overstated by more than $215 million. She settled the CFTC's charges without denying or admitting the findings in the order.
She also agreed not to be paid the $72,925 she had initially charged for the 2011 audit.
Veraja-Snelling did not immediately respond to a request for comment.
Reuters reported in July 2012 that the CFTC was investigating Veraja-Snelling. Experts said the use of such a small auditor for a brokerage with more than $500 million in assets should have been a red flag to regulators.
In June, the CFTC launched the first lawsuit against a bank tied to Peregrine's blowup, alleging that U.S. Bancorp (USB.N) knowingly let Wasendorf - dubbed the "Midwest Madoff" - use customer money held at the bank. The bank denied the allegations and said the lawsuit is without merit.
The demise of Peregrine followed on the heels of the collapse of futures brokerage MF Global, which went under after markets lost confidence that the company was viable after it bet heavily on European sovereign debt.
(Reporting by Douwe Miedema; Editing by Phil Berlowitz)