(Adds quotes from judge, trustee, context of case)
By Mark Weinraub and P.J. Huffstutter
CHICAGO, April 17 (Reuters) - The trustee in charge of returning funds to customers of scandal-ridden Peregrine Financial Group will receive an initial payment of $1.23 million for his role in unwinding the failed brokerage, a U.S. Bankruptcy Court judge ruled Wednesday.
U.S. bankruptcy code allows for the court-appointed trustee, Chicago lawyer Ira Bodenstein, to receive a commission of up to 3 percent of the $123.3 million that has been returned to former brokerage customers. The returned monies represents less than one-third of the funds customers had deposited with the futures broker when the firm collapsed and the accounts were frozen last July.
The initial payment is only part of the $3.7 million in compensation Bodenstein is seeking for his role in the bankruptcy proceedings, which represents the maximum 3 percent commission allowed under federal law.
While that sum may seem large, the Bankruptcy Court judge, Carol Doyle, said Wednesday that only one person had written a letter to the court to complain about the trustee’s pay day request.
In a letter that Doyle read in part in court, the person - who claimed to have lost $100,000 - questioned why Bodenstein should make more money in “one fell swoop” than the defrauded Peregrine customer would make in a lifetime.
Peregrine Financial, known as PFGBest, collapsed last summer after its founder, Russell Wasendorf Sr, tried to kill himself just before regulators uncovered a customer fraud scheme going back decades. Wasendorf began serving a 50-year prison term in February for stealing close to $215 million from his customers.
Some 24,000 former customers are still missing most of the money they had invested with the firm. The money to pay Bodenstein will come from Peregrine’s estates and would otherwise be used to pay back customers and creditors.
Bodenstein told Reuters after Wednesday’s 20-minute hearing at federal Bankruptcy Court in Chicago that he expected the next distribution to Peregrine customers would be sometime in the summer, adding that he did not know how big the payments would be.
Bodenstein has described his compensation request as “appropriate in light of the results and benefits achieved through his efforts on behalf of the estate and its creditors,” according to court papers. Among other things, Bodenstein’s bill covers months worth of work, including travel, meetings and interviews with reporters, according to an itemized statement filed with the court.
Bodenstein refrained from asking for the full payment right away because he did not want to be seen as putting himself ahead of Peregrine’s former customers, his lawyer, Robert Fishman, previously told Reuters. (Additional reporting by Tom Polansek and Ann Saphir; Editing by Leslie Adler)