CHICAGO/CEDAR FALLS, Iowa (Reuters) - Peregrine Financial Group Chief Executive Russell Wasendorf Sr., who last week confessed to bilking futures customers of more than $100 million, owned a jet plane and an extensive wine collection but he did not, he said in his confession, live large.
“I don’t live a lavish lifestyle,” Wasendorf wrote in a signed note detailing the 20-year fraud. “Although I am sure that some people will think that I do.”
A complete copy of the confession was obtained by Reuters on Wednesday.
As a court-appointed receiver in Chicago prepares to sell Wasendorf’s Hawker Beechcraft jet, his $100,000 wine collection and other assets that may have been bought with stolen money, the federal court in Cedar Rapids postponed Wasendorf’s Wednesday bail hearing until July 27 to give him more time to work with his newly appointed public defender.
He will remain in custody until then, a spokesman for the U.S. Attorney General said.
The 64-year-old owner and founder of the failed Iowa-based brokerage was arrested last Friday, days after a botched suicide attempt, and charged with lying to government regulators.
Once a well-known figure in the futures trading industry, Wasendorf now faces “up to decades” in prison, prosecutors have said, with additional charges likely to be filed. He confessed to using a post-office box and forged bank documents to dupe regulators, customers, employees and even his own son for 20 years.
In his note, Wasendorf said he began taking customer funds in 1993, just one year after he launched the brokerage, to keep the company afloat.
In the confession he said he had spent most of the funds he “misappropriated” on building a new headquarters in Cedar Falls, boosting the firm’s capital, covering business losses, and paying fines and fees charged by regulators.
“I don’t feel bad having deceived the Regulators -- the CFTC (the Commodity Futures Trading Commission) and the National Futures Association,” Wasendorf said in the note. “These Regulators are not the Police of the Industry they are the Gestapo!”
In the note, Wasendorf was by turns angry and contrite. He explained he was “constantly trying to find a way to replenish” customer accounts by building new businesses, and that “given more time I may have been able to pull it off and pay back everything.”
The revelation that the CEO of a futures broker could have fooled regulators for years has forced even longtime defenders of self-policing to rethink their views.
“I don’t know how you couldn’t say, we need to reevaluate the self-regulatory system,” Futures Industry Association chief Walt Lukken told reporters after an industry event in Chicago. “They weren’t doing the right things to prevent this.”
Spokesmen from the CFTC and the NFA declined to comment.
As the unfolding scandal shocked the trading community last week, the CFTC last Tuesday charged Wasendorf with misappropriating customer money. Regulators said more than $200 million is missing. That same day, Peregrine filed to liquidate under Chapter 7 of the U.S. bankruptcy code.
Michael Eidelman, the receiver for Wasendorf in the bankruptcy of PFGBest, as his firm is known, is moving to secure the CEO’s personal assets, including a $100,000 personal wine collection stored at myVerona, Wasendorf’s high-end Italian restaurant in Cedar Falls, Iowa, Eidelman said in an interview.
Other assets include a jet, valued by brokers at $7 million to $10 million, that is now at an airport in Waterloo, Iowa, and a condominium near Lake Michigan in downtown Chicago, valued by the county’s property tax assessor at about $1 million.
The director of the Waterloo airport where the jet is parked said that a representative from CFTC had called to ask that the locks be changed on the city-controlled hanger so it could be secured.
The condo will “go on the market pretty soon,” Eidelman said. Wasendorf also owns a house just outside Cedar Falls worth close to $1 million, property records show.
“Upon information and belief, the assets owned by the Wasendorf Entities are diversified and include a restaurant, publishing company, aircraft and a construction company,” Eidelman said in a motion Tuesday requesting that the bankruptcy court give him more power and funding to pursue and secure those assets.
“It is possible assets owned by the Wasendorf Entities may have been procured with funds embezzled from PFG,” he said.
Eidelman asked the court for permission to employ the jet’s pilot and myVerona’s manager, as well as the chief financial officer at Wasendorf & Associates, which runs Wasendorf’s now-closed publishing arm, to help him “identify, locate, secure, and take custody of the assets owned and controlled by Wasendorf Sr. and the Wasendorf entities.”
The criminal case is USA v. Wasendorf, U.S. District Court, Northern District of Iowa, No. 12-131
The bankruptcy case is Peregrine Financial Group Inc, Case No. 12-27488 U.S. Bankruptcy Court, Northern District Of Illinois (Eastern Division).
Additional reporting by Tom Polansek and PJ Huffstutter; Editing by Maureen Bavdek and Tim Dobbyn