CHICAGO (Reuters) - Russell Wasendorf Sr., who admitted looting more than $100 million from futures broker Peregrine Financial Group, expects to die behind bars even if a judge ignores prosecutors and imposes a lenient sentence at a hearing on Thursday.
“He has been ready, since he confessed, to get to where he is going to spend the rest of his life,” said pastor Linda Livingston of Ascension Lutheran Church, one of Wasendorf’s few regular visitors.
Prosecutors say the amount Wasendorf stole was closer to $215 million and have asked a federal court in Iowa to sentence the 64-year-old to 50 years in prison for the scam which affected tens of thousands of customers.
After spending the last six months in a county jail and losing nearly 30 pounds from his already-trim frame, Wasendorf believes that even if he does not receive the maximum sentence, he will still end up dying in jail, Livingston told Reuters.
Wasendorf admitted last July he had bilked clients over a period of nearly 20 years, faking bank statements and lying to 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.
Former customers, who range from farmers to financial traders, feel little sympathy for Wasendorf Sr.
“I‘m glad I got a little money back,” said Joe Berger, who had roughly $100,000 in a Peregrine account. “I just hope that they follow through and get a good 50-year sentence or something equivalent and that I never hear from him again, until I get a notice that he died in prison.”
Russell Wasendorf Jr., Wasendorf’s son and the president of Peregrine, said his life has been destroyed by his father’s crimes. Teetering on the edge of bankruptcy, the son has moved his family to Florida from Iowa. He denies knowing about the fraud.
“It has shattered my family, ruined my reputation, fractured my marriage, separated me from my oldest son and close friends,” Wasendorf Jr. said in a statement. “Mentally and emotionally it has torn me apart and left me battling to stay strong and optimistic all while feeling sad and betrayed.”
Wasendorf Sr. feels a weight has been lifted from his shoulders by revealing his secret and is at peace with the likelihood that he will never be a free man, Livingston said.
He is allowed out of his cell for one hour a day to walk in a room that is about 15 feet by 15 feet, she said, adding the cell has no view of the outside world. He has been under strict watch after attempting suicide.
Health has become a concern.
“The weight is indicative of the fact that he’s not ok,” said Livingston, who attended high school with Wasendorf Sr. “There’s something going on with his physical being but what that is has not been identified.”
Wasendorf Sr. has passed hours reading the James Joyce classic “Ulysses,” a lengthy account of a day in the lives of a group of Dubliners that serves as a metaphor for the human condition.
His Spartan existence in jail is a far cry from his former high-flying days, when he snapped up Romanian real estate, opened high-end restaurants and sported a jeweled pinky ring.
Part of Wasendorf’s life was an open book: He brought celebrity speakers such as Ted Koppel to industry events and wrote columns for a glossy magazine he owned.
Toward the end of the last decade, he moved his headquarters to Cedar Falls from Chicago, bought a private jet and built his $24-million state-of-the-art office, touting the move as a template for revitalizing small-town America.
Less known were the personal dramas he faced, including two divorces, a last-minute wedding in Las Vegas, a split from his brother and his seething resentment against establishment rivals in Chicago.
Wasendorf Sr.’s third wife, whom he wed last June just days before his suicide attempt, has sought an annulment of their marriage. A hearing for the annulment is set for February 12 at Clark County District Court in Nevada.
WHERE‘S THE MONEY
Peregrine customers are still bitter that regulators did not detect the scheme, which rattled confidence in the futures industry that was already shaken after the collapse of brokerage MF Global less than a year earlier.
No one has been charged in the downfall of MF Global, although U.S. congressional investigators have determined former CEO Jon Corzine failed to maintain the systems and controls necessary to protect customer funds that were improperly used to make risky bets on European debt.
While former MF Global customers have now gotten back nearly all of their money, most Peregrine customers have received back only about 30 cents on the dollar.
Cervino Capital Management, a commodity trading adviser, closed its doors following the collapse of Peregrine Financial.
“We just did not want to be associated with an industry that wasn’t functioning,” said Davide Accomazzo, who was Cervino’s managing director and agrees Wasendorf should receive a life sentence. “At the moment the regulatory framework does not protect the clients.”
Peregrine’s bankruptcy trustee, Ira Bodenstein, has distributed $123 million to customers so far, and has $112 million more in accounts he controls, filings show. Banks with which Peregrine dealt hold another $25 million of customer cash.
This week Bodenstein filed his first lawsuit to recoup additional money, suing Wasendorf’s ex-wife for the return of $2.9 million she got from her 2010 divorce. Most was transferred to her directly from customer accounts at Peregrine, the lawsuit said.
Wasendorf’s receiver, Michael Eidelman, is likewise working to raise money for the clients fleeced by Wasendorf.
Eidelman has auctioned off the former CEO’s wine collection and other assets to net $725,000; sold two of Wasendorf’s homes for a collective $1.3 million, and stands to raise another $1.3 million from the sale of a shuttered restaurant and Wasendorf’s Cedar Falls estate.
“Are we going to come close to $200 million?” he said. “Unfortunately we are not.”
Taking the witness stand against Wasendorf Sr. on Thursday will be Peregrine’s former CFO Brenda Cuypers and two other employees, along with a special agent for the FBI.
Chief Judge Linda Reade of the U.S. District Court of the Northern District of Iowa will hear their testimony but may delay issuing a sentence. Wasendorf Sr. also may be assigned to a federal prison at a later date.
The judge will hand down the maximum 50-year sentence “if she wants to clearly send a message of community outrage at what has occurred,” said Richard Holwell, a former federal judge in the Southern District of New York who is now a partner at Holwell Shuster & Goldberg LLP in New York.
“She’d get to the same results with a sentence half that, but there is a symbolic element to some of these sentences,” said Holwell, who is not involved with the Peregrine case.
By comparison, Bernard Madoff, who pleaded guilty in 2009 to running a multibillion-dollar Ponzi scheme, is serving a 150-year sentence in a North Carolina federal prison.
With reporting by PJ Huffstutter in Chicago and Ann Saphir in San Francisco; Editing by Claudia Parsons