Saturday, December 7, 2013
The Associated Press
WASHINGTON — Employees of an Iowa-based brokerage firm that has been unable to account for $220 million in customer money found their boss in his car at company headquarters, with a tube connecting the vehicle's tailpipe to the interior, authorities said Tuesday.
Russell Wasendorf Sr., founder and chairman of Peregrine Financial Group in Cedar Falls, Iowa, was discovered Monday with a suicide note that prompted investigators to notify the FBI, which is conducting a preliminary inquiry.
Black Hawk County Sheriff Tony Thompson declined to discuss the contents of the note, except to say it was "a form of documentation that caused alarm, at least concern for us to get federal authorities involved."
Emergency crews were not sure how long Wasendorf had been in the car. He was reportedly in a coma, according to a civil complaint filed Tuesday by the Commodity Futures Trading Commission, the company's top federal regulator.
The commission filed fraud charges a day after Wasendorf's suicide attempt, accusing him and the firm of misusing customer funds and failing to keep them separate from company money. The move is sure to bring more scrutiny to an industry still smarting from the implosion of MF Global, former New Jersey Gov. Jon Corzine's futures firm, which was missing billions in customer cash when it collapsed in October.
Peregrine customer Kevin Davey said the allegations, if true, violate a bedrock principle of futures trading. Traders are confident in their brokerages because they believe that nobody will touch the money in customer accounts.
"The whole industry is based on that," Davey said.
Peregrine helped customers buy, sell and trade foreign currency and futures and options — investments whose value changes based on the expected future price of food and energy commodities and other investments.
The commission said Peregrine falsely reported to the agency that it held $220 million in customer funds when it actually had only $5.1 million. The agency is asking the court to freeze the firm's assets and appoint a receiver to take over Peregrine. Regulators forced Peregrine to freeze customer accounts on Monday.
In a statement to clients, the firm acknowledged Wasendorf's suicide attempt but provided no information on his condition, saying only that his actions provoked investigation of "some accounting irregularities."
Neither a spokeswoman for Peregrine nor the firm's attorneys responded to a call seeking comment.
FBI spokeswoman Sandy Breault said the bureau is gathering facts on the matter as a first step before launching a possible full investigation.
Peregrine was sued in February in federal court in Minnesota over the company's relationship with customer Trevor Cook, who is now serving a 25-year sentence for his role in what the lawsuit called "one of the largest Ponzi schemes in Minnesota history."
The receiver accused Cook and his confederates of stealing more than $190 million from more than 1,000 investors, many of whom were completely ruined financially. Wasendorf's company allowed Cook to open and manage trading accounts "in the face of overwhelming red flags of fraud or insolvency," the lawsuit said.
Cook and his associates ultimately lost more than $30 million.
The suit alleged that Peregrine should have known since Cook became a customer in 2006 that he was "a suspicious and high-risk customer and business partner." In 2001, Cook was sanctioned by the National Futures Association for "conduct reflecting a lack of honesty." The suit is pending in federal district court.
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