Wasendorf Pleads Guilty to Four Charges, Remains in Custody

By Trish Mehaffey, Reporter

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CEDAR RAPIDS, Iowa — A federal judge will detain former Peregrine Financial founder Russell Wasendorf Sr. pending his sentencing after he pleads guilty this afternoon to embezzling $200 million from customer accounts and making false statements to regulators.

U.S. District Chief Judge Linda Reade partially granted federal prosecutors' appeal to stay a magistrate's order made last week to release Wasendorf pending sentencing. Wasendorf will remain in jail pending further ruling from the court, according to the order issued before noon.

Wasendorf, 64, of Cedar Falls, committed "one of the most lengthy and egregious frauds in the history of this district" and he recently decided to kill himself rather than face the consequences of his crimes, the government argued in the appeal filed Monday morning.

Prosecutors argued there is serious risk that Wasendorf will flee and no conditions of release will reasonably guarantee his appearance for sentencing.

U.S. Magistrate Jon Scoles had granted Wasendorf's release pending sentencing after he pleads guilty to four charges. Wasendorf would have been released to stay with his pastor and friend at her home in Marion. Scoles granted the release, saying all of Wasendorf's assets had been frozen or relinquished to a trustee or receiver and he no longer had his passport.

Prosecutors admitted Wasendorf's domestic assets have been frozen or seized but what is left are his known foreign assets and any unknown assets. Wasendorf provided answers to questions about his assets, but given the nature of his crimes "none of what he says can be taken at face value," the appeal reads. A portion of the stolen customer funds has been retrieved or accounted for with the receiver identifying less than $3 million in the case.

Wasendorf has foreign ties throughout Europe and has business interests in Romania, according to the appeal. The value of those assets in Romania are uncertain but they could be tens of millions of dollars. Many of the known assets have been seized or restrained but there could be other unknown assets. Wasendorf stole about $200,000 over 20 years and a full accounting of the proceeds may be impossible to have because a significant amount of time has passed and records are lacking, prosecutors said.

The government has proven $200 million is missing and Wasendorf is the only person to know where the money went, according to the appeal. If only a small portion is hidden away, it could be an incentive and means for him to flee a probable life sentence.

Wasendorf is expected to plead guilty at 2:30 p.m. Monday to mail fraud, embezzlement of customer funds, making false statements to the Commodity Futures Trading Commission and making false statements to a futures trading association. He faces up to 50 years in prison and millions of dollars in fines and likely restitution.

Wasendorf is accused of making and using false statements to the commission regarding customer funds by tens of millions of dollars, according to the indictment. Wasendorf on 31 occasions between February 2010 and June 2012 caused false year-end financial statements and monthly reports to be submitted to the commission and overstated the value of customer funds by at least tens of millions of dollars, which he knew was far less.

The government went over details of Wasendorf's suicide notes and a signed statement during a detention hearing last week in which he admitted to stealing more than $200 million from customer funds for more than 20 years and described how he forged bank statements to cover up his scheme.

Wasendorf told authorities about how he was able to conceal the crime by being the only individual to have access to the company's bank accounts and being the only person who saw the actual bank statements.
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