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CEO of Troubled Cedar Falls Brokerage Makes Court Appearance
KCRG/Gazette/Courier Staff Reports
CEDAR RAPIDS, Iowa - The Chief Executive Officer of Peregrine Financial Group, Inc. charged with making false statements regarding a $200 million fraud scheme made his initial appearance Friday in U.S. District Court.
Russell Wasendorf, Sr., 64, of Cedar Falls, charged with making and using false statements in a matter within the jurisdiction of the U.S. government, admitted in documents unsealed Friday that he embezzled millions from customer accounts at Peregrine. He said the forgeries started nearly 20 years ago and had gone undetected until this week when he was arrested Monday.
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"I was able to conceal my crime of forgery by being the sole individual with access to the US Bank accounts held by PFG," Wasendorf wrote in a suicide note and signed statement to his wife and son.
On Monday, Black Hawk County Sheriff's deputies were dispatched to a suicide attempt at Peregrine and found Russell Wasendorf Sr. unresponsive in his vehicle, according to the affidavit of the criminal complaint. The apparent suicide note and signed statement recovered were addressed to Wasendorf's wife and son Russell Wasendorf Jr., president and chief operating officer of Peregrine, detailing the fraud committed by Wasendorf Sr.
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Wasendorf Sr. appeared in his street clothes during the hearing but was shackled in hand and ankle cuffs. He told the judge he was taking an antidepressant but was able to understand the proceedings.
Federal Public Defender Jill Johnston represented Wasendorf Sr. but he said he had retain another attorney, Thomas Breen of Chicago.
Assistant U.S. Attorney Peter Deegan asked the court to detain Wasendorf due to the nature of the crime being a $200 million fraud. Deegan said he was a flight risk because he could face decades in prison if convicted.
U.S. Magistrate Jon Scoles set a detention and preliminary hearing for 2:30 p.m. July 18.
According to the complaint, from 2010 through July of 2012 Wasendorf Sr. made false statements to the United States Commodity Futures Trading Commission regarding the value of customer segregated funds held by Peregrine Financial Group, Inc.
-Read the Criminal Complaint-
Wasendorf Sr. said in the statement he was in financial trouble and had the choice to go out of business or cheat.
"I guess my ego was too big to admit failure," he said in the statement. " So I cheated, I falsified the very core of the financial documents of PFG, the bank statements."
Wasendorf Sr. explains how he made forgeries of bank statements, according to the affidavit. He also made forgeries of official letters and correspondence from the bank, as well as transaction confirmation statements, he wrote.
Wasendorf Sr. provided details in the statement about how he made the forgeries using Photo Shop, scanners and printers. He said he changed procedure and rules if anyone questioned his authority and had the bank statements delivered directly to him without anyone else seeing the documents and even set up post office box, so he could intercept forms mailed by auditors to the banks to verify information regarding customer funds.
He also made sure the bank only dealt with him at the company and when online banking became available he learned how to falsify those bank statements, according to his statement.
Wasendorf Jr. obtained a bank statement from the company's accounting department to verify if what his father said in the statement was true for law enforcement. The ending statement balance in December 2011 was more than $221 million but the bank statement obtained from US Bank indicated the actual balance was more than $6.3 million.
During an interview on Monday, the chief financial officer of Peregrine said she used the bank statement from the company to prepare the company's year end financial statement. The statement, which reflected the inflated amount of customer segregated funds, was sent to regulators which included Commodities Future Trade Commission, an independent federal regulatory agency that administers and enforces the provisions of the Commodity Exchange Act.
Other falsified bank statements confiscated by law enforcement for the period ending in March 2011 reports a balance of more than $218 million in the account but the actual balance was about $7.1 million, according to the affidavit.
Read the Complaint