Cedar Rapids, Iowa News, Sports, and Weather
Assets of Disgraced CEO Tracked Down, Ex-employees Explore Job Options
WATERLOO, Iowa (AP) Investigators are moving quickly to seize the wide-ranging personal assets of the disgraced founder of an Iowa brokerage so they can try to reimburse thousands of customers and workers affected by his alleged $200 million fraud.
Former workers at Peregrine Financial Group Inc. and other companies controlled by Russ Wasendorf Sr. said they were stunned by the dramatic downfall of the prominent businessman and were trying to rebuild their lives after losing their jobs. About 75 of the estimated 250 Iowa workers affected attended a meeting Wednesday at a community college in Waterloo, where they learned about unemployment, job training and other benefits.
Wasendorf's business empire collapsed last week after he was found unresponsive in his car outside Peregrine's headquarters in Cedar Falls following a suicide attempt. He left a note in which investigators say he detailed how he embezzled customer funds for nearly 20 years and falsified bank records to fool regulators. Federal regulators shut down his firm, which was missing more than $200 million in customer accounts that it claimed to have, and it filed for bankruptcy.
Underscoring the diverse assets that investigators are trying to untangle, Wednesday's meeting drew workers from the brokerage, an upscale Italian restaurant that Wasendorf opened in Cedar Falls, the company's charitable arm, and Wasendorf's publishing company.
"It was shocking abruptness. You just don't see something like that coming," said Nick Kollasch, 25, who moved to Cedar Falls four months ago to take a job as a cook at myVerona, the restaurant. He said he's proud the restaurant raised the bar for fine dining in Cedar Falls, a town of 40,000 people, but he knows he will have difficulty earning the same salary elsewhere.
Wasendorf was arrested Friday at an Iowa hospital and charged with lying to regulators. Federal prosecutors say they will seek additional charges that could land Wasendorf, 64, in prison for the rest of his life. He hasn't yet entered a plea.
In portions of his note that have not been made public by the FBI, Wasendorf said he spent most of the missing money to prop up PFG and to pay its business losses and fines and fees charged by regulators, according to the Wall Street Journal, which received the statement from a "person familiar with the situation." Wasendorf wrote that a portion went to build its $24 million, state-of-the-art headquarters in Cedar Falls, the paper reported. Attempts by The Associated Press to obtain the same material were not successful.
A court filing in Peregrine's bankruptcy case shows roughly 24,000 customers had accounts with the firm and are missing money. An industry regulator told customers it's not clear when they will have access to their funds.
Officials appointed to manage the assets of the firm and those of Wasendorf say they have made progress identifying valuable real estate properties and a range of other companies that he controlled. They say Wasendorf owned two Chicago condominiums that property records show are worth a combined $1.3 million, plus the restaurant, the publishing company, a construction company and an aircraft firm that owned at least one jet.
The assets identified so far stretch from Iowa to Florida to Europe, according to a court filing. The receiver says it has been given expanded authority to take control of funds from companies controlled by Wasendorf and take all "necessary and appropriate" actions to seize his other assets.
"We are looking diligently to find assets that he owned or had control of," said Randall Lending, a lawyer for receiver Michael Eidelman. "We're working closely with the (bankruptcy) trustee to hopefully make substantial recoveries for people that lost money."
The U.S. Commodity Futures Trading Commission has asked a judge to prohibit Wasendorf from "withdrawing, transferring, removing, dissipating, concealing or disposing of" any funds, personal property or securities that he controls.
Facing a freeze on his assets, Wasendorf learned he could not afford to hire Chicago lawyer Thomas Breen to represent him in the criminal case as he planned. U.S. Magistrate Judge Jon Scoles on Tuesday appointed federal public defender Jane Kelly to represent Wasendorf. Because of Kelly's recent appointment, Scoles delayed a detention hearing that had been scheduled for Wednesday until next week so she could have time to prepare.
In Waterloo on Wednesday, Wasendorf's former employees met for 90 minutes with local and state officials.
Jack Nees, 28, a server and bartender at myVerona, said Wasendorf dined frequently in the restaurant and was known to send back food if even the slightest thing was off. But he said he was happy Wasendorf had high expectations and was building the best restaurant in town.
"It's going to be a big loss for the community," he said of the closure. "There were a lot of people that really enjoyed it and it's unlikely we'll have something like that again."