Lawyer: Son of CEO Not a Target in Brokerage Fraud
IOWA CITY, Iowa (AP) — The president of a Cedar Falls-based brokerage does not expect to be charged in connection with the alleged $200 million fraud and embezzlement scheme that his father carried out at the now-bankrupt firm, his lawyer said Tuesday.
Before Peregrine Financial Group President Russ Wasendorf Jr. testified in front of a federal grand jury last week, investigators told him he is not a target in the case, Chicago lawyer Nicholas Iavarone said.
The panel later returned an indictment charging his father, Peregrine founder and CEO Russ Wasendorf Sr., with 31 counts of lying to regulators.
"From the facts and from what I know, he's not going to be a target, as far as I can see. He didn't commit any criminal acts," Iavarone said. "That's been the least of our worries, anything to do with the federal government."
Wasendorf Sr. was found last month in his car outside the company's headquarters after attempting to commit suicide by hooking up a tube to the car's exhaust pipe. He left a suicide note in which he admitted to falsifying bank statements to embezzle customer funds and keep the company afloat for nearly 20 years and later told the FBI he stole at least $100 million, according to court records.
Regulators found that more than $200 million in customer funds were missing and shut down the company, which filed for bankruptcy. The trustee and Peregrine's receiver are trying to identify company assets, those of other entities owned by Wasendorf such as a publishing company and an Italian restaurant, and personal assets so they can be sold off to reimburse some 24,000 customers who lost money. It's not yet clear when they will receive an initial distribution, and how much they will get, and frustration among customers is rising.
Wasendorf Sr. said in the suicide note that he acted alone and told his son that his only crime was trusting his father. Nonetheless, speculation has swirled about whether Wasendorf Jr. or others were aware of his father's alleged fraud and would face charges.
Peter Deegan, the federal prosecutor handling the case against Wasendorf Sr., declined comment Tuesday.
Iavarone said his client, who also was chief operating officer, was in charge of managing the company's 22 profit centers but was completely uninvolved with its finances and had no knowledge of his father's alleged fraud. He said he felt betrayed both by his father and regulators from the National Futures Association, which failed to catch the fraud.
"If auditors and regulators could not find it, somebody that is simply running the company would not," he said. "You have to understand that the financial aspects of the company were always run by Russ Sr. He was the fellow that owned it. He was the guy that had the money."
Iavarone said Wasendorf Jr. had a strained personal relationship with his father and had privately decided in March that he would leave later this year to either open a new Peregrine office in Australia or go into business on his own. He disagreed with the way his father was running the company, including the decision to move its headquarters from Chicago to Cedar Falls in 2009 and to buy a corporate jet, Iavarone said.
"He didn't like the way that whenever Russ Sr. did not agree with a decision, he would overrule it, sometimes belittle him and sometimes do it in front of other people," he said. "He wanted to be away from anything to do with Russ Sr. having control over his ideas."
Iavarone said the son has not spoken with his father since he visited him in the hospital two days after his attempted suicide and has no plans to reach out to him. He said his father's actions destroyed his career in business, his reputation and his inheritance and has left the son facing several class-action lawsuits from customers.
"Wasendorf is not a very good name to have in Iowa or the financial industry right now," he said. "What you have is 20 years of your life's work wiped out, your name wiped out, and you've been betrayed by your father. It doesn't get much worse than that."
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