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CEDAR RAPIDS, Iowa - A federal judge ruled late Tuesday Russell Wasendorf Sr., who pleaded last month to embezzling $200 million from customer accounts and making false statement to regulators will, remain in custody pending his sentencing.
U.S. District Chief Judge Linda Reade said in her ruling that Wasendorf failed to prove he wasn't a flight risk and failed to prove that he doesn't have the means to flee. Wasendorf attempted to end his life and wasn't willing to face the consequences of his actions and although he has cooperated with the government, he didn't have much choice or chance of success with a trial because of his "incriminating" suicide note, according to the ruling.
Wasendorf, 64, former Peregrine Financial founder, faces a long sentence and will spend the majority of the remainder of his life in prison, which gives him a "strong incentive to flee," Reade said.
Reade said the court is also not satisfied that Wasendorf doesn't have the money to flee. The receiver has secured most of his known assets but not all of the misappropriated funds between $100,000 and $200,000 are accounted for at this time. Wasendorf also has some foreign business holdings and the receiver hasn't been able to secure these assets.
Reade cites the Bernie Madoff case, saying Wasendorf failed to "prove by clear and convincing evidence that he is not a flight risk." In the Madoff ruling concerning detention, the district court found detention was warranted in light of his age, 70, the length of a potentional sentence, 150 years, and he had means to flee, according to the ruling.
A magistrate issued an order last month granting Wasendorf's request for release pending sentencing, but the government appealed to Reade.
Scoles granted Wasendorf's release pending sentencing, saying Wasendorf wasn't a flight risk because his assets had been frozen or relinguished to a trustee or receiver and his passport has been confiscated by authorities. Wasendorf was to be released to stay with his pastor and friend at her home in Marion.
Prosecutors in their appeal argued Wasendorf 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. Prosecutors argued there is serious risk that Wasendorf will flee and no conditions of release will reasonably guarantee his appearance for sentencing.
Wasendorf's domestic assets have been frozen or seized but what is left are his known foreign assets and any unknown assets, according to the appeal. 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.
Wasendorf pleaded guilty last month 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, if a judge runs the sentenced consecutively, and $3.2 million or more in fines and an undetermined amount of restitution and $100 million in forfeitures, according to the plea agreement.
Wasendorf admitted to stealing more than $200 million from customer funds for more than 20 years, as was described in a suicide note and signed statements police recovered last month, and to authorities after being charged. He also admitted in the plea to making false statements to the Commodity Futures Trading Commission and a futures trading association. Also the plea deal, he admitted to overstating the value of customer funds in a monthly report in May 2012 and to forging bank account information, submitted to regulators in May 2011.
In the suicide note and signed statements, Wasendorf admitted 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.