PFGBest Fined Months Before Scandal Revealed
By George Ford, Reporter
CEDAR FALLS, Iowa - Peregrine Financial Group, the Cedar Falls and Chicago-based company accused of misappropriating more than $200 million of customer funds, agreed to pay a $700,000 fine in February to settle charges that it did not adequately supervise four brokerages.
It is unclear if the firm had begun to comply with the settlement when the alleged theft from customer accounts by Peregrine founder Russell Wasendorf Sr. came to light last week.
Court records show that Wasendorf claimed in a signed confession found after he attempted suicide on July 9 that paying fines and fees to regulators was one reason he stole from customers. He also cited building a new headquarters in Cedar Falls, boosting the firm's capital and covering business losses.
Wasendorf, 64, chief executive officer of the company, was charged July 13 in federal court in Cedar Rapids with making false statements. A bail hearing originally set for Wednesday has been reset to July 27. Peregrine filed for liquidation under Chapter 7 of the U.S. Bankruptcy Code on July 10.
"I don't feel bad having deceived the Regulators the CFTC (the Commodity Futures Trading Commission) and the National Futures Association," Wasendorf said in the note. "These Regulators are not the Police of the Industry they are the Gestapo!"
The $700,000 fine was related to a charge by the futures association, which serves as the futures industry's self-regulating organization, that Peregrine failed to supervise Clash Financial of Lawrenceville, Ga.; Oxford Trading Group of Delray Beach, Fla.; California Capital Trading Group of Whittier, Calif., and Patriot Financial Markets of Garden Grove, Calif.
The futures association complaint claimed the four firms made trade recommendations that maximized commissions without regard for the best interests of their customers and that all four brokerages made deceptive sales solicitations. The firms are guaranteed introducing brokers, which do not take direct payments but match traders to brokerage firms that execute orders.
The complaint also claimed Peregrine and its senior management failed to implement effective anti-money laundering procedures related to some of the accounts.
Russell Wasendorf Jr., Wasendorf's son and president of Peregrine; Susan O'Meara, Peregrine's director of compliance, and Nolan Schiff, Peregrine's director of managed foreign exchange, agreed to settle the NFA complaint without admitting or denying the allegations. They also proposed the $700,000 fine, which was accepted by the NFA.
In addition to paying the fine, Peregrine agreed to retain an independent consultant to review the firm's existing procedures for supervising its introducing brokers and retail customer accounts. Peregrine also was prohibited from entering into guarantee agreements with any introducing brokers for two years.
Peregrine also was to designate a full-time anti-money laundering officer.