CEDAR RAPIDS, Iowa Former Peregrine Financial founder Russell Wasendorf Sr. said before a judge gave him a 50-year prison sentence Thursday for his fraud and embezzlement scheme that he fully deserved whatever punishment she deemed because he was guilty and the court's punishment couldn't be worse than what he did to himself.
"I lost the love of my son and will never see my grandchildren again," Wasendorf said as he started to cry. "I'm very, very sorry for the financial damage (I've caused) to creditors and employees of Peregrine ......and to the industry, community and friends and family."
U.S. District Chief Judge Linda Reade said she would not vary from the guideline sentencing, which she had the discretion to do, because he had already benefited from a plea agreement, there are a "staggering amount of victims 13,000, and the sentence must reflect the seriousness of the this offense. Reade also ordered Wasendorf to pay more than $215 million in victim restitution, as recommended by the government.
Wasendorf, 64, of Cedar Falls, pleaded guilty 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 last September. Wasendorf admitted to stealing the customer funds over 20 years and to the ongoing scheme in a note he left last July after an unsuccessful suicide attempt. Authorities found him and the notes in his car parked in the Peregrine parking lot.
WATCH: Wasendorf Sentencing Press Conference
Wasendorf, dressed in an orange jumpsuit and hooded jacket, looked frail and spoke in a soft, hoarse tone. He looked down or hung his head down during most of the hearing.
Jane Kelly, Wasendorf's attorney, said Wasendorf wasn't going to dispute the restitution amount. She did argue for less prison time based on his cooperation with the government, regulators and authorities during this investigation. Kelly said Wasendorf can't change what he did but asked to court to look at what he had done to help in this investigation. She said the scheme was "quite simple." He took money from one account and used fake deposits to put money back in. He used a copier and a post office box to keep records from others. The repetitive conduct of his actions didn't equal complex and "sophisticated means" to commit the scheme, as the government claims to increase his prison time.
Kelly said Wasendorf has done everything possible to cooperate to ensure creditors and customers get back what they are owed. He talked to agents from the moment he was conscious in the hospital after his suicide attempt. He also met with them other times whenever they requested, which helped the case proceed and got information of the assets to the receiver. Wasendorf also answered questions from the Commodity Futures Trading Commission. "He didn't have to come forward," Kelly said. "He didn't get a benefit but the parties benefited FBI, CFT, the receiver and bankruptcy trustee."
Kelly said the court should also consider what he did in the community of Cedar Falls/Waterloo for starting a business and all his charitable donations. He didn't do this out of greed. Kelly also asked the judge to consider his age and his health as factors to impose a fair sentence to he can "hug his loved ones" someday and tell his family and friends how sorry he is.
Pastor Linda Livingston of the Evangelical Lutheran Church in Marion testified earlier that Wasendorf had a tumor on the back of his neck, which wasn't malignant, and had tumor or cyst in his pancreas, which was just discovered last weekend. She said it was of concern because his mother died of pancreatic cancer.
Assistant U.S. Attorney Peter Deegan said this wasn't a case where a legitimate business was ran and someone started pulling out customer funds. This business was a fraud from the beginning and operated as a mechanism to obtain customer funds. It was a "sophisticated scheme right up to the moment it stopped." He kept a second set of books to conceal the financial situation from regulators and other company officials and employees. He phonied reports every day for the regulators. Deegan said the company should have been closed in its "infancy." Wasendorf went to the office every day for more than 20 years to continue the fraud. Peregrine always operated at a loss and was never profitable.
Wasendorf even spent money to cover up the fact that there wasn't any money, Deegan said. He spent money frivolously on a corporate jet, a penthouse in Chicago and homes with a swimming pool and an Italian restaurant in Cedar Falls that never made money. "He made himself appear rich so auditors and regulators wouldn't look close enough," Deegan said.
Deegan said what difference does it make if Wasendorf cooperated after his arrest. He said all the money was gone. He had nothing to lose. The only reason he stopped when he did was because the regulators were going to start requiring electronic verification the Friday before he attempted suicide on that Monday.
Reade said Wasendorf shouldn't benefit further from his cooperation because he was already given less charges in the plea agreement. He was originally indicted on 31 charges. The reduced counts made his maximum sentence 50 years and because he accepted responsibility, otherwise it would have been life.
Wasendorf attempted suicide and tried to avoid legal consequences in the first place, Reade said. The regulators already had the information from the suicide note, so there was no mystery for them to solve. They had everything they needed. All the documents were at the business. "All they had to do was follow the money," Reade said. "His cooperation may have expedited the process but it wasn't critical to solving the case."
Reade said his argument of contributions to the community and charitable organizations was an aggravating factor, instead of a mitigating factor. "It's easy to be generous with others' money," Reade said. "The victims unwittingly funded the charities. This is also typical of white collar criminals. The contributions made him a bigshot ... a trusted community member. This lessened his guilt and boosted his own self-esteem."
Reade said he also used his "ill gotten gains" to live a rich life style as Deegan said. She also rejected Wasendorf's health argument. His medical condition is unknown at this point and the Bureau of Prisons has facilities to meet his needs or condition if needed.
Reade said the guidelines don't even factor in how many victims his crime impacted. The guideline states up to 250 and there are 13,000 in this case. The guidelines also don't factor in the impact this has had on victims' anger and mental stress. "It's highly unlikely they will be compensated," Reade said.
Peregrine is in the process of bankruptcy, and an auction of assets belonging to the company and Wasendorf raised just over $1 million in December. Those funds will go to the victims and creditors.
The State of Iowa also recently claimed Wasendorf and his ex-wife Connie Wasendorf owes more than $14.1 million in unpaid taxes, interest and penalties, according to an assessment filed in November 2012 by the Iowa Department of Revenue. The Wasendorf's allegedly underreported their taxable income by $75 million and didn't pay $6.6 million in taxes. The information was contained in court documents involving the receiver that in the process of liquidating Wasendorf's assets to reimburse victims.
Earlier this month, U.S. Northern District of Illinois Judge Rebecca Pallmeyer granted the receiver's request to suspend any efforts by the state to enforce the assessment but preserves all rights the department and state have to assess and collect any lawful amounts owed by the Wasendorfs.