Peregrine Founder Wants Out of Jail Pending Plea Deal & Sentencing
By Trish Mehaffey, Reporter
CEDAR RAPIDS, Iowa - Assistant U.S. Attorney Peter Deegan argued Tuesday against releasing former Peregrine Financial founder Russell Wasendorf Sr. pending a hearing to submit his signed plea agreement, saying he didn't have the "character or mental condition" to show up for court.
"He had a plan (suicide) and it was unsuccessful," Deegan said. "It's a risk that he will flee now. There are assets unaccounted for that he could access. He's gone from hero to villain.... he has no ties to the community."
Deegan said Wasendorf remains under suicide watch at the jail, only allowed to wear a velcro outfit. Wasendorf attempted suicide only two months ago and hasn't received any mental health treatment while in jail.
Jane Kelly, Wasendorf's attorney, said Wasendorf has cooperated with authorities and the bankruptcy trustee and receiver and he never attempted to flee, even when he he found out the Commodity Futures Trading Commission was going to monitor the companies' accounts the day before his suicide attempt. Kelly said Wasendorf could have left the country but didn't.
Linda Livingston, a pastor and friend, testified that Wasendorf could stay with her and her husband if released. She knows Wasendorf from high school. She believed he was remorseful for his actions and wants to change. She has given Wasendorf pastoral care during his time in jail and doesn't believe he will attempt suicide again because he's now glad to be alive and has had a change of attitude.
U.S. Magistrate Jon Scoles said he would take detention under advisement and submit a written ruling by the end of the week.
Details of Wasendorf's plea agreement were revealed during the detention hearing. He admitted to embezzling $200 million from customer accounts and making false statements to regulators. Wasendorf, 64, of Cedar Falls, intends plead guilty to mail fraud, embezzlement of customer funds and two counts of making false statements. He faces up to 50 years in prison.
Kelly said during the hearing that Wa0sendorf hasn't agreed to serve 50 years. There will be some issues left for argument at the plea hearing. Scoles didn't set a plea hearing at this time. He will make his detention ruling first.
Wasendorf is accused of making and using false statements to the commission regarding customer funds by tens of millions of dollars, according to the indictment. Wasendorf on 31 occasions between February 2010 and June 2012 caused false year-end financial statements and monthly reports to be submitted to the commission and overstated the value of customer funds by at least tens of millions of dollars, which he knew was far less.
The government went over details of Wasendorf's suicide notes and a signed statement during the hearing in which he admitted to stealing more than $200 million from customer funds for more than 20 years and how he forged bank statements to cover up his scheme.
Wasendorf told authorities about 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. The government submitted exhibits of the false records and the real bank statements Wasendorf concealed.
FBI Agent William Langdon testified about how Wasendorf "stockpiled" sleeping pills for two months to use when it was "necessary" and how he ran a hose from his Chevrolet Cavalier's tailpipe into the car July 9. Wassendorf also had a bottle of alcohol in the car, he said.
Langdon in regards to Wasendorf's mental state said Wasendorf told him his son Russell Wasendorf Jr. was mad at him and his wife Nancy, who he recently married in Las Vegas, was going back to Illinois and was thinking about getting an annulment.
There was a petition for annulment and Nancy Wasendorf cited fraud and marrying her under false pretenses as grounds for the annulment, Langdon said.
Langdon said the agency corroborated the information from Wasendorf's suicide notes and signed statements. They recovered false documents and false reports to regulators and bank accounts. Agents found cut and paste type records at the company to verify false documents he mentioned in the notes. There were actual bank statements for the company, with one from Jan. 31, 2010 which showed a balance of $12.3 million and a false statement which showed more than $206 million.
There was evidence that customer funds had been transferred into Wasendorf's accounts for restaurant "My Verona" and a construction company, Langdon said.
However, not all of the assets could be accounted for, Langdon said. In June, there was a wire transfer of $250,000 made to Romania that nobody has recovered, including authorities, the trustee or receiver. Wasendorf told authorities most of the money went to keep the business running and fees and fines to regulators but he admitted more than $100 million was missing.
Langdon said the amount of loss determined by the agency was about $200 million but not all the documents and records have been researched at this point. There are more than 24,000 customer accounts involved and 120 boxes of statements to go through.
Langdon said there are some properties in Romania, which Wasendorf owned with others, that could be worth $100 million and haven't been seized, Langdon said.
Kelly said on cross there was some question about the financial condition of the Romania company according to one of the investors and it could be close to insolvency.
Langdon said he didn't know. He did admit the value of the properties had dropped.
Kelly asked if Wasendorf had access to any of his homes, cars or car titles, the plane, credit cards, bank accounts or to his passport. Langdon said he didn't. "Didn't the majority of the money go to keep the business afloat," Kelly asked.