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Russ Wasendorf, Sr. Monday, April. 4, 2011. (RICK CHASE / Courier Staff Photographer)

RICK CHASE

For our full coverage of the financial fallout at Peregrine Financial Group, click here.

 

CEDAR FALLS, Iowa --- Peregrine Financial Group filed for bankruptcy Tuesday and the U.S. Commodity Futures Trading Commission filed a concurrent complaint against the company and its owner, Russell Ralph Wasendorf Sr., to freeze company assets.

The action came a day after Wasendorf, 64, allegedly attempted to take his own life and another regulatory arm, the National Futures Association, took action against the company.

The company filed for bankruptcy Tuesday under Chapter 7 of the U.S. Bankruptcy Code, usually the course companies take toward liquidation. But the CFTC action seeks a restraining order to freeze assets, appoint a receiver and preserve records. It also seeks restitution, and civil monetary penalties.

The company’s bankruptcy petition, filed in federal court in Chicago Tuesday, was signed by Wasendorf’s son, Russell Wasendorf Jr. The younger Wasendorf is the company’s president and chief operating officer. The filing noted Wasendorf Jr. was empowered to take the action pursuant to a power of attorney action due to his father’s incapacitation. The power of attorney action was dated July 3, according to the company’s bankruptcy filing.

Officials said Wasendorf Sr. was taken to University of Iowa Hospitals and Clinics in Iowa City, and his condition wasn’t available. Court records filed Tuesday stated he is believed to be in a coma as a result of the suicide attempt. A note left by Wasendorf prompted investigators to notify the FBI, which is conducting a preliminary inquiry.

The CFTC complaint, filed Tuesday in U.S. District Court for the Northern District of Illinois, alleges PFG and Wasendorf committed fraud by misappropriating customer funds, violated customer fund segregation laws and made false statements in financial statements filed with the commission.

The commission alleges PFG falsely represented that it held in excess of $220 million of customer funds during an NFA audit when in fact it held approximately $5.1 million. CFTC alleges PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts as required by the Commodity Exchange Act and CFTC Regulations.

The alleged bogus numbers go back to February 2010 when the company claimed $207 million in its segregated customer funds account but really had less than $10 million. In March 2011, the complaint further alleges, defendants made false statements in filings required by the commission regarding funds held in segregation for customers trading on U.S. Exchanges.

In the aftermath of Wasendorf’s suicide attempt, the staff of the NFA received information that Wasendorf may have falsified certain bank records.

Signs of trouble surfaced months ago. In February, the company and its executives paid $700,000 to settle charges by the National Futures Association, the regulator that shut PFG down this week. The association alleged Peregrine had failed to supervise brokers who made deceptive sales pitches and sought big commissions at the expense of customers.

That helped convince Phil Flynn, at the time a broker with Peregrine, to leave the firm after five years.

“For me, that was a big red flag to start looking for another firm,” Flynn, who now works with Price Futures Group in Chicago, told The Associated Press. “My only regret is that I didn’t act faster.”

Flynn said Wasendorf Sr. gave an awkward, rambling speech at the company’s most recent Christmas party about his early business career and what it takes to become a success.

“It was kind of a downbeat thing for a Christmas party, kind of out of place and weird,” he said.

Flynn said some firm employees referred to Wasendorf’s inner circle as “Wasendorfians.” He said the chairman was often surrounded by underlings who treated him “like he was the rock star of the firm, with great deference.”

Wasendorf built an $18 million headquarters for the company that included a daycare center, a Montessori School for employees’ kids and free breakfast and lunch, Flynn said.

“It was almost unbelievable,” he said of the facility’s opulence.

 

Chief of troubled Cedar Falls brokerage left suicide note; emergency dispatch recording released


Russell R. Wasendorf Sr.

5 p.m. Tuesday - CEDAR FALLS, Iowa --- The founder of Peregrine Financial Group was breathing but incoherent when his employees found him near death on Monday morning.

Russell Wasendorf, 64, had driven a car behind his office building on Peregrine Way in rural Cedar Falls and tired to poison himself with the vehicle’s exhaust, according to reports released Tuesday by the Black Hawk County Sheriff’s Office.

The sheriff’s office released its short summary of the attempted suicide call as well as radio traffic between dispatchers and emergency crews.

Included is the fact that Wasendorf left a note inside the car “that indicated possible discrepancies with accounts at Peregrine Financial Group which was began by Mr. Wasendorf,” according to the written sheriff’s office synopsis.

The emergency dispatch call came in at about 8 a.m. Monday, and workers who phoned were initially confused as to how he was able to reach the rear of the building in the vehicle.

“It will be in a wooded area behind Peregrine Financial Group ... we have a subject in a vehicle with a tube running into the window, and the vehicle is running. There is a person inside,” the dispatcher can be heard telling medics as they headed to the scene.

“The reporting party says you are going to have to go to the front of the building. She can’t figure out how he got back there. She’s really shooken up. She saw it on her way into work,” the dispatcher told medics.

As the ambulance left the station, the emergency operator gave them an update on the situation.

“There’s several people out there. They took the tube out, and they opened the door. They are trying to see if they can help,” she said.

She later told them that people at the business were attempting to revive him.

“He is still in the vehicle, they don’t have him out yet, but they were somehow trying to do CPR. My person, or people that I’m talking to, are inside looking through the window,” she said.

(To listen to the dispatch call, click the play button to left of the page under "Related Audio Clips." Or click here.)

A family member was also on the scene at the time, the sheriff’s office report indicates.

Medics took Wasendorf to Sartori Hospital, and he was later flown to University of Iowa Hospitals and Clinics in Iowa City.

Sheriff Tony Thompson said it wasn’t immediately clear when Wasendorf pulled up. He said security camera footage has been turned over to FBI agents who are investigating the incident.

Reports indicate the FBI was called because the company has offices across the country.

 

U.S. regulatory commission files complaint against PFG


11:45 a.m. Tuesday - CEDAR FALLS, Iowa --- The U.S. Commodity Futures Trading Commission has filed a complaint against Peregrine Financial Group Inc. of Cedar Falls and its owner, Russell R. Wasendorf Sr.

The action came a day after Wasendorf, 64, allegedly attempted to take his own life and another regulatory arm, the National Futures Association, took action against the company.

Officials said Wasendorf was taken to University of Iowa Hospitals and Clinics in Iowa City, and his condition wasn’t available. Court records filed Tuesday stated he is believed to be in a coma as a result of the attempt.

The CFTC complaint alleges that PFG and Wasendorf committed fraud by misappropriating customer funds, violated customer fund segregation laws and made false statements in financial statements filed with the Commission.

It was filed Tuesday in U.S. District Court for the Northern District of Illinois.

The CFTC seeks a restraining order to freeze assets, appoint a receiver and preserve records. Further, the litigation seeks restitution, and civil monetary penalties.

The commission alleges PFG falsely represented that it held in excess of $220 million of customer funds during an NFA audit when in fact it held approximately $5.1 million.

CFTC alleges that beginning in at least February 2010, PFG and Wasendorf failed to maintain adequate customer funds in segregated accounts as required by the Commodity Exchange Act and CFTC Regulations.

The Complaint further alleges that defendants made false statements in filings required by the Commission regarding funds held in segregation for customers trading on U.S. Exchanges.

According to the Complaint, Wasendorf attempted to commit suicide yesterday, July 9, 2012. In the aftermath of that incident, the staff of the NFA received information that Wasendorf may have falsified certain bank records.

Peregrine helped customers buy, sell and trade foreign currency and futures and options — investments whose value changes based on the expected future price of food and energy commodities and other investments.

 

More than $200 million reported missing from Cedar Falls company


Russell R. Wasendorf Sr.

6 a.m. Tuesday - CEDAR FALLS, Iowa --- In a stunning turn of events in one day, the future of a Cedar Falls-based international brokerage firm hangs in the balance as regulatory and government officials moved in to investigate possible financial wrongdoing in light of the attempted suicide of company founder and CEO Russ Wasendorf Sr. Monday.

Wasendorf, founder and CEO of PFGBest, the international brokerage firm he wholly owns, reportedly attempted to commit suicide outside the corporate headquarters north of Cedar Falls, company officials confirmed Monday afternoon. Employees found him shortly after 8 a.m. and called 911.

He was taken to Sartori Memorial Hospital, then later was airlifted to University of Iowa Hospitals and Clinics, where he was in critical condition Monday afternoon. An updated condition report was not immediately available.

The National Futures Association, the self-regulating organization of the United States futures industry, initiated an emergency enforcement action Monday afternoon after a review of company bank accounts showed about $220 million was missing and there was a report that Wasendorf falsified records.

News of the development spread quickly over international financial news services. The Wall Street Journal reported a company spokesperson said the firm’s 125 employees across the country could be at risk of losing their jobs. Workers in Cedar Falls were told they could report to work today, but with no guarantees of being paid.

PFGBest had reported on June 29 that it had about $400 million in segregated funds, $225 million of which was supposed to be deposited at U.S. Bank. The NFA had received a report Monday that Wasendorf had falsified bank records. The NFA then checked at U.S. Bank and found only $5 million on deposit.

In the course of the investigation, the NFA also found that reports in February 2010 and March 2011 at US Bank also appeared to be false. On those dates $207 million and $218 million were reported on deposit, respectively. In both cases the NFA found less than $10 million on deposit.

The National Futures Association has placed PFGBest on a “liquidation only” status due to Wasendorf’s condition. The company stated that all funds have been put on hold, meaning customers will only be able to sell off their interests, until future notice.

According to company officials, accounting irregularities are being investigated.

Earlier, on Feb. 8, the National Futures Association announced it had levied a $700,000 fine against Peregrine, based on an NFA complaint and a settlement offer by the company. The complaint alleged that Peregrine and company officials failed to supervise four of its “guaranteed introducing brokers” or GIBs, alleging those brokers “made trade recommendations that maximized commissions without regard for the best interests of their customers and that all four GIBs made deceptive sales solicitations.”

The company and officials “neither admitted nor denied the allegations of the complaint in making their settlement offer,” under which the company also was required to retain “an independent consultant to review Peregrine’s existing procedures for supervising its GIBs and retail customer accounts.”

Wasendorf moved the corporate offices of the company from Chicago to rural Cedar Falls in 2009. He had started the company in Chicago in 1990. Wasendorf is a native of Marion and a 1970 graduate of the University of Northern Iowa, according to online biographies and his own Facebook page.

Wasendorf built a state of the art, environmentally responsible $18 million building set in the woods here when he decided to move his corporate headquarters.

He also established an Italian restaurant, My Verona, in downtown Cedar Falls. More recently he announced he would add a second restaurant at the TechWorks site in Waterloo.

His reach has extended into the community in a number of ways, from the Peregrine Charities Triathlon to a $2 million donation in 2009 to the athletics program at the UNI.

 

Cedar Falls company investigated for alleged connection to Ponzi scheme


8 p.m. Monday - CEDAR FALLS, Iowa --- The founder of Peregrine Financial Group’s attempted suicide on Monday came months after authorities announced they were going after the company in connection with millions of dollars it allegedly received from the operator of one of the largest Ponzi schemes in Minnesota history.

The man behind the scheme, Trevor Cook, allegedly stole $190 million from thousands of investors through a currency trading program.

Cook was sentenced to 25 years in prison in 2010.

In February, R.J. Zayed, a court-appointed receiver in the Cook matter, filed a complaint in Minnesota District Court alleging millions of dollars were transferred into accounts at Peregrine Financial Group Inc.

Cook engaged in foreign currency trading through accounts at PFG totalling $48 million in 2005, court records state.

Zayed alleged PFG allowed Cook to maintain the accounts “in the face of overwhelming red flags of fraud and insolvency.”

Zayed claimed the transfers were made to “hinder, delay or defraud creditors” and that PFG didn’t receive transfers in good faith.

Cook’s scheme claimed to use “Shariah compliant” banks to hold money on one side of a hedged currency transaction. The banks were allegedly forbidden to charge interest on loans under religious doctrine, so investors wouldn’t have to pay interest.

The operation boasted a 10 to 12 percent annual return on investments using a strategy that eliminated all risk.

The scheme did trade some currency and used firms like PFG but under circumstances that should have raised red flags, the complaint alleges.

This included Cook alleged moving of funds between accounts that had different owners.

Had PFG acted reasonably and complied with regulations “it would have refused to do business with Cook and the other Ponzi Principals and the Ponzi scheme would have been halted much earlier,” Zayed said in court records.

Instead, he said, PFG continued to do business with Cook because it was profiting from his trades.

Zayed said PFG also should have known about Cook’s past, which included National Futures Association disciplinary actions for lack of honesty and misleading statements in 2001 and 2005.

 

Wasendorf hospitalized after suicide attempt


Russell R. Wasendorf Sr.

4 p.m. Monday - CEDAR FALLS, Iowa --- Russ Wasendorf Sr., the founder and CEO of international brokerage firm PFGBest, reportedly attempted to commit suicide this morning outside the corporate headquarters in rural Cedar Falls, company officials confirmed Monday afternoon.

Wasendorf was taken to Sartori Memorial Hospital this morning, then later was airlifted to University of Iowa Hospitals and Clinics, where he was in critical condition.

Emergency crews were called to the headquarters shortly after 8 a.m. after employees found a man in a car near the headquarters building, located near the Beaver Hills Country Club.

The National Futures Association, the self-regulating organization of the United States futures industry, has placed PFGBest on a “liquidation only” status due to Wasendorf’s condition. The company is wholly owned by Wasendorf.

The company stated that all funds have been put on hold, meaning customers will only be able to sell off their interests, until future notice.

According to company officials, accounting irregularities are being investigated.

"PFG has failed to demonstrate that it meets capital requirements and segregated funds requirements. NFA also has reason to believe that PFG does not have sufficient assets to meet its obligations to its customers," states a message on the National Futures Association's website.

Wasendorf, the founder of PFGBest, moved the corporate offices of the company from Chicago to rural Cedar Falls in 2009. He had started the company in Chicago in 1990.

Wasendorf is a native of Marion and a 1966 graduate of Marion High School.

 

Correction added (7/9): The original version of this story reported Wasendorf is a Cedar Falls native. According to Facebook, Wasendorf is a native of Marion.

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