The Fraud Examiner

Focus on Finding Assets
 

August 2012

By Mark Scott, J.D., CFE

 

The circumstances surrounding the dramatic downfall of Peregrine Financial Group (Peregrine) – one of the largest independent U.S. futures brokerage firms – and its sole owner and chief executive, Russell Wasendorf, illustrates the important role of asset tracing and recovery in fraud cases.

 

Facts 

Wasendorf’s empire began to unravel on July 9, 2012, after he attempted suicide just outside Peregrine’s Iowa headquarters – he tried to asphyxiate himself with exhaust from his car – and left a signed note in which authorities say he confessed to defrauding customers for nearly 20 years.

 

Wasendorf, who was found by employees and airlifted to a nearby hospital, was arrested on Friday, July 13, 2012, and charged by federal prosecutors for lying to government regulators, although additional charges for fraud are likely to follow.

 

The criminal complaint filed in connection with Wasendorf’s arrest contained portions of his suicide note describing the 20-year fraud. According to the complaint, the note detailed how Wasendorf embezzled customer funds and falsified bank records to dupe regulators and conceal the fraud. Wasendorf said he began taking customer funds in 1993 – only one year after he founded Peregrine – to keep the company in business. “With careful concealment and blunt authority, I was able to hide my fraud from others,” he wrote.

 

That same week, Peregrine filed for bankruptcy protection and listed more than $500 million in assets and more than $100 million in liabilities. The Commodity Futures Trading Commission (CFTC), the federal agency that regulates commodity futures and options markets in the U.S., filed a complaint alleging that Peregrine and Wasendorf misappropriated more than $200 million of customer money. “The whereabouts of the funds,” the complaint states, “is currently unknown [sic].” This, of course, raises the question: What happened to the millions of dollars allegedly embezzled by Wasendorf?

 

Officials appointed to manage the property of Peregrine and Wasendorf are currently working to locate and secure assets that can be sold to pay creditors and clients victimized by the alleged embezzlement. 



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