New York: Russell Wasendorf Sr, the Peregrine Financial Group Inc founder, pleaded not guilty to 31 counts of lying to US regulators about the value of customer funds held by his now-bankrupt commodities firm.
Wasendorf, wearing leg irons and handcuffs and dressed in an orange prison uniform, appeared in court today in Cedar Rapids, Iowa, where federal public defender Jane Kelly entered the plea on his behalf.
“At this time, not guilty to all counts,” she told US Magistrate Judge Jon Scoles during a hearing that lasted less than five minutes. Wasendorf, 64, told the judge he understood the indictment. Scoles set a tentative trial date for October 15.
Wasendorf was indicted by a federal grand jury on August 13. He’s accused of making false statements to the US Commodity Futures Trading Commission in the firm’s monthly and annual reports to the agency from February 2010 through June 2012.
The charges carry a maximum punishment of 155 years in prison and a $7.75 million (D27 million) fine.
The CFTC sued Peregrine and Wasendorf on July 10, accusing them of stealing at least $200 million in customer funds. The Cedar Falls, Iowa-based firm filed for bankruptcy court liquidation in Chicago later that day. Wasendorf was arrested July 13.
Suicide Attempt
Before a failed suicide attempt on July 9, Wasendorf wrote a confession in which he said he had been embezzling from Peregrine for almost 20 years, according to an FBI agent’s affidavit filed with the Cedar Rapids federal court on July 11.
“I have committed fraud. For this I feel constant and intense guilt,” said Wasendorf, the firm’s chairman and chief executive officer, according to the affidavit of Federal Bureau of Investigation Special Agent William Langdon.
“Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts at Peregrine Financial Group Inc,” he said, according to Langdon. “The forgeries started nearly 20 years ago and have gone undetected until now.”
While hospitalised after the suicide attempt, the CEO admitted to stealing at least $100 million from Peregrine, Langdon said.
Guilty Plea?
Wasendorf’s plea of not guilty today may be a prelude to a negotiated guilty plea later, criminal defence lawyer Douglas T. Burns said today. Burns isn’t connected to the Peregrine case.
“At the initial appearance to answer an indictment, a not guilty plea is a legal formality,” he said in an e-mail. “Given his extensive written admissions, I expect that a guilty plea will be entered.”
Peregrine’s Chapter 7 bankruptcy petition lists more than $500 million in assets and more than $100 million in liabilities. Some of more than 10,000 creditors have already sued Wasendorf and other executives.
Wasendorf has been in custody since his arrest. US District Judge Rebecca Pallmeyer in Chicago, who is presiding over the CFTC’s lawsuit, has appointed a receiver to marshal and liquidate Wasendorf’s holdings.
The criminal case is US v. Wasendorf, 12-cr-2021, US District Court for the Northern District of Iowa (Waterloo). The bankruptcy case is In Re Peregrine Financial Group Inc, 12-27488, US Bankruptcy Court for the Northern District of Illinois (Chicago).
The regulatory case is Commodity Futures Trading Commission v. Peregrine Financial Group Inc, 12-cv-5383, US District Court, Northern District of Illinois (Chicago).
