Cedar Rapids, Iowa: A judge sentenced Peregrine Financial Group Inc. founder Russ Wasendorf Sr. to 50 years in prison on Thursday for stealing $215 million from investors and concealing his theft for 20 years.
US district Judge Linda Reade told Wasendorf at the hearing in Cedar Rapids that he knowingly caused “staggering losses” to investors, employees and creditors that grew larger over 20 years.
Reade said Wasendorf, 64, lacked the courage to stop his fraud sooner and admit his company was a failure from its inception in the early 1990s. She also said the collapse of Peregrine Financial Group had rippled across the financial industry, affecting regulatory agencies and the nation as whole.
“By imposing a substantial sentence, the court sends a message that white collar criminals may serve long prison sentences for stealing money from other people,” Reade said.
Wasendorf appeared frail at the sentencing. His attorney said he’d lost a substantial amount of weight while being held in jail. Before the sentencing, Wasendorf issued a broad apology for the damage he caused and said he would accept any sentence imposed.
Wasendorf pleaded guilty in September to misusing at least $100 million to cover business losses at his Cedar Falls-based brokerage, which did business as PFGBest, and a range of personal expenses. He admitted that he hid the theft from colleagues and regulators by making phony financial statements for nearly two decades.
Wasendorf was found unconscious outside the company’s headquarters last July after attempting suicide in his vehicle by connecting a tube to his exhaust pipe. He left a startling suicide note confessing to the fraud, saying he started stealing because his “ego was too big to fail,” that he did not feel bad about duping regulators he felt were overzealous, and had learned to make “convincing forgeries” of bank and financial statements using printers and scanners.
Regulators immediately discovered PFGBest could not account for more than $200 million in customer funds it was supposed to be holding, and the firm filed for bankruptcy protection. Some 24,000 customers were unable to access their accounts and still have not been fully reimbursed. Customers who opened accounts to trade commodities have received between 30% and 40% of their money back, while customers who traded foreign currency have received nothing because that activity has less legal protection. Wasendorf used their money to build up a business empire that included a publishing company, a corporate jet, the nicest restaurant in Cedar Falls, and a family charity known for making donations to universities and hospitals.
Customer money also helped build what was perhaps the biggest symbol of Wasendorf’s home-grown success with a firm he started in a basement 30 years ago: PFG’s $20 million headquarters, a three-story glass building that opened in 2009 and included a gym, a daycare center, a Montessori school, and a restaurant. Today, the building is largely empty and up for sale.