A federal grand jury in Iowa has indicted Peregrine Financial Group founder and former CEO Russell Wasendorf Sr. on 31 counts of making false statements to the Commodity Futures Trading Commission.
The indictment, handed up today, accuses Wasendorf of repeatedly overstating the value of PFG’s customer funds “by at least tens of millions of dollars” as far back as 2010. The brokerage firm collapsed in July, and more than $200 million in customer funds are missing.
Wasendorf, 64, attempted suicide July 9, soon after regulators demanded independent verification of the firm’s customer fund balances. Authorities say they found a suicide note at the scene, in which Wasendorf allegedly confessed to forging bank statements for nearly 20 years “using a combination of PhotoShop, Excel, scanners, and both laser and ink jet printers.”
Excerpts of the note are included in a criminal complaint filed against Wasendorf on July 12. The complaint alleges Wasendorf admitted to authorities that he wrote the note, and confirmed the details.
Wasendorf, has not entered a plea on the criminal complaint, and the new indictment adds no new details other than to specify the dates of the alleged false statements. An arraignment on the indictment has not been scheduled. Wasendorf has been held without bail since he was released from the hospital July 12. Because his assets are frozen, he is being represented by public defender Jane Kelly. She was not immediately available for comment on the indictment.
Last month, Wasendorf waived his right to a preliminary hearing on the criminal complaint, an action that often precedes a plea agreement. Today’s indictment could mean that plea negotiations—if there were any—have hit a snag.
The fact that Wasendorf apparently managed to avoid detection for so long raised new questions about the U.S. Commodity Futures Trading Commission, which regulates the futures industry, and about the industry’s self-regulatory organization, the National Futures Association.
NFA President Daniel Roth told CNBC last month that the sheer volume of documents PFG generated raised questions about whether Wasendorf could have acted alone. No one else has been charged thus far, and Wasendorf, in his alleged suicide note, insisted he acted on his own, driven by ego.
“I had no access to additional capital and I was forced into a difficult decision: Should I go out of business or cheat? I guess my ego was too big to admit failure. So I cheated, I falsified the very core of the financial documents of PFG, the bank statements” he allegedly wrote.
Wasendorf’s son, PFG Chief Operating Officer Russell Wasendorf Jr., has been cooperating with authorities since the scandal broke, according to his attorney. Wasendorf Jr. was reportedly scheduled to testify before the grand jury this week.
— By CNBC's Scott Cohn