CEDAR RAPIDS, Iowa (AP) — The founder of an Iowa-based brokerage pleaded not guilty Friday to fraud charges in a suspected $200 million embezzlement scheme that drove his firm to bankruptcy and left thousands of customers without their money.
Peregrine Financial Group Inc. CEO Russ Wasendorf Sr. was charged with 31 counts of lying to regulators.
“At this time he pleads not guilty to each count,” Wasendorf's attorney, Public Defender Jane Kelly, told the judge in a Cedar Rapids federal courtroom packed with reporters.
Wasendorf, 64, who faces a maximum prison term of 155 years and a fine of $7.7 million if convicted on all counts, appeared upbeat and relaxed. His hands and legs shackled, he joked and made small talk.
“I snuck in,” Wasendorf told Kelly with a smile as the lawyer joined him at the defense table.
U.S. Magistrate Judge Jon Scoles scheduled the trial for Oct. 15 and set a status conference for next month.
Wasendorf's image as a prominent businessman and philanthropist crumbled last month when he was found in his car outside Peregrine's headquarters in Cedar Falls, unconscious after attempting suicide by hooking up a tube to the exhaust pipe.
Investigators said they found a suicide note in which he confessed to a 20-year fraud scheme. Hours later, he said during an interview from his hospital bed that he stole at least $100 million from clients.
Regulators said more than $200 million in customer funds are missing. The U.S. Commodity Futures Trading Commission has shut down the company, which did business under the name PFGBest. It filed for bankruptcy to liquidate its assets the day after Wasendorf's suicide attempt.
Investigators said more than 24,000 customers have been unable to get access to funds in their Peregrine accounts.
Regulators and the company's bankruptcy trustee have been searching across the world for company funds and Wasendorf's personal assets that can be sold to reimburse customers. One expert has estimated that customers are likely to get at least half of their funds back.
In his suicide note, Wasendorf said he started forging bank records to prop up his struggling firm nearly 20 years ago, because his “ego was too big to admit failure,” according to court documents.
Wasendorf said he used computer software, scanners and printers to make convincing forgeries of bank statements to fool regulators about how much customer money, which is supposed to be segregated from company funds, the company had.
In an indictment returned by a grand jury last week, Wasendorf is charged with submitting false financial documents to the futures trading commission that overstated the value of Peregrine's customer money by “at least tens of millions of dollars.”
The 31 counts represent the number of false monthly reports and year-end financial statements Peregrine submitted between January 2010 and May 2012.
The case has led to criticism of the industry's regulators, the National Futures Association and the futures trading commission for failing to catch the fraud. Commission Chairman Gary Gensler has acknowledged that the regulatory system failed to protect Peregrine's customers.
Wasendorf operated Peregrine for years in Chicago before relocating in 2009 to the now-vacant state-of-the-art headquarters in Cedar Falls. More than 200 workers in Iowa and Chicago lost their jobs after the collapse.
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