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He’s the Midwestern Madoff.
Russell Wasendorf, founder of a small town Iowa brokerage firm, Peregrine Financial Group, and a pillar of his community, admitted to stealing $100 million of customer cash over a couple of decades.
Like Ponzi King Bernie Madoff, the 64-year-old Wasendorf has been committing fraud for the better part of his 32-year career to help fuel a lifestyle complete with a corporate jet, lavish homes and substantial charitable contributions.
“I have committed fraud,” Wasendorf wrote in a note to Nancy Paladino, 48, his wife of one week, court documents revealed yesterday.
The would-be suicide note was recovered on Monday, when Wasendorf was discovered in his car after attempting to kill himself by attaching a hose to the tailpipe and running it into the passenger compartment.
Four days after the suicide attempt, a recovered Wasendorf was arrested by FBI agents and charged in federal court in Cedar Rapids, Iowa, with fudging bank statements sent to regulators in an attempt to hide the fraud.
Wasendorf appeared in court shackled at his wrists and ankles, wearing a blue polo shirt and an olive-green undershirt. He made pains not to make eye contact with the gallery audience and appeared to be a sullen shell of his former suited, dignified self.
In a gravelly voice, the fallen bigwig told the judge he was taking anti-depressants.
Prosecutor Peter Deegan asked that Wasendorf be denied bail, calling the alleged felon “a serious flight risk.”
A judge ordered Wasendorf to remain in custody at least until a hearing on July 18.
The shocking and massive 20-year fraud began to collapse when a regulator, the National Futures Association, pressed Peregrine to adopt an electronic reporting method — one that would make it impossible for Wasendorf to fake bank statements.
On the day the new auditing system was to begin, Wasendorf parked his Chevrolet Cavalier in the parking lot of Peregrine, also known as PFG, and, with a bottle of vodka at his side, attempted to kill himself.
Until then, Wasendorf had been able to fool the NFA into thinking PFG had far more money than it actually had by forging the balances on the firm’s monthly bank statement.
Wasendorf admitted the forgery scam in the suicide note, which he signed, the FBI said.
To make the scam work, Wasendorf made sure he was the sole point man for all of Peregrine’s bank documents. When he received account statements, he used PhotoShop and scanners to doctor them to suggest Peregrine had hundreds of millions in customer funds.
Most recently, he told the NFA he had $225 million in customer cash in Peregrine’s accounts at US Bank. In fact, the firm had closer to $5 million, regulators said.
To assist the scam, Wasendorf, in 2006, rented a postal box and told NFA it belonged to US Bank. NFA mailed balance confirmation forms to the postal box.
Wasendorf would simply take the forms and fill in the fake numbers.
“I falsified the very core of the financial documents of PFG, the bank statements,” Wasendorf wrote in the note. “I guess my ego was too big to admit failure. So I cheated.”
A copy of the note was on the desk of his son, Russ Wasendorf Jr., a PFG executive, when the son arrived at work on Monday morning.
While Wasendorf’s scheme and shocking confession are reminiscent of Madoff’s decades-long scam, it has raised the ire of folks burned by last year’s collapse of MF Global, another futures trading firm, which was run by former NJ Gov. Jon Corzine.
“I can’t trust who’s going to be next,” said Don Miller, who had money frozen when regulators discovered MF Global had improperly dipped into customers’ segregated accounts. Miller said he’s reducing his exposure to futures trading firms in light of Peregrine’s collapse.