All this week the market has been in turmoil over another brokerage firm going belly up and hitting customer segregated funds. While the National Futures Association is working to tighten rules on the issue, the rest of the trade is watching the unwinding of Peregrine Financial Group. As more details become available, it's like watching a soap opera.
The FBI affidavit filed this week in the U.S. District Court of for the Northern District of Iowa offers fascinating details on the case. PFG filed for a Chapter 7 bankruptcy on Tuesday after the firm's founder - Russell Wasendorf, Sr. - was found trying to commit suicide outside the firm's headquarters Monday morning.
The affidavit filed by Special Agent William F. Langdon, is in support of a criminal complaint charging Wasendorf with making and using false statements in relation to his business. In Langdon's statement, he notes that when Wasendorf was found trying to commit suicide he had a suicide note and a signed statement on him. A copy of the statement was found with the suicide note by Russell Wasendorf Jr., the founder's son, and president of PFG. Here's an excerpt of the statement from Wasendorf Sr.:
"I have committed fraud. For this I feel constant and intense guilt. I am very remorseful that my greatest transgressions have been to my fellow man. 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. The forgeries started nearly twenty years ago and have gone undetected until now. I was able to conceal my crime of forgery by being the sole individual with access to the U.S. Bank statement. The Bank statements were always delivered directly to me when they arrived in the mail. I made counterfeit statements with a few hours of receiving the actual statements and gave the forgeries to the accounting department."
The unwinding of this event is like reading a novel. Langdon's statement adds another excerpt that shows the financial distress and challenges Wasendorf Sr., was facing: