PFGBest’s workers try to make sense of collapse
BY DAVID ROEDER AND FRANCINE KNOWLES Business Reporters July 11, 2012 8:17AM
PFGBest futures brokerage firm 311 W. Monroe, filed for Chapter 7 bankruptcy. Micke Leska talks about the firm and his 6 year there. Wednesday July 11, 2012 | Brian Jackson~Sun-Times
Updated: August 13, 2012 1:48PM
Workers at PFGBest in Chicago said they were focused on trying to assist clients Wednesday and still reeling from the firm’s bankruptcy liquidation filing, the suicide attempt of its chairman and allegations that more than $200 million in customer funds is missing.
Following the rapidly unfolding events this week, only 30 or so employees — roughly a third of the futures brokerage firm’s local workforce — were at its downtown offices Wednesday, staff interviewed by the Chicago Sun-Times said.
“People are trying to do their best regardless of the situation,” said a broker, who has worked for the firm for about four years and who declined to give his name. “They’re trying to do their best for the clients, to make sure the clients are OK and informed.”
Russell Wasendorf Sr., its owner, used a phony post office box to dupe regulators seeking information about its bank balance, a source said Wednesday.
That news followed word the company filed for Chapter 7 bankruptcy late Tuesday.
The source, who is close to the investigation, said Wasendorf intercepted mailings from his company’s front-line regulator, the National Futures Association, to his bank. He allegedly falsified information about balances in accounts at U.S. Bank and returned the documents to the NFA.
It was part of a fraud that duped the company’s regulators for two years, the source said. On Monday, the NFA froze accounts at PFGBest and its parent company, Peregrine Financial Inc., after discovering the shortfall of more than $200 million in customer accounts. Both businesses are based in Cedar Falls, Iowa., Wasendorf’s hometown. Peregrine handled most trading through its Chicago office at 311 W. Monroe.
The source said Wasendorf’s phony post office box was in Iowa but that he used other methods of duping regulators, including generating phony confirmations from U.S. Bank concerning account balances.
“There is nothing simple about this fraud,” the person said. He said the NFA grew suspicious in recent months because Wasendorf actively resisted a modernization move to confirm balances electronically and directly with the bank.
The prolonged nature of the alleged fraud drew comparisons to a much larger theft, the Ponzi scheme run by New Yorker Bernie Madoff.
In seizing Wasendorf’s operation, regulators said that U.S. Bank accounts that were supposed to have $225 million instead had only $5 million as of Monday.
Reuters first reported word of the intercepted bank forms. Executives at the NFA could not be reached or declined comment.
On filing for bankruptcy, the firm’s board said that it, “after due and careful consideration, has determined that it is in the best interests of the corporation and the corporation’s customers, creditors and other interested parties for the corporation to file a petition seeking relief under the provisions of Chapter 7 of the U.S. Bankruptcy Code.”
Wasendorf, 64, tried to commit suicide Monday morning near his company’s headquarters, leaving a note that indicated financial problems at Peregrine. He is hospitalized, and his company has not provided an update on his condition since Monday, when it told employees he was in critical condition. A spokeswoman did not answer calls and emails Wednesday.
The FBI’s office in Omaha, Neb., is investigating Wasendorf. Some of Wasendorf’s acquaintances in the Chicago futures markets said they heard the FBI interviewed him after his suicide attempt. A spokeswoman for the FBI would not confirm that.
One IT worker at the firm in Chicago, who chose to remain anonymous, said Wednesday that staff had heard Wasendorf was getting better and is coherent.
Some of the firm’s customers calling in Wednesday morning were “still in the dark,” said Mike Leska, a trade clerk who has worked for the firm for six years. “We’re still getting calls from people that really had no idea. It’s really disgusting.
“We all thought he was a different person,” he said of Wasendorf. “He would visit here all the time. I always respected the man.”
Leska said he didn’t know if regulators were at the firm’s offices, but there were some new faces on hand.
The developments have left staff worried about their future.
“It’s pretty sad up there right now,” said Leska. “People are coming in hoping to still get paid, just sticking it out.”
But some have left, and Leska expects this will be his last week, noting he and others already have filed for unemployment.
Employees said they haven’t been told how long the offices will remain open.
Two men exiting the building Wednesday morning, carried a plastic bin and bags of items, one labeled PFGBest. Asked if they worked for the firm, one replied, “not anymore,” declining further comment, as the two loaded their belongs into a cab and left.
Like other PFGBest staff, the anonymous broker said he was “shocked” at the firm’s implosion.
“I’m just wondering where all the money’s hidden, what they converted it to, if they converted it, where it’s hidden, how long it will take them [regulators] to find it,” he said. “I think it’s somewhere. I don’t think you can piss $200 million in a lifetime.”