$200 million missing after PFGBest chairman’s suicide attempt?
BY DAVID ROEDER Business Reporter July 9, 2012 5:50PM
Russell R. Wasendorf, Sr., Chairman & CEO of Peregrine Financial Group, November 6, 2002. | Al Podgorski~Sun-Times
Updated: July 10, 2012 12:15PM
Regulators seized operations of the Chicago futures brokerage PFGBest on Monday as they investigate more than $200 million in customer funds that may be missing.
The action occurred hours after the firm’s chairman, Russell Wasendorf Sr., tried to kill himself outside the firm’s headquarters in Cedar Falls, Iowa, said a source close to the company. The Waterloo-Cedar Falls Courier said Wasendorf, 64, was taken to University of Iowa Hospitals & Clinics in Iowa City, where he was listed in critical condition.
The National Futures Association filed an enforcement action against his businesses Monday afternoon. The NFA effectively froze accounts at the brokerage, forbidding it to process trades except to liquidate customer positions.
The action was filed against two PFGBest operating units, Peregrine Financial Group Inc. and Peregrine Asset Management Inc.
Peregrine Financial, the NFA said in a statement, “has failed to demonstrate that it meets capital requirements and segregated funds requirements.” It also said it has “reason to believe” Peregrine cannot meets customer obligations.
The futures association, which has regulatory power over the industry’s brokerages, said that while the firm asserted it had $225 million in an account with U.S. Bank, a review showed that only $5 million was on deposit.
The money was part of $400 million in customer funds the firm was required to keep in segregated accounts, the NFA said.
Wasendorf is a well-known figure in the Chicago futures community who in 2009 opened a new headquarters for the company in Cedar Falls, his hometown. He has used the name PFGBest in marketing the brokerage’s services to individual accounts holders, while others concentrate on serving large funds and institutions.
Citing privacy laws, a University of Iowa Hospitals spokesman declined to say if Wasendorf was there. A PFGBest spokeswoman could not be reached.
A scandal involving PFGBest would be a new blow to an industry still reeling from the implosion of the much larger MF Global brokerage.
In February, the NFA fined PFGBest $700,000 for failing to supervise certain brokers who bring it business.
Also, the firm has been accused of being a conduit in a fraud scheme run out of Minnesota by Trevor Cook. A receiver rounding up assets for Cook’s victims in February filed suit against Peregrine Financial seeking $48 million for allegedly facilitating fraud.
Wasendorf founded Peregrine in 1990. He acquired the Chicago futures trading firm Alaron in 2009, substantially growing his business in retail accounts.
A source said PFGBest has recently laid off staff and cut other employees’ salaries by 20 percent.