CEDAR RAPIDS – Prosecutors argued Thursday that Peregrine Financial Group's former chief executive Russell Wasendorf Sr. should stay behind bars for 50 years for looting more than $215 million from former clients of the failed futures brokerage.
Supporters of the disgraced 64-year-old executive asked Chief Judge Linda Reade of the U.S. District Court of the Northern District of Iowa for leniency, arguing that Wasendorf is in frail health and that he had helped others even in the midst of his 20-year fraud.
A sentencing hearing was ongoing in federal court in Cedar Rapids, Iowa.
Wasendorf, wearing an orange sweatshirt, looked gaunt in court after spending six months in isolation in a county jail.
Asked by Reade whether he understood the proceedings, Wasendorf replied "Yes, your honor," in a feeble voice.
Wasendorf has been sick in jail, and doctors found a tumor on or near his pancreas, said his pastor, Linda Livingston of Ascension Lutheran Church. Wasendorf's mother died of pancreatic cancer, but it is unknown whether Wasendorf's tumor is cancerous, she said.
No witnesses testified for the prosecution.
Wasendorf admitted last July that he had bilked tens of thousands of clients over a period of nearly 20 years, faking bank statements and lying to regulators, employees and his closest family members.
As regulators closed in on the fraud, Wasendorf made a botched suicide attempt outside his $24-million headquarters in Cedar Falls, Iowa, which investigators say was financed with money siphoned from customers.
Peregrine Financial, known as PFGBest, quickly collapsed, and 24,000 former customers are still missing most of the money they had invested with the firm.
Wasendorf pleaded guilty in September to embezzling more than $100 million.
U.S. prosecutors say the large loss, the sophisticated nature of the crime, and the sheer number of victims justify Wasendorf spending the rest of his life behind bars.
Peregrine's collapse dealt a blow to confidence in the U.S. futures industry, already reeling from $1.6 billion hole in customer pockets left when giant brokerage MF Global failed nine months earlier.
Futures traders had never before suffered such large losses as a result of a brokerage failure.
Despite his misdeeds, Wasendorf "did do some positive things for the community," said former U.S. Congressman David Nagle from Iowa, who spoke up for the fallen CEO in court.
Nagle, who helped Wasendorf win zoning approval for Peregrine's environmentally-friendly headquarters, asked the judge for leniency.
"Who wants to defend the magnitude of the crimes Mr. Wasendorf committed?" he said. "But good people do bad things."
(Reporting by P.J. Huffstutter, Writing by Tom Polansek; Editing by Claudia Parsons)