A U.S. judge on Thursday sentenced the founder of Peregrine Financial Group to 50 years in prison for looting hundreds of millions of dollars from the brokerage, saying his customers would probably never recover the money they lost.
Continue Reading Below
Russell Wasendorf Sr., who had tried to kill himself just before the fraud was uncovered, received the maximum sentence allowed by law and was ordered to pay $215.5 million in restitution for his nearly 20-year scheme.
Wasendorf's fraud was revealed in 2012, triggering the collapse of the brokerage and further shaking investors' confidence in the U.S. futures industry, already rattled by the failure of larger rival M.F. Global.
"I'm very sorry for the financial and emotional damage I've caused to investors and employees of Peregrine Financial Group," Wasendorf said in a feeble voice at a sentencing hearing in Cedar Rapids, Iowa. "I feel I fully deserve whatever sentence I am given... My guilt is such I will accept that sentence."
Chief Judge Linda Reade of the U.S. District Court of the Northern District of Iowa said former Peregrine customers will probably never get all their money back.
Wasendorf, 64, 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 federal 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. Prosecutors said the amount stolen was more like $215 million.
"The lengthy prison sentence imposed today is just punishment for a con man who built a business on smoke and mirrors," said Acting U.S. Attorney Sean Berry.
PLEAS FOR LENIENCY
Supporters of the disgraced executive had asked Reade for leniency, arguing that Wasendorf is in frail health and that he had helped others even in the midst of his 20-year fraud.
Wasendorf, wearing an orange sweatshirt, looked gaunt in court after spending six months in isolation in a county jail.
He has been sick in jail, and doctors found a tumor on or near his pancreas, according to testimony from 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.
U.S. prosecutors said the large loss, the sophisticated nature of the crime, and the sheer number of victims justified Wasendorf spending the rest of his life behind bars.
"The defendant spent like he was the richest man in the world," Assistant U.S. Attorney Peter Deegan said in court.
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."
Wasendorf was well known for donating to local charities before his empire came crashing down.
However, he built his reputation for generosity using money stolen from his customers, Judge Reade said, adding that the donations likely lessened Wasendorf's feelings of guilt.
Peregrine customers "unwittingly funded the charities, but it was Mr. Wasendorf who took the credit," she said.