Russ Wasendorf, Sr., was sentenced to 50 years in prison Thursday. / Rick Chase, Waterloo Courier via AP
DES MOINES, Iowa -- A judge sentenced disgraced financier Russell Wasendorf Sr., the head of Peregrine Financial Group, to 50 years in prison Thursday for stealing $215 million from more than 13,000 customers over a 20-year period.
Wasendorf, 64, would be at least 107 years old by the time he's eligible for release.
Wasendorf pilfered customer funds to live a lavish lifestyle and expand the business, which prosecutors said was never profitable on its own.
Investor confidence in the sanctity of the $37 trillion futures market was shaken by details of the scam that were contained in suicide notes discovered after Wasendorf's botched attempt to take his own life July 9.
"This is a very serious offense with staggering affects to the victims and ripple effects," said U.S. District Judge Linda Reade in Cedar Rapids, Iowa.
"By imposing a substantial sentence, the court sends a message that white collar criminals may serve long prison sentences for stealing money from other people," Reade said.
Wasendorf appeared frail at the sentencing. His attorney said he'd lost a substantial amount of weight while being held in jail.
Before the sentencing, Wasendorf issued a broad apology for the damage he caused and said he would accept any sentence imposed.
Wasendorf pleaded guilty in September to misusing at least $100 million to cover business losses at his Cedar Falls-based brokerage, which did business as PFGBest, and a range of personal expenses. He admitted that he hid the theft from colleagues and regulators by making phony financial statements for nearly two decades.
Wasendorf was found unconscious outside the company's headquarters in July after attempting suicide in his vehicle by connecting a tube to his exhaust pipe. He left a startling suicide note confessing to the fraud, saying he started stealing because his "ego was too big to fail," that he did not feel bad about duping regulators he felt were overzealous, and had learned to make "convincing forgeries" of bank and financial statements using printers and scanners.
Regulators immediately discovered PFGBest could not account for more than $200 million in customer funds it was supposed to be holding, and the firm filed for bankruptcy protection. Some 24,000 customers were unable to access their accounts and still have not been fully reimbursed. Customers who opened accounts to trade commodities have received between 30% and 40% of their money back, while customers who traded foreign currency have received nothing because that activity has less legal protection.
Wasendorf used their money to build up a business empire that included a publishing company, a corporate jet, the nicest restaurant in Cedar Falls, and a family charity known for making donations to universities and hospitals.
Customer money also helped build what was perhaps the biggest symbol of Wasendorf's home-grown success with a firm he started in a basement 30 years ago: PFG's $20 million headquarters, a three-story glass building that opened in 2009 and included a gym, a daycare center, a Montessori school, and a restaurant. Today, the building is largely empty and up for sale.
Federal sentences are only reduced by a maximum of 15% for good behavior, which means that Wasendorf must serve a minimum of 42.5 years before being eligible for release. Reade noted that his victims included 13,000 investors and more than 200 employees.
Wasendorf must also serve a three-year term of supervised release after the prison term.
There is no parole in the federal system. The judge imposed a judgment of forfeiture in the amount of $100 million and ordered Wasendorf to make $215,530,041.39 in restitution to his victims.
As part of the plea agreement, Wasendorf agreed that any proceeds from any publicity about his crimes would be assigned to the United States and applied toward his restitution.
Wasendorf is being held in the United States Marshal's custody until he can be transported to a federal prison.
Assistant U.S. Attorney Pete Deegan said Wasendorf's embezzlement was "off the charts" of the federal sentencing guidelines.
Deegan made the remarks Thursday during the sentencing hearing for Wasendorf.
"The offense in this case is really beyond the pale," Deegan said as a gaunt Wasendorf bowed his head. "The defendant boldly lied every day in order to get away with this massive embezzlement fraud."
A native of Marion, Iowa, Wasendorf had climbed upward through the futures industry and brought the business he built in Chicago back home to Iowa in 2009.
Prosecutors said last week that Wasendorf bought out his partner at Peregrine with stolen customer funds in 1993 or 1994 and proceeded to tap them as needed. They funded a lavish lifestyle that included a lakefront condo in Chicago, a commuter jet, and an estate and two restaurants in Cedar Falls.
Contributing: The Associated Press
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