- Peregrine Financial CEO Indicted On 31 Charges (ZeroHedge, Aug 13, 2012):
It only took 20 years, a trail of counterfeit documents, superficial and failed audits, dubious tax returns and one unsuccessful suicide attempt, but in the end they got him: the CEO of failed commodity brokerage Peregrine aka PFG, Russell Wasendorf has been indicted on 31 charges of lying to government regulators regarding the failed brokerage’s operations. He faces a maximum sentence of 155 years’ imprisonment on the charges and fines of about $7.75 million, according to a statement from the U.S. Attorney’s Office for the Northern District of Iowa. There is also that whole $215 million in commingled and subsequently stolen client money but that’s another matter. In other words, just like Bernie Madoff, Wasendorf is going away for a long, long time for doing precisely what everyone else does: the first one for engaging in a ponzi even as now everyone acknowledges the entire system is one big ponzi – does that make it better and legitimate: apparently so; the second one for commingling client cash for personal benefit. As a reminder, this is what JPM did with $350 billion in excess deposit cash as part of its London whale trading fiasco, and broadly what every bank in the post Glass-Steagall world does with the roughly $8 trillion in total US bank deposits.More from the WSJ:
Mr. Wasendorf was arrested July 13 on charges of lying to regulators following a suicide attempt on July 9 that included a confession that authorities say detailed a nearly 20-year fraud against Peregrine’s customers. Regulators have estimated that about $215 million in customer money is missing.
Peregrine, which did business as PFGBest, filed for bankruptcy July 10.
No date has yet been set for Mr. Wasendorf to be arraigned on the charges, according to a statement from the U.S. Attorney’s Office.
A grand jury in Cedar Rapids, Iowa, on Peregrine took just one day to hear testimony and hand up the indictment against Mr. Wasendorf.
Is it good that Wasendorf is going away, most likely for the rest of his life? Of course- the man is a sociopathic criminal. But the problem is that the incentives, the controls, and the “processes” that PFG engaged in to cheat thousands of clients out of their life savings are pervasive throughout the US financial system. It is this, and not an individual appeals court case which incidentally has no impact on a completely standalone bankruptcy process and whose outcome can be appealed under any other jurisdiction, that US investors, or what’s left of them, should be worried about. Because it is the fundamental flaws in the US financial system which virtually assure that all capital currently residing with US banks as financial intermediaries will, sooner or later, in the parlance of MF Global, vaporize.
Sadly, and just like in the stock market, the cognitive bias that “it can’t happen to me” and that “I can always get out first” is dominant here as well. And will be, until both of these delusions are found to be 100% just that.
Finally we have one more thing to add: free Corzine! (who may or may not be found at the contact details for his home office).