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January 31, 2013

Iowa CEO -- aka "Madoff of the Midwest" -- gets 50 years for major embezzlement and bank fraud

As reported in this New York Times piece, headlined "Ex-Peregrine Chief Sentenced to 50 Years in Prison," another white-collar scoundrel got another functional life sentence in federal court today. Here are the basics:

A prominent futures-industry executive was sentenced to 50 years in prison on Thursday for embezzling from his clients and defrauding banks over nearly two decades.

Russell Wasendorf Sr., the chief executive of the now-defunct brokerage firm the Peregrine Financial Group, stole more than $215 million from his customers in a remarkably crude fraud that involved doctored documents that went undetected for years.

Shackled and dressed in orange prison garb, Mr. Wasendorf sat expressionless as Judge Linda Reade of the United States District Court in Cedar Rapids, Iowa, handed down the maximum sentence recommended by the government....

“The lengthy prison sentence imposed today is just punishment for a con man who built a business on smoke and mirrors,” said Sean Berry, acting United States attorney in Cedar Rapids.

Mr. Wasendorf’s penalty is the latest in a string of stiff sentences handed down by judges for financial crimes.  Bernard L. Madoff received 150 years for perpetrating the largest Ponzi scheme ever uncovered.  Allen Stanford is serving a 110-year term after being convicted of swindling investors of nearly a $7 billion.  Thomas J. Petters got a 50-year sentence for defrauding investors of nearly $4 billion.

Given the extremely lengthy sentences and advanced age of some of the defendants, many of these terms are largely symbolic, intended to reflect the gravity of the crimes and the need for retribution.

The fraud carried out by Mr. Wasendorf, 64, did not involve any opaque financial instruments and took place more than 1,000 miles from Wall Street, in Cedar Falls, Iowa. Federal regulators discovered the crime last summer after local police found Mr. Wasendorf unconscious in his car in Peregrine’s parking lot, a hose running from the exhaust pipe into the passenger compartment.  He left a detailed suicide note explaining his crimes.

Mr. Wasendorf stole millions of dollars from his customers at Peregrine, which also did business as PFGBest, by using laser printers and software like Photoshop and Excel to make near-perfect replicas of account statements from US Bank.  He duped auditors by supplying them with a false address to sending forms to the bank, which he would then intercept and send back on forged US Bank letterhead....

Peregrine’s clients — and Mr. Wasendorf’s 13,000 victims — including speculators betting on the price of orange juice and farmers who use such contracts to protect themselves from large price fluctuations....

Judge Reade rejected any leniency for Mr. Wasendorf because of his contributions to the community. “It is easy to be generous with other people’s money,” she said.

Iowa newspapers nicknamed Mr. Wasendorf “the Madoff of the Midwest.” Though Mr. Wasendorf’s criminal proceeds were a tiny fraction of Mr. Madoff’s, the two men suggested similar reasons for why they turned to a life of crime.

Mr. Madoff has said in interviews that he began his fraud after his investment performance soured and he couldn’t admit defeat.  Similarly, Mr. Wasendorf, in his confession, said he began to steal from his clients when his business slumped and he began to run out of money.  “I guess my ego was too big to admit failure,” wrote Mr. Wasendorf. “So I cheated.”

On Thursday, Mr. Wasendorf, gaunt and diminished, expressed deep remorse.  “I feel I fully deserve whatever sentence I’m given,” he said.  “The punishment I’ve caused myself is worse than anything you can impose.”

January 31, 2013 at 11:44 PM | Permalink

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Comments

None of these long Federal white collar sentences even approaches the 845 years (reduced to 825 years!) that Sholam Weiss received in the Middle district of Florida in 2001, when he was sentenced in abstentia. His initial appeal was dismissed by the Eleventh Circuit under the fugitive disenfranchisement doctrine. After Weiss was extradited back to teh U.S. from Austria, his 2241 habeas Corpus Petition was granted in part and a new order of Judgment and Commitment was entered 2 years ago, in 2011. An appeal of that J&C is now briefed and pending at the 11th Circuit in Atlanta.

Posted by: Jim Gormley | Jan 31, 2013 11:51:35 PM

Any crime causing damages greater than $6 million, the market value of life, should result in a summary death penalty. He killed an economic person, and should be shot in the back of the head upon conviction.

Posted by: Supremacy Claus | Feb 1, 2013 8:27:03 AM

There must be some sort of viciousness lying deep within that frump Linda Reade's belly (and it's a pendulous one). From the image online, Linda Reade is also one big alcoholic. Wine, methinks, from Santa's red red nose.

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