Reuters: Regulatory News: UPDATE 1-Peregrine clients sue Wasendorf for $200 mln 'theft'

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UPDATE 1-Peregrine clients sue Wasendorf for $200 mln 'theft' Aug 1st 2012, 21:52 Wed Aug 1, 2012 5:52pm EDT CHICAGO Aug 1 (Reuters) - Several customers of Peregrine Financial Group are suing the failed futures brokerage's chief executive, Russell Wasendorf Sr., for allegedly stealing more than $200 million of client funds. The allegations in the three separate lawsuits, all filed in July and seeking class-action status, are similar to those made by the Commodity Futures Trading Commission when it filed suit against the company and Wasendorf earlier in the month. On Thursday, the federal judge in that case, Rebecca Pallmeyer, w ill consider whether one of those cases should be reassigned to her, and the lawsuits coordinated. She will also hear arguments from lawyers for a second of the lawsuits who are seeking to intervene in the CFTC case. On Wednesday, Wasendorf's court-appointed receiver objected to the reassignment, saying that lumping the client lawsuits together with the CFTC action could impede the government's case and his ability to do his job. "T he discovery objectives in the CFTC action are very different from t he objectives of the various class actions," receiver Michael Eidelman said in a filing late Wednesday, and "rea ssignment could unduly and prejudicially hamper th e rece i ver's activities." Eidelman's job is to secure and then sell at the highest price possible as many of Wasendorf's assets as he can, with the proceeds to be distributed to creditors and former customers of Peregrine. Wasendorf was arrested last month in Iowa after a botched suicide attempt. He had left a written confession that he had bilked customers for years, faking bank statements, lying to regulators, and spending the money on everything from a brand new office building in Cedar Falls, Iowa, to fines and fees levied against the firm. A grand jury in Iowa earlier this week subpoenaed Wasendorf's son, Russell Jr., who was the firm's president, to testify about his father's alleged wrongdoing. Wasendorf Sr. is being held in a county jail. The lawsuits by the clients borrow heavily from both the CFTC's lawsuit and the FBI's criminal complaint against Wasendorf Sr., but are different in that they target not only him but also Wasendorf Jr., Peregrine Vice Chairman Neil Aslin, Chief Financial Officer Brenda Cuypers, Chief Compliance Officer Susan O'Meara and auditor Jeannie Veraja-Snelling. The lawsuits also say they target 10 "John Does" whose identities are not now known but who also allegedly helped in the fraud. "Defendant Wasendorf Sr.'s massive fraud and theft was largely made possible by a failure of reasonable oversight, inquiry and diligence by PFG's primary regulator, the NFA (National Futures Association), and PFG's senior officers and independent auditors," Hong Kong-based Power Vanguard, a former Peregrine client, said in its lawsuit. A Peregrine spokeswoman did not respond to a request for comment. The cases are Power Vanguard Ltd et al. v. Russell R Wasendorf Sr. et al, 12-cv-05727; Wolinsky v. Wasendorf Sr., et al., 12-cv-05624; and LaSalvia et al. v. Wasendorf Sr. et al., 12-cv-5546, all in the U.S. District Court, Northern District of Illinois (Chicago). Link this Share this Digg this Email Reprints

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