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Peregrine trustee OK'd to notify clients about assets

by George White | Published July 20, 2012 at 11:32 AM

An Illinois judge on Thursday gave the Chapter 7 trustee for Peregrine Financial Group Inc. the green light to begin notifying customers of the bankrupt brokerage firm regarding the return of their assets.

Judge Carol Doyle of the U.S. Bankruptcy Court for the Northern District of Illinois in Chicago on Thursday signed an order granting trustee Ira Bodenstein of Shaw Gussis Fishman Glantz Wolfson & Towbin LLC permission to provide notice to the firm's clients.

In an interview Thursday, Bodenstein said the order "sets the ground rules with the consent of the [Commodity Futures Trading Commission]" for the eventual return of certain client property held by PFG.

Customers will be notified by overnight mail and have 14 days after the receipt of their notice to request the return of their assets, or else Bodenstein has the authority to liquidate the assets, court papers show.

According to a Tuesday motion filed by Bodenstein, there are some 24,000 customers that had accounts with the firm that have lost money but only 11 might qualify for the immediate return of their property under federal regulations. These customers' accounts mainly hold warehouse receipts for precious metals, court papers show.

PFG chief executive Russell Wasendorf Sr. was arrested by FBI agents and charged with making false statements on July 13 after he admitted to embezzling more than $100 million from PFG's clients.

According to a criminal complaint made public the same day, Wasendorf was charged with the crime just after attempting suicide, according to a statement from the U.S. Attorney's Office for the Northern District of Iowa. (Earlier reports had indicated that the CEO lay in a coma.)

Wasendorf had been found unresponsive in his vehicle on July 9, with a suicide note addressed to his wife and a signed statement in which he detailed fraud that he had committed over the past 20 years, the July 11 complaint said.

PFG filed for bankruptcy on July 10 following an accusation of funds misappropriation made by the CFTC and just a day after Wasendorf was hospitalized in Cedar Falls, Iowa, as a result of his suicide attempt.

In its bankruptcy court filing, PFG reported $500 million to $1 billion in assets and $100 million to $500 million in debts.

Calls to PFG were not immediately returned.

Assistant Federal Defender Jane Kelly is representing Wasendorf in the criminal case.

Jennifer Muchoney, an in-house lawyer at PFG, is listed as debtor counsel. Kimberly Bacher, Salvatore Barbatano and Robert Fishman at Shaw Gussis are counsel to Bodenstein.

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