PFG's Chairman Was Forging Bank Documents For Years Even As The CFTC Gave An "All Clear"

Tyler Durden's picture

If there is an event that should cost Gary Gensler his job as head regulator at the CFTC, it is this. According to a just released Reuters report, the head of MFG(lobal) part 2, PFG, whose story we broke yesterday, Russell Wasendorf Sr. "intercepted and forged bank documents for more than two years to cover up hundreds of millions of dollars in missing money, a person close to the situation." Once Wasendorf realized he was caught, and knew the implications of his actions would be exposed for the whole world to see, he tried to commit suicide, and failed. "Wasendorf, 64, is reported to be in a coma after a suicide attempt Monday morning, according to a complaint filed by the Commodity Futures Trading Commission on Tuesday that accuses Wasendorf and Peregrine of fraud." And while crime happens all the time, what is truly stunning is that as we reported previously, the CFTC gave the firm a clean bill of health in its January inspection of Peregrine Financial Group. That's 6 months ago. The CFTC, as a reminder, was it regulator. The entity whose sole charge is to make sure that firms at least have real, not rehypothecated, cash in their segregated client bank accounts. PFG never did for the past two years. And somehow the CFTC missed this. MF Global was a warning shot, and the CFTC missed it entirely. And not only that but 2 months later ir pronounced PFG clean. For this Gensler has to be fired immediately, and with prejudice.

More from Reuters:

The source offered new details on how Wasendorf allegedly carried out the deceit, which involved the forging of confidential documents that the NFA uses to verify a broker's cash balance with its depository institution.

 

Wasendorf intercepted these documents after they were mailed by the NFA, the broker's first-line regulator, to U.S. Bank, where PFGBest had said it had well over $200 million on deposit, the person said. The NFA has said the account actually held just $5 million this week.

 

Wasendorf had set up a post office box in Cedar Falls, Iowa, according to a second person involved in the matter. It was to that post office box that NFA sent the documents, which were addressed to the bank.

 

The post office box was neither in Wasendorf's name nor registered to the bank, the second person said.

 

Wasendorf then forged signatures and fabricated bank balances on the documents and simply mailed them back to the Chicago-based NFA, the person said.

 

Calls to spokespeople for PFGBest and NFA were not returned. A woman who answered the phone at the home of Wasendorf declined to comment.

If anyone deserves some credit here, it is the NFA:

The scheme apparently began to unravel after the NFA began to press Wasendorf, who was an early advocate of electronic trading, to allow the regulator to confirm balances electronically and directly with the bank, rather than in a hard copy via mail, the person said.

 

NFA "started getting suspicious. He was resisting this new way of confirming the balance," the source said.

 

Wasendorf only recently signed the authorization, a decision that would quickly have led regulators to uncover the discrepancy, the person said. PFGBest's total segregated funds requirement was around $400 million, meaning more than half is missing.

Finally the spin: PFG is not MFG, it is Madoff.

While news that a second broker in less than a year appears to have misappropriated customer funds drew immediate comparisons to the MF Global failure in October, the source said the prolonged nature of the apparent deceit drew a more fitting parallel to the Ponzi scheme run by Bernard Madoff, though the size of the funds missing from PFGBest is tiny by comparison.

Well thank god for that: the farmers whose money is now forever gone can sleep much better knowing their cash was not Corzined, it was merely Made-off.

Of course, the real problem is that since there was only $5 million in the "client fund", there never likely was more than $5 million in real cash terms to begin with.

And this is what the CFTC signed off on.

Cur Congressional banana hearings, witch trials, and more fingerpointing which will result in more of the same: a former Goldmanite in charge of the CFTC, and virtually no hope that anything in these broken capital markets will ever be fixed until the big reset finally sweeps all this toxic garbage away.

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francis_sawyer's picture

His 'Luis Dega' life awaits on PAPILLION ISLAND...

SHEEPFUKKER's picture

Captain Edward J. Smith of the Titanic.......all clear. 

CrazyCooter's picture

For this Gensler has to be fired immediately, and with prejudice.

Unfortunately this must mean he will be the next Treasury Secretary. Gotta hit a high bat average to warm that seat!

Regards,

Cooter

HoofHearted's picture

I nominate Turd Feguson for Gensler's seat. Thumbs up if you agree. Down if I'm an idiot. Maybe you should be able to hit both buttons...

cossack55's picture

Good fuckin' call, PM. +15.8 trillion

merizobeach's picture

"Wasendorf, 64, is reported to be in a coma"  ...in the Cayman Islands?

cougar_w's picture

Good choice if only because Charles Keating wanted him dead.

Vegamma's picture

Totally agree PM. I think Black is our last chance...and therefore TPTB will never let it happen. Sigh.

laughing_swordfish's picture

I nominate Chumbawamba.

If he declines, then Cognitive Dissonance/

Al Gorerhythm's picture

Chumbawumba. Oh yeah, baby.

The Carnage. The Carnage. 

Cognitive Dissonance's picture

If nominated I will not run. If elected I will not serve.

(BTW what does the position pay.........just in case...........you know.............ummm............never mind.:>)

<humor tag for the humor impaired>

El Oregonian's picture

"The LORD detests the use of dishonest scales, but he delights in accurate weights."

-Proverbs 11:1

New living Translation

Everyone either is rewarded or, pays in the end.

Al Huxley's picture

I thought Tyler understood how the system work.  Overlooking this kind of shit is exactly why Gensler has his job.  To think otherwise would be to believe that the regulatorly bodies are actually there to prevent fraud in the system, which is akin to believing in unicorns, fairies and wizards.

JLee2027's picture

Yes, until caught and then the Genz is the fall guy is my take.

disabledvet's picture

"The Chicago Way." Surprised anyone things any different in these here parts. Hell the President was even in Iowa "asking for your vote!" How about he start by having his AG arrested and taken to Gitmo? I know I wouldn't be too happy to know the "you know who" are up to it again! How 'bout that healthcare bill Mr. President! Shall we talk War in Syria! No? Really? Hmmmm. Go figure. Oh, look! It's Angela Merkel on Line One sir! i wonder what she wants!???

Rasna's picture

Wasendorf would have been in the clear if he had continued to use magic markers and crayons on yellow legal pad on those intercepted mail docs.  He probably could have enlisted Gensler's help.

It was only when he began substituting typed (air quotes) official looking (close air quotes) fraudulent docs, that looked real, that the NFA and CFTC became suspicious.  "Somethin jus didn't luk rit," claimed an unnamed CFTC source to FT. (You fuck with the mail... You go to jail),

As for the $200M?  That's "Weekend at Bernies" money for Jaime.  Holder doesn't even answer the phone for that.

And I'm also guessing that the PFG traders weren't looking at their monthly statements.  Oh, wait... 

Wasendorf was intercepting those also!

newworldorder's picture

This is America - CrazyCooter,

No one with a title of Manager or Above gets fired with prejudice. Its just not done. It would brand a person as incomptent and delelict in his duties. Cant have that especially for an ex Goldmanite favorate son.

Dr. Sandi's picture

 

For this Gensler has to be fired immediately, and with prejudice.

Gensler's not going anywhere. But the guy who cleans his office is looking at 20 years of hard time for his involvement.

Gringo Viejo's picture

With all due respect to gays, (including my brother) I'm an old ex-marine and I mean only an expletive of stress in a combat situation.

YOU COCKSUCKING, MOTHERFUCKING, PIECES OF SHIT, CUNT, MOTHERFUCKING PIECES OF SHIT!

francis_sawyer's picture

The NAVY invented sex...

MARINES invented sex with women...

Gringo Viejo's picture

As per Sid, in Ken Burns' movie "The War"...about WWII: The Marine recruiter told him "you can't enlist in the Navy anyway......because your parents are married."

knukles's picture

Marines.
Why the Navy doesn't need goats aboard ships.

   Olde US Navy adage.

Semen
Naval personnel

   USMC knowledge.

post turtle saver's picture

My Ass Rides In Navy Equipment

unemployed's picture

 The Guadacanal Seabees told me that to be an Army Ranger you had to be an orphan....   Probably something about not having to write letters to the survivors etc.

HungrySeagull's picture

No no no.

The Marines invented sex by the Buddy System.

Two by two...

Al Gorerhythm's picture

Can we have his fucking waterboy, Bart Chilton, handcuffed to Gary's ankle when the boat sails? I don't want to see that CUNT even trying to stand tall as he goes.

Just in case you didn't get the emphasis Bart: CUUUUUUUUNT!

nmewn's picture

Saaay...isn't Chilton a "regulator"?

This won't go over well with the regulate first ask questions later crowd ;-)

Al Gorerhythm's picture

He's a storefront manequin with a loop recorded message.

LetThemEatRand's picture

Saaaay... isn't PFG's Chairman a "private businessman?"

This won't go over well with the free market first ask questions later crowd.  ;-(

nmewn's picture

;-)

You're a private business "man" aren't you?

LetThemEatRand's picture

I am.   Do you think I should be eliminated because the PFG private businessman was corrupt?

tmosley's picture

Clearly you need more regulation because of him.

LetThemEatRand's picture

I am heavily regulated and doing just fine.  And I am a small business.  The problem as I see it is the large corporations and banks which are regulated on the books but not in practice due to capture of our government.       

LetThemEatRand's picture

Tmosley

I finally figured you out.  You work for a big company and in advocating the elimination of regulation, you are talking your book.  Tell me I'm wrong.  What do you do?

nmewn's picture

"Do you think I should be eliminated because the PFG private businessman was corrupt?"

No, the question is, do you think other private business men should be eliminated because one private business man was corrupt?

That is what happens to "marginal" businesses just starting out when over regulated. Regulation can also act as the friend of the monopoly...that is, large corps, as it cuts down on the competition who do not have the staff to comply with the complexity and expense of compliance.

Think about it.

LetThemEatRand's picture

Of course I don't think that one private business man's corruption should end business.  I am in business, unlike you.  I have been advocating for a long time that we need to gut our regulatory system and take money out of govenment because regulation is a friend of big business.  You, on the other hand, have been advocating getting rid of government regulation almost completely.  Have you come around to my point of view?  

nmewn's picture

"I am in business, unlike you."

I was introduced to what my accountant called an intangible tax...when I had my own business. 

A curious contrivance of the state that says once one buys a piece of equipment or fixed asset they must continue to pay a tax yearly. I said no, shove it...it was the principle of the thing.

Point being, you're wrong again...I've been a private actor twice (legally) ;-)

"I have been advocating for a long time that we need to gut our regulatory system and take money out of govenment because regulation is a friend of big business."

Well, thats news to me, I don't read every one of your comments.

"You, on the other hand, have been advocating getting rid of government regulation almost completely."

I've already told you I'm not an anarchist...you can't possibly be confusing me with anyone else...so I'll take "almost" as it was intended?

"Have you come around to my point of view?"

Doubtful...but I do hold out "hope" for you...lol...your first reaction last night was more regulation and regulators...mine was jail on the regs we already have on the books.

A distinct difference.

LetThemEatRand's picture

You can depreciate the equipment etc.  And my guess is you never had enough personal property to trigger intangible.  

Putting that aside, you misunderstand me.  I advocate for more effective regulation and elmination of entire arms of captured government.  I want more regulation and less fake regulation.  Absent taking our government back from the big corporations who you believe should run the world, we are all screwed.

nmewn's picture

"You can depreciate the equipment etc.  And my guess is you never had enough personal property to trigger intangible."

lol...my accountant would be shocked, shocked I say, to learn that and wrong guess again. But lets not get side tracked.

My point is...laws, regulation and taxes are a burden on business always. Small business bears a higher burden by virtue of their size. Regulation is more easily borne by a large corp...not a small one. The more regulation you have, the less small biz, the more monopoly status of the large...less competition against the large.

If you can't see that this is a "hopeless" exchange.

"I advocate for more effective regulation and elmination of entire arms of captured government."

Well,so do I. Dept of Ed...DHS...Energy...HHS...its a very long list.

"Absent taking our government back from the big corporations who you believe should run the world, we are all screwed."

You do realize governments are nothing but a variation of a big corporation don't you?

The only real difference is a government can legally take your life or property by force and you have no recourse except to meet it with force. The shareholders (us) are the ones who give it that power for one reason and one reason alone...that they use that power sparingly to enforce law evenly and fairly across the board. When it doesn't, we dissolve the corporation.

Think about it, right down to the "letters of incorporation"...or as is commonly known...a constitution.

westboundnup's picture

We never separate old friends.  Book them on the next transport.

Dugald's picture

Don't they jump out of windows anymore???

nmewn's picture

No.

Many have no shame anymore...no guilt...no honor...no pride...no integrity...no ethics...no morals...no values.

Nothing but hollow shells.

They are bereft of what makes them recognizable as human beings...and its not just in "high finance" either.

StychoKiller's picture

Most modern skyscrapers don't have windows that open (easily).

Mr Kurtz's picture

No, they become Governors and Senators for the state of New Jersey.