Peregrine felt financial pressure, employees took pay cuts - KWWL - Eastern Iowa Breaking News, Weather, Closings

Peregrine felt financial pressure, asked employees to take pay cuts

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CEDAR FALLS (KWWL) -

Peregrine Financial Group was feeling financial pressures long before collapse of the company this week.

Several weeks before Tuesday's bankruptcy filing, employees were asked to take a 10 percent pay cut in two installments, June and July. They took the first pay cut last month.

Just last Friday, according to a confidential internal Peregrine email obtained by KWWL News, Peregrine President and COO, Russ Wasendorf, Jr., told employees the second pay cut, set for this month, would not be necessary. He said business was improving and thanked employees for their patience and sacrifices.

Then, just three days later, Russ Wasendorf, Sr., suicide attempt sparked an FBI investigation,  bankruptcy filing, Federal lawsuits and some $200 million in customer money missing.  

So many people are wondering; who knew what was going on at Peregrine?

By all accounts, Russ Wasendorf, Jr., was visibly shaken and very emotional when he told employees about his father's attempted suicide and the company's imminent financial problems.

According to court documents released on Friday, Wasendorf, Jr., walked into his office on Monday morning to find a suicide note from his father and a signed statement detailing more than 20 years of fraud. In the letter, Wasendorf, Sr., says he was the only person in the company that knew the company's true financial situation.

A Peregrine employee told Alex Halperin of Salon.com  "I don't think the son had any idea unless he's an Oscar winning actor."

Wasendorf, Sr., was arrested Friday morning and charged with making false statements regarding segregated customer funds at Peregrine.

The 64-year old founder and owner of PFGBest was hospitalized after attempting suicide Monday in a wooded area near his company headquarters in Cedar Falls.

Earlier reports indicated Wasendorf had been near death when employees discovered him inside a car Monday morning with one end of a hose attached to the car exhaust and the other end inside the vehicle. Wasendorf had left a suicide note, alluding to financial irregularities at Peregrine.

The suicide attempt triggered a chain of events this week which essentially closed down the commodity futures trading company, amid allegations of fraud and misappropriation of more than $200 million in client funds.

After reading the suicide note, local authorities notified the Waterloo office of the Federal Bureau of Investigation of the possible financial problems at PFGBest.

The National Futures Association moved quickly to freeze all Peregrine accounts. The Commodity Futures Trading Commission filed a Federal lawsuit Tuesday against Peregrine Financial Group, accusing the firm and Russ Wasendorf, Sr., of fraud and misappropriation of client funds.

The lawsuit said the company had a shortfall of more than $200 million in its segregated client accounts, saying, "the whereabouts of the funds is currently unknown."

CFTC Commissioner Bart Chilton said the lawsuit alleges "intentional fraud" on the part of the company and Russ Wasendorf, Sr. Chilton told Fox Business News, ‘money was stolen."

The CFTC lawsuit seeks to freeze all PFG assets and appoint a receiver for the company.

Peregrine countered by filing Chapter 7 bankruptcy late Tuesday in U.S. bankruptcy court in Chicago. The bankruptcy petition says the company has somewhere between 10,000 to 25,000 creditors. The petition listed  assets between $500 million and $1 billion, with liabilities somewhere between $100-$500 million. The list of creditors has yet to be made public.

There are unanswered questions about developments which occurred before this week's  reversal of fortune at Peregrine.

Russ Wasendorf, Sr., decided to elope more than a month before his scheduled wedding in Cedar Falls Aug 4. 

The wedding was to have been held at Bethlehem Lutheran Church in Cedar Falls, followed by a formal reception at Wasendorf's My Verona restaurant and an informal reception later that day at the Wasendorf home in rural Cedar Falls.

Instead Wasendorf and his fiance were married in Las Vegas. Nevada court records show a marriage license was filed for Wasendorf and a Nancy Paladino on July 6.

There are also many questions being raised asking why Russ Wasendorf, Sr., turned Power of Attorney over to Russ Wasendorf, Jr., on July 3.

In an eerie foreshadowing of things to come, the Power of Attorney document says Wasendorf, Jr., would take control of the company, "in the event that Russell R. Wasendorf, Sr., becomes incapacitated.".

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