Russ Wasendorf, Jr. sues U.S. Bank - KWWL - Eastern Iowa Breaking News, Weather, Closings

Russ Wasendorf, Jr. sues U.S. Bank, claims fraud

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  • Russ Wasendorf Sr. and PFG

    Russ Wasendorf Sr. and PFG

    The CEO of PFG stole more than $215 million from more than 13,000 victims and was sentenced to 50 years in federal prison. All related stories can be found here.More >>
    The CEO of PFG stole more than $215 million from more than 13,000 victims and was sentenced to 50 years in federal prison. All related stories can be found here.More >>

The latest lawsuit in connection with the collapse of Peregrine Financial Group involves an interesting twist.

This lawsuit has been filed by Russ Wasendorf, Jr., the son of PFG Founder and CEO, Russ Wasendorf, Sr.

Russ Wasendorf, Sr. pleaded guilty this week to four federal charges relating to the $200 million fraud and collapse of his company, Peregrine Financial Group. He remains in the Linn County Jail, awaiting sentencing. He could face up to 50 years in prison.

His son, Russ Wasendorf, Jr., filed the lawsuit against U.S. Bank and a U.S. Bank employee, Hope Timmerman. In 79-pages of court documents, Russ Wasendorf, Jr., and his wife Amber, accuse U.S. Bank of fraud, negligent representation and unilateral mistake. The suit says PFG maintained various accounts at U.S. Bank, but the suit focuses mainly on a PFG Customer Segregated Account at a U.S. Bank branch in Cedar Falls.

The lawsuit, filed by Algona attorney Scott Buchanan, accuses U. S. Bank employee Hope Timmerman of breach of fiduciary duty. In the lawsuit, Timmerman is described as a U.S. Bank employee, who was relationship manager for the PFG accounts.

The lawsuit asks that the court enter a judgment of at least $100,000 against Hope Timmerman, citing the alleged fiduciary breach.

The suit also asks the court to rescind a personal guaranty agreement signed by Amber and Russ Wasendorf, Jr.  The Wasendorf's signed the guaranty agreement when U.S. Bank loaned Wasendorf Construction Company more than $6 million for the new PFG headquarters building in Cedar Falls.

The suit says Amber and Russ Wasendorf, Jr., in signing the guaranty agreement, relied on information provided by U.S. Bank regarding the nature of Russ Wasendorf, Sr.'s assets. The petition claims U.S. Bank told the Wasendorf's the accounts were in 'good order' when they signed the guaranty agreement.   

The lawsuit says, had U.S. Bank disclosed the true facts surrounding the PFG Customer Segregated Account in question, the Wasendorf's would not have executed any of the guaranty agreements related to the loan for PFG's new building.

The suit accuses U.S. Bank of violating Federal rules regarding Customer Segregated Accounts. The filing claims U.S. Bank did not inform either the Commodity Futures Trading Commission or PFG that checks received from PFG, designated as customer segregated funds, were being deposited into an account not designated as a segregated funds account.

The suit says U.S. Bank permitted Russ Wasendorf, Sr. to wire funds out of the Customer Segregated Account in violation of Federal regulations.

Reached at his office in Minneapolis, U. S. Bank Senior Vice-President Tom Joyce released a statement to KWWL, saying U.S. Bank plans to fight the lawsuit with vigor. In the statement Joyce says, "The Wasendorf's lawsuit is entirely without merit. There is no evidence of any employee misconduct by anyone at U.S. Bank."

In his statement to KWWL, the U.S. Bank Senior Vice-President placed blame on the Wasendorfs. He said,"The lawsuit is an outrageous attempt by the Wasendorf's to deflect the blame and the financial obligations from the collapse of Peregrine caused by Mr. Wasendorf Sr.'s criminal activity and the failure of their own management and internal controls."

Joyce added, "Mr. Wasendorf, Sr., has already pled guilty to and accepted sole responsibility for the actions in question. We will be vigorously defending the claim and believe that it is so lacking in merit that the Wasendorf's or their counsel will be responsible for our attorneys' fees."

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