By Chelsey Dulaney
An Iowa district court has ordered U.S. Bancorp to pay $18
million to customers of the now-defunct Peregrine Financial Group
Inc, the U.S. Commodity Futures Trading Commission said
Wednesday.
The company's U.S. Bank unit was the home of a Peregrine bank
account holding funds that were misappropriated by Peregrine and
its owner Russell Wasendorf Sr., the CFTC said.
The account was used to defraud more than 24,000 clients and
misappropriate more than $215 million in customer's money,
according to the CFTC.
In a statement, U.S. Bancorp said it was pleased to have reached
the resolution with the CFTC and noted it didn't admit any
wrongdoing.
"Like PFG's customers, U.S. Bank was subject to this
sophisticated fraudulent scheme," a representative for the bank
said.
The Iowa brokerage collapsed in 2012 after the exposure of its
founder's fraud and filed for Chapter 7 bankruptcy liquidation that
July.
From 2008 to 2012, Mr. Wasendorf withdrew and transferred about
$36 million from the U.S. Bank account to non-Peregrine customers,
the CFTC said. U.S. Bank regularly withdrew its account fees from
the funds for both Peregrine and non-Peregrine accounts held at the
bank, it added.
"Russell Wasendorf stole enormous sums of money that Peregrine's
customers entrusted to him. He is responsible for his crimes," said
Aitan Goelman, CFTC director of enforcement. "However, that fact
does not excuse U.S. Bank's failure to meet its own
responsibilities to safeguard Peregrine's customer funds that it
held."
Mr. Wasendorf was arrested in 2012 after confessing to the fraud
in a failed suicide attempt. He was later convicted of stealing
more than $215 million in customer funds from more than 13,000
victims over a nearly 20-year span.
A federal judge sentenced Mr. Wasendorf the following year to 50
years in prison, which he is currently serving in Terre Haute,
Ind.
Write to Chelsey Dulaney at Chelsey.Dulaney@wsj.com
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