Peregrine Financial Fraud: What Shocks Me

After close to four years of tracking and highlighting stories of financial frauds and accompanying regulatory failures, I am not easily shocked. The other day while reading of the news surrounding the fraud and failure of the Peregrine Financial Group in Cedar Falls, Iowa, I was shocked.

We now know the fraud at Peregrine was carried out over a 20 year time period. Excruciatingly painful for Peregrine’s customers? No doubt. But in light of all we have learned about our captured regulators, is this shocking? Regrettably, no, it is not.

Peregrine’s owner and CEO Russell Wasendorf maintains he perpetuated this fraud on his own. Is this to be believed? Not on its face, but this assertion alone does not shock me.

I “would” be shocked to think that there are not other Peregrine-type frauds out there. Why is that and what truly shocks me about this situation at Peregrine?

In the process of reading a review of the Peregrine fraud, I learned the following shocking news in the Financial Times,

. . .  reforms must allow for self-regulatory organisations and the CFTC to have direct electronic access to futures brokers’ customer funds, without asking for permission as is current practice.  (LD’s highlight)

I literally gagged the other day upon reading that statement. Are you kidding me? Not to make light of this painful situation, but as I drank my coffee after having read this news, I envisioned the following exchange between regulators.

“How ya doing today?”

“Good, yeah, . . . doing just fine.”

“Anything new out there?”

“No, not really. Had a few questions and concerns about some stuff going on over at Peregrine, but that’s about it.”

“Peregrine, . . . really? Russ Wasendorf? He’s a good guy, . . . no?”

“Supposed to be. I know he’s highly thought of in his community. Unfortunately, though, when we wanted to check some things out with Peregrine’s customers, we just did not get the green light, you know, the permission from Russ, to look into it.”

“Really? Uh…ok. . . . Anything else new?”

“No, no, . . . that’s about it.”

For the customers of Peregrine, I do not mean to make light of your pain.

I do mean to shame the financial regulators from the CFTC and NFA (National Futures Association) who failed to perform. Permission? Are you serious?

How many other frauds are out there right now because our captured regulators did not get the permission to check customer accounts?

“You bowling tonight?”

“Yeah, yeah, yeah . . . my wife gave me permission. See you there!!”

Financial regulatory oversight in America circa 2012 = J-O-K-E!!

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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