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!!