A top federal official admits regulators failed to adequately protect consumers of a Cedar Falls-based brokerage that’s at the center of a fraud investigation.
Russell Wasendorf, Senior — the CEO of Cedar Falls-based Peregrine Financial Group — was arrested last Friday and charged with filing false bank statements with federal regulators. During a Senate Ag Committee meeting Tuesday, Senator Tom Harkin commented on the case.
“I find it hard to believe — hard to believe — that one person with hundreds of employees dealing with all these accounts could be the sole person responsible for this,” Harkin said. “And I hope the investigations will continue on to find out if there were others involved.”
Wasendorf, the man at the center of the controversy, tried to commit suicide July 9. According to a statement released by court officials, Wasendorf admitted he falsified bank statements for 20 years. Harkin suggested this episode calls into question the idea that the commodity trading industry can be “self-regulated.”
“I’m astounded that this could go on for nearly two decades and yet nobody checked,” Harkin said. “…I find that mind-boggling.”
The chief of the Commodity Futures Trading Commission told Harkin his agency doesn’t have the money or the staff to ensure this kind of fraud isn’t happening.
“Frankly, we don’t,” he said. “We’re only about 10 percent greater than we were 20 years ago and the futures market alone are five-fold bigger and then we have the swaps market that is vast.”
According to the Commodity Futures Trading Commission chairman, self-regulatory organizations will remain the first line of defense for investors in the commodity markets. Harkin said that’s not good enough.
“When I hear people say that we need to get rid of the reforms of Dodd-Frank, most of which are not in effect yet, it makes me wonder whether or not people are paying attention to the things that we read about in the paper,” Harkin said during Tuesday’s Senate Ag Committee hearing.
The top federal regulator of the commodities industry told Harkin and other senators that just like local cops can’t prevent all bank robberies, market regulators cannot prevent all financial fraud. New regulations announced last Friday, however, would give the Commodities Futures Trading Commission direct access to brokers’ bank accounts.
Wasendorf rented a post office box and intercepted paperwork that federal regulators thought was being sent to the bank that held his clients’ money.