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'Bernie Madoff Of The Midwest' To Plead Guilty


Another massive financial fraud case is going to federal court on this Monday. In Iowa, the founder and CEO of Peregrine Financial Group - or PFG - is expected to plead guilty to charges that he swindled customers out of at least $100 million. NPR's David Schaper reports.

DAVID SCHAPER, BYLINE: Some are calling him the Bernie Madoff of the Midwest. Russ Wasendorf Sr., founder and CEO of the PFG brokerage firm in Cedar Falls, Iowa, admits that he stole tens of millions of dollars from his customers over the past 20 years. According to his plea agreement, Wasendorf secretly withdrew funds from customer accounts, and pumped some of the money back into the company.

He also admits investing some of the stolen money in outside businesses, and taking some of it for personal use. In the plea, he says he covered his tracks by creating phony bank documents, which he used to fool auditors and regulators. He generated monthly reports that showed his company with at least $200 million more in customer funds than it actually had.

The elaborate ruse was discovered when Wasendorf tried to kill himself, in July. Prosecutors say Wasendorf was found in his car, in the parking lot behind his company's headquarters, along with a suicide note that detailed how he defrauded thousands of his customers.

DOUG MCCLELLAN: Oh, yeah. I was shocked.

SCHAPER: Doug McClellan runs his own brokerage firm in Lincoln, Nebraska, and had about $500,000 in customer funds invested in Wasendorf's company.

MCCLELLAN: I mean, I can't believe that the guy was able to pull it off.

SCHAPER: McClellan says he also can't believe regulators and auditors couldn't unravel the scheme sooner; and he's stunned that following today's plea hearing, the federal judge overseeing the case will release Wasendorf from jail, to await sentencing.

MCCLELLAN: Get him a stall next to Bernie. Let him go ahead and do his sentence, serve his time. Don't let him off the hook.

SCHAPER: Wasendorf faces up to 50 years in prison.

David Schaper, NPR News. Transcript provided by NPR, Copyright NPR.

David Schaper is a correspondent on NPR's National Desk, based in Chicago, primarily covering transportation and infrastructure, as well as breaking news in Chicago and the Midwest.