CEO admits to embezzlement
CEDAR RAPIDS, Iowa – The chief executive of an Iowa-based brokerage firm admitted in a tell-all suicide note that he carried out an elaborate fraud scheme in which he embezzled at least $100 million from customers over two decades, federal investigators said Friday.
FBI agents arrested Peregrine Financial Group Inc. CEO Russell Wasendorf Sr. at a local hospital Friday and he appeared in federal court later that day on charges of lying to federal investigators. Court documents detail a wide-ranging fraud scheme in which Wasendorf apparently fooled colleagues, customers and regulators by creating fraudulent financial records.
Those documents detailed a note found in Wasendorf’s car Monday, when authorities found him unresponsive in the vehicle outside the company’s headquarters in Cedar Falls. “Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts,” Wasendorf wrote, adding that the fraud had gone undetected “until now.”
Wasendorf, who investigators said tried to commit suicide by hooking up a tube to his car’s tailpipe, had been hospitalized since Monday.
Peregrine Financial Group, which marketed itself as PFGBest, filed for bankruptcy Tuesday. It was the same day the industry’s top regulator filed civil fraud charges alleging the firm misused customer money and falsely claimed a bank account contained more than $220 million when it actually had about $5 million.
Fed saw rate manipulation
WASHINGTON – The Federal Reserve Bank of New York released documents Friday that show it learned five years ago of big banks understating their borrowing costs to manipulate a key interest rate.
The documents also show Treasury Secretary Timothy Geithner, who was then president of the New York Fed, urged the Bank of England to make the rate-setting process more transparent.
A congressional panel requested the documents and is investigating manipulation of the London interbank offered rate (LIBOR) rate, which affects the interest people pay on loans.
The process for setting the LIBOR has come under scrutiny since Britain’s Barclays bank admitted two weeks ago that it had submitted false information to keep the rate low. In settlements with U.S. and British regulators, the bank agreed to pay a $453 million fine.
Regulators are also looking to see if other major banks, including Citigroup Inc. and JPMorgan Chase & Co., committed similar violations.
Mortgages boost Wells Fargo
Wells Fargo reported higher earnings, higher revenue, and a record number of mortgage applications on Friday.
The bank, based in San Francisco far from its New York peers, was considered a large regional bank until the end of 2008, when it stepped onto the national scene by scooping up Wachovia, a major bank in the South that was teetering on the brink of collapse.
Wells Fargo has since staked its reputation on mortgages, churning out more loans than any other bank. It’s now the biggest U.S bank by market value, a crown it took from JPMorgan.
Net income rose 18 percent to $4.4 billion, compared with $3.7 billion in the same period a year ago. On a per-share basis, the bank earned 82 cents, in line with estimates of analysts polled by FactSet. Revenue rose 4 percent to $21.3 billion, also in line with analysts’ expectations.
Mortgage originations more than doubled, to $131 billion from $64 billion. About 16 percent came from the government’s Home Affordable Refinance Program, or HARP. The trade publication Inside Mortgage Finance estimates that Wells Fargo controls 34 percent of mortgage lending in the U.S. The runner-up, JPMorgan Chase, controls 11 percent.