Russell Wasendorf, Sr., CEO of Peregrine Financial Group (aka PFG Best) admitted in a suicide note that he had embezzled millions of dollars from customers for the past 20 years. The reason the financial fraud was able to continue undetected for so long was due to a comedy of errors and omissions on the part of both regulators and auditors (see Regulators Maintain Perfect Record of Incompetence – Massive Fraud At Peregrine Financial Goes Undetected).
In his suicide note, Wasendorf described how he was able to carry on an embezzlement for 20 years without being caught.
“Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts at Peregrine Financial Group, Inc. The forgeries started nearly twenty years ago and have gone undetected until now. I was able to conceal my crime of forgery by being the sole individual with access to the US Bank accounts held by PFG.”
The one person audit firm employed by Peregrine Financial apparently had no problems with the lack of segregation of duties surrounding the US Bank account. A standard audit should have highlighted the lack of internal accounting controls involving what was apparently the main cash account at Peregrine Financial.
The bank account controlled solely by Peregrine’s CEO showed a balance of approximately $220 million when in fact there was less than $5 million in the account. Yahoo Finance describes how Wasendorf was able to fool regulators and customers.
He said he used “careful concealment and blunt authority” as the company’s founder and sole shareholder to hide the fraud. He said he ordered bank statements be delivered directly to him unopened, that he was the only person with access to the firm’s online bank account, and he told the bank that he was the only representative they should call, according to court documents.
Wasendorf said he also fooled regulators checking how much money his company held by opening a Cedar Falls post office box in 2006 in the name of US Bank, an address he put on the counterfeit bank statements he created. Auditors mailed confirmation forms to the address, and he sent phony documents back showing the accounts contained “the amount I needed to show.”
“When online banking became prevalent, I learned how to falsify online bank statements and the regulators accepted them without question,” he added.
Based on the nonstop series of frauds at financial companies, it is not surprising that 57% of the public has little confidence in the U.S. banking system.
Speak Your Mind
You must be logged in to post a comment.