Peregrine Financial Group Case Study
Peregrine Financial Group
What went wrong?
Keller Graduate School of Management
August 18, 2012
Fraudulent financial reporting has always been and will always be present in the financial world. They are shocking when they come to light and at the same time, consumer starts doubting the system that were supposed to be watching out for these frauds. These financial scandal is another reminder of how incompetent government overseers have been at detecting financial fraud and how ill equipped the industry has been at policing itself. This paper will back up that claim by looking at the Peregrine Financial Scandal that happened just last month of this year. How Russell Wasendorf Sr. allegedly defrauded their clients and fooled their auditors using PO Box and Photoshop.
Peregrine Financial group is a futures brokerage based in Cedar Falls, Iowa that accepts trades from other countries. They are a direct access brokerage that offers access to exchanges in the US. For many companies who went down on a scandal, the main reason was always greed of the top officers; for Wasendorf Sr., it was not greed but pride. According to Russel Wassendorf Sr., “"I had no access to additional capital and I was forced into a difficult decision: Should I go out of business or cheat? I guess my ego was too big to admit failure, I have committed fraud" (Levine). In front of everyone, Wasendorf Sr. had everything; he was CEO of his own company that was a multi million-dollar brokerage firm and everyone looked up to him and was considered a pillar of the community. He had such a sterling public image that he had way too much pride in him to admit that he failed. It was when interest rates dropped significantly that Wassendorf Sr. started having a hard time being in this business. Instead of filing for bankruptcy, he submitted false financial documents for his company to the U.S. Commodity Futures Trading Commission that overstated the value of Peregrine’s customer money using
What went wrong?
Keller Graduate School of Management
August 18, 2012
Fraudulent financial reporting has always been and will always be present in the financial world. They are shocking when they come to light and at the same time, consumer starts doubting the system that were supposed to be watching out for these frauds. These financial scandal is another reminder of how incompetent government overseers have been at detecting financial fraud and how ill equipped the industry has been at policing itself. This paper will back up that claim by looking at the Peregrine Financial Scandal that happened just last month of this year. How Russell Wasendorf Sr. allegedly defrauded their clients and fooled their auditors using PO Box and Photoshop.
Peregrine Financial group is a futures brokerage based in Cedar Falls, Iowa that accepts trades from other countries. They are a direct access brokerage that offers access to exchanges in the US. For many companies who went down on a scandal, the main reason was always greed of the top officers; for Wasendorf Sr., it was not greed but pride. According to Russel Wassendorf Sr., “"I had no access to additional capital and I was forced into a difficult decision: Should I go out of business or cheat? I guess my ego was too big to admit failure, I have committed fraud" (Levine). In front of everyone, Wasendorf Sr. had everything; he was CEO of his own company that was a multi million-dollar brokerage firm and everyone looked up to him and was considered a pillar of the community. He had such a sterling public image that he had way too much pride in him to admit that he failed. It was when interest rates dropped significantly that Wassendorf Sr. started having a hard time being in this business. Instead of filing for bankruptcy, he submitted false financial documents for his company to the U.S. Commodity Futures Trading Commission that overstated the value of Peregrine’s customer money using
References: Bunge, Jacob (August 2012). Peregrine financial CEO misled regulators month-by-month-indictment. The Wall Street Journal. Retrieved 15 August 2012 from http://online.wsj.com/article/BT-CO-20120814-709171.html. Elliot, Nick (July 2012). Peregrine financial: 4 common methods of camouflaging fraud. The Wall Street Journal. Retrieved 15 August 2012 from http://blogs.wsj.com/corruption-currents/2012/07/30/peregrine-financial-4-common-methods-of-camouflaging-fraud/. Foley, Ryan (August 2012). US brokerage CEO indicted in $200m fraud scheme. The Associated Press. Retrieved 15 August 2012 from http://abcnews.go.com/US/wireStory/iowa-brokerage-ceo-indicted-200m-fraud-scheme-16997868#.UDAFuam9w0s. Levine, David (July 2012). Peregrine Financial Group’s former employees recall a troubled workplace. The Huffington Post. Retrieved 15 August 2012 from http://www.huffingtonpost.com/2012/07/14/peregrine-financial-group_n_1673589.html. Phillips, M., Leising, M., & Harris, A . (July 2012). Peregrine scandal had regulators fooled. San Francisco Chronicle. Retrieved 15 August 2012 from http://www.sfgate.com/business/article/Peregrine-scandal-had-regulators-fooled-3743271.php#page-2.