8:33 p.m. | Updated
A prominent futures-industry executive was sentenced to 50 years in prison on Thursday for embezzling from clients and misleading banks for two decades.
Russell Wasendorf Sr., the chief executive of the now-defunct brokerage firm the Peregrine Financial Group, stole more than $215 million, money that a judge said is likely never to be recovered.
Dressed in orange prison garb, his wrists and ankles shackled, Mr. Wasendorf sat expressionless as Judge Linda Reade of the United States District Court in Cedar Rapids, Iowa, handed down the maximum sentence recommended by the government.
“The lengthy prison sentence imposed today is just punishment for a con man who built a business on smoke and mirrors,” said Sean Berry, acting United States attorney in Cedar Rapids.
Mr. Wasendorf’s penalty is the latest in a string of stiff sentences handed down by judges for financial crimes. Bernard L. Madoff received 150 years for perpetrating the largest Ponzi scheme ever uncovered. Allen Stanford is serving a 110-year term after being convicted of swindling investors of nearly a $7 billion. Thomas J. Petters got a 50-year sentence for defrauding investors of nearly $4 billion.
Given the extremely lengthy sentences and advanced age of some of the defendants, many of these terms are largely symbolic, intended to reflect the gravity of the crimes and the need for retribution.
The fraud carried out by Mr. Wasendorf, 64, took place more than 1,000 miles from Wall Street, in Cedar Falls, Iowa. Federal regulators discovered the crime last summer after local police found Mr. Wasendorf unconscious in his car in Peregrine’s parking lot, a hose running from the exhaust pipe into the passenger compartment. He left a detailed suicide note explaining his crimes.
Mr. Wasendorf stole millions of dollars from his customers at Peregrine, which also did business as PFGBest, by using laser printers and software like Photoshop and Excel to make near-perfect replicas of account statements from US Bank. He duped regulators by supplying them with a false post-office box address for sending forms to the bank, which he would then intercept and send back on forged US Bank letterhead.
Mr. Wasendorf said that he acted alone, keeping his scheme from his approximately 240 employees by being the only Peregrine employee with access to customers’ accounts. No one else, including his son, Russell Wasendorf Jr., who worked at the firm, has been charged in the case.
“With careful concealment and blunt authority, I was able to hide my fraud from others at P.F.G.,” he wrote in his suicide note.
Mr. Wasendorf’s fraud shocked the financial world, coming just months after the implosion of MF Global, a commodities and futures brokerage firm where about $1 billion in client money disappeared. The scandal raised questions about oversight failures in the futures industry. Futures brokerage firms like Peregrine match buyers and sellers of contracts for commodities, charging a small commission for the service.
Peregrine’s clients — and Mr. Wasendorf’s 13,000 victims — including speculators betting on the price of orange juice and farmers who use such contracts to protect themselves from large price fluctuations.
The case also stunned Cedar Falls, a town of 40,000 perhaps best known as the home of the University of Northern Iowa, the college where Mr. Wasendorf, an Iowa native, earned his degree. He started his business there in the late 1960s before moving it to Chicago, the epicenter of the futures industry. (Cedar Falls is about 60 miles north of Cedar Rapids, where Mr. Wasendorf was sentenced.)
In 2009, Mr. Wasendorf returned to Cedar Falls, spending $20 million to build a gleaming headquarters on the outskirts of town. A delegation of Iowa lawmakers, including Senator Charles E. Grassley, Republican of Iowa, attended the office’s grand opening.
He became a local hero, creating jobs, sponsoring numerous charitable causes and opening two restaurants in town. His Italian eatery, myVerona, became a Cedar Falls hot spot and a coveted place to land a job. In 2010, Mr. Wasendorf paid for the entire staff to travel to Italy — visiting Milan, Parma and Modena — to hone their culinary skills and sample the authentic cuisine.
“How can I expect them to prepare and cook north Italian food if they haven’t experienced it?” Mr. Wasendorf told The Waterloo Cedar Falls Courier.
His estate, a compound carved out of Iowa farmland, featured a 1,000-bottle wine cellar and a U-shaped indoor swimming pool with a retractable glass-paneled roof. He owned a private jet — nicknamed Air Wasendorf — that he flew out of nearby Waterloo, traveling frequently to Chicago for meetings.
Judge Reade rejected any leniency for Mr. Wasendorf because of his contributions to the community. “It is easy to be generous with other people’s money,” she said.
Iowa newspapers nicknamed Mr. Wasendorf “the Madoff of the Midwest.” Though Mr. Wasendorf’s criminal proceeds were a tiny fraction of Mr. Madoff’s, the two men suggested similar reasons for why they turned to a life of crime.
Mr. Madoff has said in interviews that he began his fraud after his investment performance soured and he couldn’t admit defeat. Similarly, Mr. Wasendorf, in his confession, said he began to steal from his clients when his business slumped and he began to run out of money.
“I guess my ego was too big to admit failure,” wrote Mr. Wasendorf. “So I cheated.”
On Thursday, Mr. Wasendorf, gaunt and diminished, expressed deep remorse.
“I feel I fully deserve whatever sentence I’m given,” he said. “The punishment I’ve caused myself is worse than anything you can impose.”
A version of this article appeared in print on 02/01/2013, on page B1 of the NewYork edition with the headline: Ex-Peregrine Chief Sentenced to 50 Years in Prison.
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