CEDAR RAPIDS, Iowa A U.S. judge on Thursday sentenced the founder of Peregrine Financial Group to 50 years in prison for looting hundreds of millions of dollars from the brokerage, saying his customers would probably never recover the money they lost.
Russell Wasendorf Sr., who had tried to kill himself just before the fraud was uncovered last year, received the maximum sentence allowed by law and was ordered to pay $215.5 million (£135.9 million) in restitution for his nearly 20-year scheme.
A local hero in Iowa known for his charitable work and lavish lifestyle, Wasendorf triggered the collapse of the brokerage through his fraud. The scam shook investors' confidence in the U.S. futures industry, already rattled by the failure of larger rival MF Global less than a year earlier.
"I'm very sorry for the financial and emotional damage I've caused to investors and employees of Peregrine Financial Group," Wasendorf said in a feeble voice at a sentencing hearing in Cedar Rapids, Iowa.
"I feel I fully deserve whatever sentence I am given," he said. "My guilt is such I will accept that sentence."
Chief Judge Linda Reade of the U.S. District Court of the Northern District of Iowa said former Peregrine customers will probably never get all their money back.
Wasendorf, 64, admitted last July that he had bilked tens of thousands of clients over a period of two decades. He used little more than a rented post office box, Photoshop and inkjet printers to fake bank statements and lie to federal regulators, employees and his closest family members.
As regulators closed in on the fraud, Wasendorf made a botched suicide attempt outside his $24-million headquarters in Cedar Falls, Iowa, which investigators say was financed with money siphoned from customers.
Peregrine Financial, known as PFGBest, quickly collapsed, and 24,000 former customers are still missing most of the money they had invested with the firm.
Wasendorf pleaded guilty in September to embezzling more than $100 million, used to fund a life of luxury that included a private jet, extensive wine collection and lakefront condo in Chicago. Prosecutors said the amount stolen was more than $215 million.
"The lengthy prison sentence imposed today is just punishment for a con man who built a business on smoke and mirrors," said Acting U.S. Attorney Sean Berry.
Supporters of the disgraced executive had asked Reade for leniency, arguing that Wasendorf is in frail health and had helped others even in the midst of his 20-year fraud.
Shackled at his wrists and ankles and wearing an orange sweatshirt over a prison jumpsuit, Wasendorf looked gaunt in court after spending six months in isolation in a county jail.
He has been sick in jail, and doctors found a tumour on or near his pancreas, according to testimony from his pastor, Linda Livingston of Ascension Lutheran Church. Wasendorf's mother died of pancreatic cancer, but it is unknown whether Wasendorf's tumour is cancerous, she said.
Despite his misdeeds, Wasendorf "did do some positive things for the community," said former U.S. Congressman David Nagle from Iowa, who spoke up for the fallen CEO in court.
Nagle, who helped Wasendorf win zoning approval for Peregrine's environmentally-friendly headquarters, asked the judge for leniency.
"Who wants to defend the magnitude of the crimes Mr. Wasendorf committed?" he said. "But good people do bad things."
Wasendorf was well known for donating to local charities before his empire came crashing down.
However, he built his reputation for generosity using money stolen from his customers, Judge Reade said, adding that the donations likely eased Wasendorf's feelings of guilt.
"It is easy to be generous with other people's money," she said.
Wasendorf's downfall shocked his family and colleagues and shattered his image in his adopted hometown of Cedar Falls, where he moved Peregrine's headquarters in 2009.
With an unusual empire including a Romanian property company and a glossy magazine, Wasendorf's ego stood out even in the rough and tumble world of the Chicago-based futures industry.
He proudly underwrote big-name guest speakers at industry events and held private VIP receptions for them, and flashed a jewelled pinky ring. His favourite quote, according to his Facebook page, was, "If I wanted patience, I would buy it."
U.S. prosecutors said the large financial loss, the sophisticated nature of the crime, and the sheer number of victims justified Wasendorf spending the rest of his life behind bars.
"The defendant spent like he was the richest man in the world," Assistant U.S. Attorney Peter Deegan said in court.
Prosecutors said the government doesn't anticipate filing further criminal charges in Peregrine's downfall. The FBI continues to review the firm's records.
Wasendorf could trim 7.5 years off his sentence for good behaviour, which would made him at least 106 years old before he is eligible for release.
The National Futures Association, which regulated Peregrine, had no comment on Wasendorf's sentence.
The government has not yet decided where Wasendorf will serve out his days or when he will be shipped to federal prison.
Judge Reade said she would try to place him in a facility near his family.
James Koutoulas, co-founder of the Commodity Customer Coalition which has been working to help former Peregrine customers get their money back, welcomed the sentence. "I want this guy sitting on a cot afraid a shiv is going to go in his neck at night," he said.
Bernard Madoff, who pleaded guilty in 2009 to running a multibillion-dollar Ponzi scheme, is serving a 150-year sentence in a medium-security North Carolina federal prison.
(Reporting by P.J. Huffstutter in Cedar Rapids, Reporting and writing by Tom Polansek in Chicago; Editing by Claudia Parsons)