CEDAR RAPIDS, Iowa/ CHICAGO, (Reuters) – Russell Wasendorf Sr, arrested yesterday, confessed to a 20-year fraud at his now-bankrupt Iowa brokerage, saying business troubles and his “big” ego left him no choice: “So I cheated.”
In the dramatic conclusion to a week-long saga that has shaken trader confidence in the trillion-dollar U.S. futures markets, authorities released parts of a detailed statement in which one of the industry’s best-known veterans explained how he used little more than a rented P.O. Box, Photoshop and inkjet printers to dupe regulators in a more than $100 million scheme.
FBI agents arrested Wasendorf, 64, at the Iowa City hospital where he has been since trying to commit suicide on Monday. He was charged with making false statements to regulators, but prosecutors said they would seek more charges. He faces “decades in prison”, Assistant U.S. Attorney Peter Deegan said.
In the signed statement, left along with a suicide note and released as part of the criminal complaint, Wasendorf said he began forging bank documents after the business he built from his basement risked failing without additional capital. The timeline suggests his deceit lasted almost the entire life of his brokerage.
“I was forced into a difficult decision: Should I go out of business or cheat?” he wrote.
“I guess my ego was too big to admit failure. So I cheated,” the note said. It was discovered on Monday in his car outside the company’s new Iowa headquarters, where Wasendorf had tried to kill himself by funneling in tailpipe exhaust.
The arrest ends much of the mystery that has enveloped the futures industry this week. But it will not ease the pain of betrayal in the small Iowa town that Wasendorf made his corporate home in 2009, nor the anger of a financial industry still smarting from the failure of rival brokerage MF Global.
“I have committed fraud,” Wasendorf wrote in the note, the contents of which he later told authorities were true. “I feel constant and intense guilt.”
Yet he also wrote in almost boastful detail about the “blunt authority” that allowed him to control the flow of documents into the company; how he used a simple post office box to trick “unquestioning” regulators; and his skill in turning out forged bank statements within hours that “no one suspected.”
Wearing a blue polo shirt, jeans and a white hospital bracelet around his left wrist, Wasendorf shuffled into a Cedar Rapids courtroom with slumped shoulders hours after his arrest. He was handcuffed, chained at the waist, and his legs were shackled.
He did not enter a plea at the initial appearance, and told Magistrate Judge Jon Stuart Scoles that he was taking anti-depressants. He will be held at an undisclosed location at least until his next court appearance on Wednesday, Deegan said.
A spokeswoman for PFGBest, which had been one of the industry’s 10 largest independently owned futures brokers before collapsing this week, could not be reached for comment. The company is now in Chapter 7 liquidation proceedings.
