Joined Nov 11, 2007
31,929 Blog Posts

U.S. Regulators Sue $USB Over Allegedly Allowing ‘Midwest Madoff’ To Use Customer Funds

“NEW YORK/CHICAGO (Reuters) – U.S. regulators sued U.S. Bancorp on Wednesday, alleging it knowingly allowed the head of a failed Iowa brokerage, dubbed ‘the Midwest Madoff,’ to use customer money held at the bank to help fund a lavish lifestyle.

The case is the first from regulators to target banks used by Russell Wasendorf Sr., the former chief executive of Peregrine Financial Group (PFG), who began serving a 50-year sentence in February for bilking $215 million from customers.

The revelation of a nearly two-decade fraud last summer has dealt another blow to confidence in the futures industry after the failure of MF Global in late 2011, and drew comparisons with New York money manager Bernard Madoff’s massive Ponzi scheme due to the length of his deception. Madoff is serving a 150-year prison sentence.

“(The bank) knowingly facilitated Wasendorf’s transfers of millions of dollars of customers’ funds out of this account to pay for Wasendorf’s private jet, his restaurant, and his divorce settlement, among other things,” the U.S. Commodity Futures Trading Commission (CFTC) said.

“Although the (account) was a customer segregated account containing Peregrine’s customer funds,U.S. Bank and Banker A treated the account as if it were a Peregrine commercial checking account.”

The lawsuit singled out a female employee, identified only as ‘Banker A’ and described as a ‘Assistant Relationship Manager’ at the bank’s Cedar Falls, Iowa, branch, who had close dealings with Wasendorf. According to the suit, the bank and employees involved with the account were aware it held customer money.

“Throughout the relevant period, Banker A personally facilitated telephonic and inbranch deposits and wire transfers of Peregrine customer funds,” the CFTC lawsuit said.

“Banker A and other U.S. Bank personnel perceived Wasendorf as a successful, desirable bank client with the potential to be a profitable, high growth client.”

The CFTC complaint, filed in the U.S. District Court for the Northern District of Iowa, alleged U.S. Bank NA, a unit of U.S. Bancorp, accepted customer funds as security on multimillion dollar loans to Wasendorf, his wife and his construction company….”

Full article

If you enjoy the content at iBankCoin, please follow us on Twitter