CFTC sues US Bank over Peregrine Financial fraud
WASHINGTON (AP) — The Commodity Futures Trading Commission on Wednesday accused U.S. Bank National Association of illegally using an investment firm's funds to back loans to that company's owner, who was later convicted of stealing millions from his investors.
Peregrine Financial Group Inc. founder Russ Wasendorf Sr. was sentenced in January to 50 years in prison for stealing $215 million from investors and concealing his theft over a 20-year period. The crimes were uncovered after a botched suicide attempt, where Wasendorf left a suicide note confessing to the fraud.
U.S. Bank, the lead bank of Minneapolis-based U.S. Bancorp, maintains branch offices in Cedar Falls, Iowa, where Peregrine and Wasendorf were located. Wasendorf used a U.S. Bank account containing investor funds to commit his fraud, the CFTC said.
U.S. Bancorp spokesman Tom Joyce said in a statement that while the bank is sympathetic to the victims of Wasendorf's fraud, the lawsuit "is without merit and represents an inappropriate attempt to reassign blame to U.S. Bank."
Joyce added that Wasendorf has admitted he "actively deceived" the bank and emphasized that U.S. Bank at no time had any knowledge of the fraudulent scheme.
According to the commission, who filed suit Wednesday in the U.S. District Court for the Northern District of Iowa, between 2008 and July 2012, U.S. Bank unlawfully accepted Peregrine customer funds as security on loans it made to Wasendorf, his wife and his construction company to build an office complex for Peregrine in Cedar Falls.
The commission also claims U.S. Bank improperly held Peregrine's customers' funds in an account that the bank treated as Peregrine's commercial checking account, and knowingly allowed Wasendorf's transfers of millions of dollars of customers' funds out of that account to pay for his private jet, a restaurant he owned and his divorce settlement, among other things.
In its suit, the commission is seeking an injunction against U.S. Bank for further violations of the Commodity Exchange Act and federal regulations, along with restitution and civil monetary penalties.
U.S. Bancorp shares fell 36 cents to $34.90 in afternoon trading.