My latest column @Forbes is about the most recent futures
industry fraud case, PFGBest. PFGBest is another reason why the industry's poor
business environment, wracked with a crisis of confidence after MF Global, just
got much worse.
All Fall Down; PFGBest and MF Global Frauds Reveal Weak
I have also been extensively quoted in the Chicago
Tribune Phil Rosenthal's column this past weekend on the case.
Sterner penalties required to halt wrongdoing in financial
PFGBest has a long story behind it. CEO Russell
Wasendorf, who admitted to a twenty year fraud on customers in his suicide
attempt note, started the firm in 1980, according to MarketsWiki,
an online open source knowledge base for current and historical information
about the global exchange traded capital, derivatives, environmental and
related OTC markets. The site is run by Chicagoan John Lothian who publishes a
subscription-only industry newsletter.
PFGBest (formerly Peregrine Financial Group, Inc. - PFG),
founded in 1980, is a privately
held non-clearing registered Futures Commission Merchant. PFGBest
has branch offices in Chicago; Bloomfield and New York City, NY; Camarillo and
Mission Viejo, CA; Cedar Falls, IA; Scottsdale, AZ; Altamonte Springs, FL, and
McKinny, TX. It serves Canada through an office in Toronto, and its Asian
division offers brokerage and other services to clients who speak various
Chinese dialects. The company also has a network of brokers
spanning the globe.
Peregrine Financial Group hit the big time in the mid
1990s when a firm named First Commercial Financial Group was forced by regulators to move its customer business after
regulators found financial irregularities. First Commercial's business was
moved to Peregrine and to RB&H, the firm headed by then CME Chairman Jack
Sandner. RB&H became a part of MF Global. (Sandner is currently
chairman of E-Trade Futures and on the board of the CME Group.)
Lothian writes in his blog on July 12:
Former CME Chairman Larry Rosenberg was CEO of
It is safe to say that Mr. Wasendorf did not get the pick
of the litter when the customer business, which cleared at RB&H, was split
up between RB&H and Peregrine. First Commercial was a party to 75 CFTC
reparation cases and a respondent to 10 NFA arbitrations prior to their
registration finally being revoked by the NFA in 1996.
Mr. Wasendorf and his firm Wasendorf & Son was also
involved with another CME-related firm that had its own unhappy ending, GNP
Commodities, headed by one-time CME Chairman Brian Monieson. GNP was the party
to 117 CFTC reparation cases and five NFA arbitration awards. GNP also had two
NFA, three CFTC and six exchange regulatory actions against it before its
registration was revoked.
Of course Alaron also had its problems. It was a
party to 55 CFTC reparation cases, was a respondent to 12 NFA arbitration cases
and two NFA, two CFTC and 15 exchange regulatory actions. By contrast,
Peregrine was party to 38 CFTC reparation cases and 31 NFA arbitration awards,
as well as four NFA and one CFTC regulatory actions.
Larry Rosenberg went on to head Lake Shore, which was
also closed for fraud. First Commerical was also invested in by backers of
the L & S firm, Glenn Laken and Bob Schialasi. Laken served time while
indicted and jailed for securities fraud under NY RICO statutes in
2000. First Commercial owned 49% of Jack Sandner's RB & H.
Unsubstantiated reports say RB & H was also backed by investors
Sheikh Abdulla Backesh who is connected to the BCCI Bank $ 10 Billion fraud and
had a minority stake and Talat Othman, of Arlington Heights' Dearborn Financial.
Read this article in its entirety at the re: The Auditors, a blog
by Francine McKenna.
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