Federal prosecutors have appealed a judge’s order that would free a disgraced U.S. businessman while he awaits sentencing for a $200 million fraud scheme at his brokerage.
The U.S. Attorney’s Office in Cedar Rapids filed paperwork asking Chief Judge Linda Reade to keep Iowa-based Peregrine Financial Group CEO Russ Wasendorf Sr. detained at the Linn County jail.
Prosecutors said Wasendorf presents a risk of fleeing abroad or committing suicide before his sentencing hearing, which has not been scheduled. He is likely to face a recommended sentence of 20 years to life in prison.
The filing came hours before the 64-year-old Wasendorf was to appear in federal court in Cedar Rapids to plead guilty to mail fraud, embezzling customer funds and lying to regulators. U.S. Magistrate Judge Jon Scoles ruled last week that Wasendorf could be released to live with his pastor in suburban Cedar Rapids after he formally entered his guilty pleas, saying he did not present a flight risk.
Prosecutors asked Reade to delay the plea hearing until she decided their appeal on Wasendorf’s detention. Reade did not immediately rule.
In the motion, prosecutors said Scoles was mistaken in downplaying the risk of Wasendorf not showing up for sentencing. Wasendorf was arrested in July after attempting to commit suicide outside the Cedar Falls-based firm and leaving a note detailing how he made false bank statements for 20 years to prop up the company and embezzle customer funds.
“At bottom, the Court is faced with the perpetrator of one of the most lengthy and egregious frauds in the history of this district. Approximately $200 million is missing and defendant, with limited family and community ties, has recently decided to kill himself rather than face the consequences of his crimes,” prosecutors wrote. “There is a serious risk defendant will flee and no conditions of release will reasonably assure his appearance.”
Scoles ruled last week that he doesn’t believe Wasendorf is likely to flee because he surrendered his passport and no longer has access to cash, cars or his corporate jet. He heard testimony from a friend that Wasendorf was no longer suicidal and ruled that the risk of suicide was not a reason to detain him under the law.
Under Scoles’ order, Wasendorf would be confined to Pastor Linda Livingston’s home under GPS electronic monitoring and allowed to leave only under special circumstances such as to attend church or medical appointments. Scoles said those conditions made it likely that Wasendorf would appear in court as required.
But prosecutors argued that Livingston cannot guarantee Wasendorf’s health or appearance at sentencing and some other friends and relatives have abandoned him. By contrast, Wasendorf has significant foreign ties and partly owns a construction company in Romania worth millions, so “a lifetime abroad may be a relatively appealing option for defendant,” prosecutors wrote. Wasendorf might also have hidden a portion of the $200 million in missing customer funds that he could access, they added.
“By his own admission, defendant was able to successfully deceive thousands of investors and regulators for approximately 20 years. He employed remarkably bold lies in doing so,” prosecutors wrote. “The government and the Court cannot presume any purity of motive at this stage in the proceedings.”