%1

Peregrine Financial Group founder and chief executive Russell Wasendorf Sr. was indicted on charges of lying to regulators, a little over a month after he attempted suicide and confessed to bilking customers of his brokerage for years, Reuters reported yesterday. Wasendorf "overstated the value of PFG's customer segregated funds by at least tens of millions of dollars" to the Commodity Futures Exchange Commission, according to the indictment, filed in federal court in Cedar Rapids, Iowa. The indictment carries a possible maximum sentence of 155 years in prison, a $7.75 million fine, and 93 years of supervised release following any imprisonment, the U.S. Attorney's office said.

General Reinsurance Corp.'s $72 million settlement of investor claims that it participated in a fraudulent transaction with American International Group Inc. was revived by a federal appeals court, Bloomberg News reported yesterday. The court yesterday reversed a ruling by U.S. District Judge Deborah Batts, who had denied a request to certify a class in the case to allow the 2009 settlement to go forward. The U.S. appeals court in New York sent the case back to Batts to consider the fairness of the settlement. AIG investors sued in 2004, alleging the companies were involved in a scheme that allowed New York-based AIG to improperly inflate its loss reserves. The investors, led by three Ohio public pension funds, claimed that in late 2000 and early 2001 AIG and Gen Re engaged in a sham transaction that let AIG inflate its revenues and loss reserves.

An Iowa grand jury is expected to hear testimony from Peregrine Financial Group's president this week as it begins considering alleged wrongdoing at the failed futures brokerage, Reuters reported on Friday. Russell Wasendorf Jr., Peregrine's president and the son of the brokerage's accused chief executive, has been subpoenaed by the grand jury and will likely testify. Russell Wasendorf Sr., Peregrine's founder and CEO, was arrested on July 13 on charges of lying to federal regulators in connection with an alleged massive financial fraud at the company. Prosecutors have said that they expect to expand charges against him.

The trustee tasked with unwinding Bernie Madoff’s fraud is trying to block the state from paying $410 million to investors with fallen money manager Ezra Merkin, The New York Post reported yesterday. Irving Picard, the court-appointed trustee responsible for clawing back money for Madoff victims, wants a bankruptcy judge to block a settlement between New York Attorney General Eric Schneiderman and Merkin, who has been accused of secretly steering client money to Madoff’s massive Ponzi scheme. In a sharply worded motion filed with the U.S. Bankruptcy Court in Manhattan, Picard said that Schneiderman’s settlement will “wreak havoc” on his efforts to recover funds for Madoff victims. “Every victim should be treated equally,” Picard said. “That fundamental principle cannot be abrogated by the state of New York.” Picard said he is seeking to recover $500 million from Merkin and his funds, which invested in Madoff’s $20 billion scheme.

Irving Picard, the trustee liquidating the estate of convicted Ponzi scheme mastermind Bernard Madoff, sued New York Attorney General Eric Schneiderman in Manhattan federal court to stop a settlement with former Madoff investor Ezra Merkin, Bloomberg News reported today. New York announced June 25 that it settled a lawsuit for $410 million with J. Ezra Merkin over claims that Merkin funds secretly placed client money with Bernard L. Madoff. The agreement provides $405 million to compensate investors and $5 million for the state, according to a statement yesterday by the office of New York Attorney General Eric Schneiderman. In the case, filed in 2009 by Schneiderman's predecessor, Andrew Cuomo, the state claimed Merkin steered assets to Madoff and concealed Madoff's role.

Customers of Bernard Madoff's brokerage, who have received just $333 million from the liquidator of the con man’s estate, will get a second payment of $1.5 billion to $2.4 billion, an amount some investors found disappointing, Bloomberg News reported yesterday. Madoff trustee Irving Picard said that he will ask a judge to approve the distribution, which would bring payments to as much as 50 percent of allowed claims. Part of $5 billion received in a settlement with the Jeffry Picower estate would be used for the payment, although "a large portion" would be held in reserve, Picard said yesterday.

Peregrine Financial Group's bankruptcy trustee has hired a team of forensic accountants to help figure out what remains at the failed futures brokerage after its CEO's arrest and confession to years of stealing from customers, Reuters reported yesterday. PricewaterhouseCoopers was hired over the weekend and started work on Monday, trustee Ira Bodenstein told Reuters on Wednesday. Their task is to secure data and gather information, he said. Peregrine filed for bankruptcy on July 10, a day after the firm's CEO Russell Wasendorf Sr. attempted suicide and left a signed note describing how he bilked customers of more than $100 million over a nearly 20-year period, forging bank statements and intercepting mail between his bank and the firm's auditors at the National Futures Association.

The bankruptcy trustee for Peregrine Financial Group on Monday asked a bankruptcy judge for extra time to file a full accounting of the failed futures brokerage's finances, saying that the books are too complicated to get the job done by the July 25 deadline, Reuters reported yesterday. Peregrine, whose CEO was arrested earlier this month after confessing to years of bilking customers out of more than $100 million, said at its July 10 bankruptcy filing that it had assets of between $500 million and $1 billion, and liabilities of between $100 million and $500 million. The CEO, Russell Wasendorf Sr., faces a bail hearing this Friday. The firm did not prepare any of the schedules documenting assets, liabilities or the firm's financial condition that are due within 15 days of a bankruptcy filing, and has no intention of doing so itself, trustee Ira Bodenstein said in a court filing on Monday. The trustee asked the judge to allow him to prepare the schedules himself, and said that doing so will take him another 43 days, until Sept. 6.

A former executive at the Bank of America Corporation has been indicted in connection with what prosecutors called a "far-reaching conspiracy" to defraud municipal bond investments through bid-rigging, Bloomberg News reported on Saturday. Phillip D. Murphy, former head of Bank of America’s municipal derivatives desk, was charged with conspiracy to defraud the United States, wire fraud and conspiracy to make false entries in bank records, according to the indictment filed on Thursday in federal court in Charlotte, N.C. Murphy "allegedly participated in a complex fraud scheme and conspiracies to manipulate what was supposed to be a competitive process," said Scott D. Hammond, a deputy assistant attorney general in the Justice Department’s antitrust division. To date, 13 individuals from banks including Bank of America, JPMorgan Chase and UBS have pleaded guilty in the Justice Department’s investigation. Bank of America, JPMorgan, UBS, Wells Fargo and General Electric have paid more than $700 million in restitution and penalties.

A federal appeals court has revived a lawsuit accusing Grant Thornton LLP of defrauding shareholders and bondholders of a broadband services company it had audited, and which went bankrupt during the telecom bubble a decade ago, Reuters reported yesterday. The U.S. Court of Appeals for the Second Circuit said that a lower court was wrong to dismiss claims that Grant Thornton deliberately ignored signs of fraud at Winstar Communications Inc., one of its largest clients, when vetting its financial statements for the 1999 fiscal year. Yesterday's decision reversed a September 2010 ruling by U.S. District Judge George Daniels in Manhattan. The case will return to the district court.