Select paragraphs of criminal complaint in Peregrine fiasco

The Wall Street Journal has a copy of the criminal complaint filed against the owner of Peregrine Financial Group. You can find it here.

I’m going to take a shot at developing a fraud case study of the Peregrine fiasco and try to do so in real-time.

Here is what I know so far:

• Post 1 –  Regulators apparently deceived in PFGBest fraud
• Post 2 – Peregrine CEO charged – allegation is he ran fraud for 20 years.

I will pull in some of the info provided publicly by the FBI.  This provides more depth of interest to CPAs that is currently visible in the media. 

The first major quote from the FBI complaint is this:

I have committed fraud. For this I feel constant and intense guilt. I am very remorseful that my greatest transgressions have been to my fellow man. Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts at Peregrine Financial Group, Inc. The forgeries started nearly twenty years ago and have gone undetected until now. I was able to conceal my crime of forgery by being the sole individual with access to the US Bank accounts held by PFG. No one else in the company ever saw an actual US Bank statement. The Bank statements were always delivered directly to me when they arrived in the mail. I made counterfeit statements within a few hours of receiving the actual statements and gave the forgeries to the accounting department.

Key information there: embezzlement, millions of dollars involved, has been running for ‘nearly’ 20 years, fabrication of documents.

An additional quote of the claimed suicide note:

…. I had no access to additional capital and I was forced into a difficult decision: Should I go out of business or cheat? I guess my ego was too big to admit failure. So I cheated, I falsified the very core of the financial documents of PFG, the Bank Statements. At first I had to make forgeries of both the Firstar Bank Statements and the Harris Bank Statements. When I choose [sic[ to close the Harris Account I only had to falsify the Firstar statements [elsewhere in the signed statement Wasendorf noted that Firstar “eventually became US Bank”). I also made forgeries of official Firstar and correspondence from the bank, as well as transaction confirmation statements.

Using a combination of Photo Shop, Excel, scanners, and both laser and ink jet printers I was able to make very convincing forgeries of nearing (sic) every document that came from the Bank. I could create forgeries very quickly so no one suspected that my forgeries were not the real thing that had just arrived in the mail.

With careful concealment and blunt authority I was able to hide my fraud from others at PFG. PFG grew out of a one man shop, a business I started in the basement of my home. As I added people to the company everyone knew I was the guy in charge. If anyone questioned my authority I would simply point out that I was the sole shareholder. I established rules and procedures as each new situation arose. I ordered that US Bank statement were to be delivered directly to me unopened, to make sure no one was able to examine an actual US Bank Statement. I was also the only person with online access to PFG’s account using US Bank’s online portal. On US Bank side, I told representatives at the Bank that I was the only person they should interface with at PFG.

When it became a common practice for Certified Auditors and the Field Auditors of the Regulators to mail Balance Confirmation Forms to Banks and other entities holding customer funds I opened a post office box. The box was originally in the name of Firstar Bank but was eventually changed 10 US Bank. I put the address ·PO Box 706, Cedar Falls, IA 50613-0030″ on the counterfeit Bank Statements. When the auditors mailed Confirmation Forms to the Bank’s false address, I would intercept the Form, type in the amount I needed to show, forge a Bank Officer’s signature and mail it back to the Regulator or Certified Auditor. When online Banking became prevalent I learned how to falsify online Bank Statements and the Regulators accepted them without question.

Key information there: hints for motivation; fabrication of sundry kinds of documents including correspondence, printed bank statements & online banking statements; control of a P.O. Box previously used by U.S. Bank; successful deception of CPAs and regulators; working knowledge of auditor procedures.

I’m sure there will be lots more information tumbling out in the next days and weeks.