Hospitals, universities and other organizations that benefited from the generosity of Peregrine Financial Group Inc. and The Peregrine Charities could be forced to return the money gifted to them.
Laura Range, an attorney with Beecher, Field, Walker, Morris, Hoffman and Johnson P.C., said the PFG bankruptcy has left all benefactors “exposed to potential liability to have to repay what they received.”
The company filed for bankruptcy a day after owner Russell Wasendorf Sr., attempted suicide July 9. The National Futures Association and the U.S. Commodity Futures Trading Commission have taken actions against the firm. Wasendorf recovered and is being held in the Linn County Jail in Cedar Rapids. He is charged with making false statements regarding a $200 million fraud scheme.
Wasendorf, his company and his charity have donated millions to Cedar Valley and Iowa organizations, benefitting both the University of Northern Iowa and pediatric health care.
“If Wasendorf is the sole shareholder of the company, which he is, and he was complicit in the embezzlement and therefore knew the alleged profits were from embezzled funds, therefore the donations could only be made from that source. And if his compensation, the money he personally would have used to finance these donations, was strictly from funds that he knew to be embezzled, then it isn’t a stretch to imagine the trustee would claim that those funds never lost their fraudulent nature,” Range said.
“That would mean that those recipients who received funds from Wasendorf or Peregrine Charity may also be at risk,” she continued.
However, Range said federal bankruptcy code will only allow the trustee to look back two years. The look-back period for fraudulent transfers in the Iowa code is five years.
“I, quite frankly, have not been in a situation where the bankruptcy court or the trustee has asked to go back five years,” Range said. “But here, we are in federal court, so I can tell you for certain the look-back period is at least two years.”
Though corporate donations are not a matter of public record, charities do have to report donors on the Internal Revenue Service 990 forms they file annually. According to The Peregrine Charities 2010 form PFG donated $20,000 to the charity. Wasendorf donated $177,700. The charity’s total contributions for the year were $218,982.
Information about PFG’s 2011 contributions to the charity were not yet available.
The charity, in turn, donated the money to pediatric health care programs and research across the state. According to The Peregrine Charities website, in 2011 they awarded $44,850 to the St. Luke’s Foundation in Cedar Rapids for the purchase of a CinemaVision goggle system made specifically for children undergoing a MRI. The goggles make the children feel like they are going to the movies instead of having a medical procedure, the website states.
The University of Iowa Foundation received two grants in 2011. A $42,210 grant was used to purchase a fluorescence-activated cell sorting machine, which will help therapies for children with some congenital and acquired diseases. A second grant, valued at $100,000, was used to augment the Peregrine Charities Discovery Fund for Children’s Medicine at the University of Iowa. The fund was created by Peregrine Charities in 2007. It supports research into rare pediatric diseases by scientists at the Department of Pediatrics in the UI Roy J. and Lucille A. Carver College of Medicine. The charity has donated more $500,000 to the fund.
Tom Moore, a spokesperson for the University of Iowa Hospitals and Clinics, said the money was used to research multiple pediatric disorders through the fund.
“At this point the only fact we know is that the money has been donated and spent. Beyond that I would prefer not to speculate,” he said.
Looking back further, Peregrine Charities has made donations in the Waterloo-Cedar Falls area as well. In 2010, the charity donated $34,446 to the Allen Foundation for vein finders and fluoroscopy software to make procedures more kid-friendly and safe, said Matt Rolinger, senior director of development for the Allen Foundation.
Rolinger said the board will “clearly want to know what the status of the gift was,” he said. “If it was legit, it was. But if not, we will have to do something.”
What that something is though, he couldn’t say.
Allen also received donations in 2007, 2008 and 2009. The Covenant Foundation, which received donations in 2008, 2009 and 2010 according to the charity’s tax forms, declined to comment on the gifts.
The University of Northern Iowa has also benefitted from PFG and Wasendorf. In October 2009, Wasendorf pledged $2 million to the school’s athletics program. Though the payments are up-to-date, the university could not release how much of the gift has been collected. Wasendorf also gave a $100,000 gift for university use. That gift has been collected.
“While the obligation that the organization may have to repay is not what we might say to be fair, ultimately because the company turned to the bankruptcy court for release they are subject to their rules,” Range said.