UPDATE: A judge overseeing the bankruptcy of a collapsed, Iowa-based brokerage approved a $20,000 raise for the firm’s lawyer Wednesday, rejecting objections from angry customers who are missing hundreds of millions of dollars.
Judge Carol Doyle agreed to increase the annual salary of Peregrine Financial Group, Inc., general counsel Rebecca Wing to $400,000 during a court hearing in Chicago.
Trustee Ira Bodenstein proposed the increase last month for Wing, saying she has a wealth of knowledge about Peregrine’s business that is needed to help operate the company as it seeks to close down and reimburse customers after massive fraud.
Investigators say the company is missing more than $200 million in customer funds that it claimed to be holding, and founder and CEO Russ Wasendorf Sr. has been jailed and charged with lying to regulators. The company collapsed after Wasendorf was discovered in July outside the firm’s Cedar Falls headquarters following a suicide attempt in his car. The FBI says he left a note in which he confessed to falsifying bank statements and embezzling customer funds for nearly 20 years.
The Commodity Customer Coalition, a nonprofit seeking to help customers get their money back, had objected to the raise, saying it was inappropriate given the circumstances. Vitaloon Inc., a Peregrine customer that says it is missing $180,000, joined the objection.
Coalition President James Koutoulas argued the raise essentially doubled Wing’s base salary, since the $380,000 she earned last year included bonuses. He said the raise was unseemly given that customers have waited for weeks without receiving any money, and that Wing worked for the company during the alleged fraud.
Doyle ruled that the raise was within Bodenstein’s authority.
Koutoulas said he is expecting Bodenstein to soon release details about the initial distribution of funds to customers, which will come from more than $150 million in customer money and assets. He said his group has recommended customers receive 25 percent of the amount they had in the accounts, and more later. In all, customers could eventually receive 50 to 75 percent of their money back, the coalition has estimated previously, but it’s too soon to be certain.
Koutoulas said Peregrine’s collapse had caused some commodities trade advisors to go out of business. Individual investors who are retired have called asking whether they need to return to work, he said.
“It’s a serious, serious problem for a lot of these people,” he said. “They were told their funds were segregated and audited by the federal government and underlying self-regulatory agencies. They were lied to by the government, they weren’t protected by the regulators and now they are facing severe financial distress because of it.”