The trustee unwinding Peregrine Financial Group is seeking to be paid $3.7 million, the maximum allowed under bankruptcy law for his role in returning some money to former customers of the failed broker.
Ira Bodenstein, the court-appointed bankruptcy trustee and a lawyer in Chicago, has asked a federal bankruptcy judge for an initial payment of $1.23 million, with the balance paid at a “later date,” documents filed in Chicago bankruptcy court late on Friday show.
Under U.S. bankruptcy code, the trustee might receive a commission of as much as three percent of the $123.3 million he has returned to former Peregrine customers.
The amount returned to customers represents less than a third of the funds they deposited with the broker just before their accounts were frozen when the futures broker collapsed in July.
Bodenstein’s filing described his requested payment as “appropriate in light of the results and benefits achieved through his efforts on behalf of the estate and its creditors.”
To bolster his argument, he submitted an itemized statement that noted services rendered in the case, including travel, meetings and even interviews with reporters.
Bodenstein refrained from asking for the full payment right away because he did not want to be seen as putting himself ahead of Peregrine’s former customers, the trustee’s lawyer, Robert Fishman, told Reuters in a telephone interview.
“We sat down and we said: ‘What feels fair?’” Fishman said. “He made a public relations decision that this would look better.”
Peregrine founder Russell Wasendorf Sr., 65, began serving a 50-year prison sentence last month for stealing close to $215 million from his customers over nearly 20 years.
As regulators closed in on him last summer, Wasendorf made a botched suicide attempt outside his $24 million headquarters in Cedar Falls, Iowa, which investigators say was financed with money siphoned from customers.
He pleaded guilty in September to embezzlement and other crimes and is expected to spend the rest of his life in a high-security federal prison in Indiana.
Thousands of customers are still missing money and a federal judge has said they will likely never be fully repaid.
The money used to pay Bodenstein will come from Peregrine’s estate and would otherwise be used to pay back customers and creditors.
Bodenstein “has done a pretty good job, but seeing him bill the statutory max to fraud victims who stand to lose half their assets” is disconcerting, said James Koutoulas, a hedge fund manager who has been working to help former Peregrine clients get their money back.
Bodenstein could not immediately be reached for comment while on vacation on Monday.
Bodenstein has spent 747 hours, at a rate of $475 an hour, working with former Peregrine employees, customers, regulators, and law enforcement officials to unwind the futures broker, according to court documents. That amounts to about $355,000 worth of work, the filings show.
The trustee is not required under bankruptcy law to itemize his time, because he is paid not by the hour, but by a fixed percent of the amount he returns to creditors.
He “provided his time so the judge would see he is doing lots of stuff,” Fishman said, adding that Bodenstein “is a big ‘disclose, disclose, disclose’ guy.”
Among the disclosures were as many as 11 hours spent doing interviews with news reporters. Bodenstein billed $475 for an hour-long interview with a Chicago Tribune reporter in September.
The dates for several of the times he billed for press interviews coincide with dates on which he spoke with Reuters reporters.
Talking with the press counts as work because it helps the trustee get his message out to Peregrine clients, Fishman said. It is also “an hour he can’t spend doing something else” on the case, he said.
Fishman added that he is paid by the hour and, unlike the trustee, did not bill for time spent on the telephone with a Reuters reporter.
(Reporting by Tom Polansek and Ann Saphir. Editing by Tim Dobbyn and Andre Grenon)