All language subtitles for American Greed s08e06 The Falcon and the Con Man.eng

In this episode of American Greed.

If you're not trading with the best
resources, it's time to get smarter.

He's a trailblazer with a fanatic
ambition.

And by all appearances, Russell
Wozendorf leads one of the most

trading firms of its kind.

Everything that I heard was fabulous. It
was just something that everybody

wanted to be a part of.

But if there's one thing Wozendorf knows
how to sell, it's a brilliant lie.

While more than $200 million goes
missing.

He pulled off an audacious fraud for 20
years.

I concealed my crime so easily, but what
wasn't simple was living with the

guilt. He's a thief. It's just who he
is.

July 9th, 2012.

It's just before 8 a .m. in Cedar Falls,
Iowa.

At Peregrine Financial Group, a leading
independent commodities brokerage firm,

an employee makes a startling discovery.

She immediately calls for help.

9 -1 -1, what's the problem?

There's a car behind our building with a
tube from the exhaust into...

The window and there's a person inside.

Okay. And the car's running.

Can you tell if they are?

No, I haven't been down. I'm on the top
floor.

Moments later, her coworkers go out to
investigate.

I just opened the door, but I don't know
if... Okay, are you watching it from

the... Yes, I'm watching it right now.

I've got a group of people out there.

Oh, my God.

Can you tell me what's going on?

She recognizes the vehicle's occupant.

It's the chairman and CEO of Peregrine,
Russell Wassendorf.

Is he with your business? He owns our
business.

He's the owner of the business?

Okay. Okay. Oh, my God.

Wassendorf was alive. He was breathing,
but he was incoherent.

Police say that he had been downing
vodka and bleeding pills.

He was airlifted to the hospital a short
time later.

Police find a signed letter inside
Wozendorf's car.

It reveals an extraordinary secret that
will forever change the lives of more

than 200 employees and 13 ,000 clients.

This is my last confession, the letter
begins.

I have committed fraud.

It just told the story of this caper
that he'd been pulling off over the last

two decades.

Since that fateful day, Russell
Wozendorf has never spoken to the media,

now.

In an interview with American Greed, he
tells his story from a federal prison in

Terre Haute, Indiana.

It begins in rural Iowa, where he was
born in 1948, the youngest of three

children. My father died when I was five
years old.

After a period of mourning, my mother
got a factory job. We were quite poor.

lived in a very, very small farmhouse.

No hot and cold running water, no indoor
toilet facilities.

But then, very soon, my mother earned
enough money to be able to buy a very

inexpensive house in a small town in
Iowa.

Wozendorf is a striver growing up, and
he gets into college where he studies

filmmaking.

His talent for showmanship lands him a
job shooting a PR piece for the American

Soybean Association in 1973.

That year, prices for commodities like
soybeans and grain are soaring.

Traders are making a killing.

All of a sudden, stocks were going down,
so everybody kind of leaned to futures,

the new thing, to make money.

Everyone was excited about Futures
Markets. It got me involved in

an interest.

For Wozendorf, playing the market is
more than an interest.

It becomes a calling.

By 1980, he gives up filmmaking to work
as a consultant for Futures Investors.

He then opens Wozendorf & Associates
from the basement of his Cedar Falls

and begins trading commodities for his
clients as well.

I decided to set up my own broker
capability, and a large New York bank

of my customers, a large oil man from
Texas.

So these were big -time commercial
users.

In the futures markets, if you want it
as an investment vehicle, it can be

But most people are looking for a little
more excitement, a little more action,

and they can get it, for sure.

Sometimes it's all risk and no reward,
as millions of investors learn the hard

way on Black Monday.

It is a day that will be in bold print
and history books.

It's October 19th, 1987, when the stock
market crashes and the Dow Jones suffers

its greatest one -day decline ever.

Multitudes of brokers are panicked.

But not Russell Wozendorf. He's sitting
pretty.

And so were his clients.

That's because he urged them to sell
their shares ten days earlier.

It was just a matter of looking at the
world as it was and seeing that the

potential was there. And the extent of
the crash was actually quite easy to

predict because it was just a direct
mathematical extrapolation from the 1929

crash. Financial writer Daryl Jobman
knew Wozendorf and says he probably had

both vision and luck on his side.

I see lots of gurus come along and they
always predicted the crash.

I mean, you make enough predictions,
some of them are going to be right and

you're going to look like a genius.

Genius or not, Wozendorf's fortunes
improved dramatically after his October

prediction.

I had spoken to a group in Hong Kong in
September and practically got booed off

the stage.

In November, I spoke to a group in the
Cayman Islands, and I literally could

go into the bathroom without somebody
following me in and trying to open an

account. By 1990, Russell Wozendorf
moved to Chicago, the epicenter of the U

future markets, and rents an office next
door to the Chicago Mercantile

Exchange.

He renamed his company Peregrine
Financial Group, or PFG, after the

Falcon, one of the world's fastest
predators.

In 1992, he incorporates Peregrine as a
Futures Commission Merchant, or

FCM. Unlike a broker, an FCM has the
authority to hold and trust

its customers' money.

In becoming an FCM, a Futures Commission
merchant, Wassendorf was taking the

next big step.

But he faces a potential game changer
the following year. For reasons unknown,

he has a falling out with a major
investor.

There had been a partner of his that put
in about $200 ,000. That partner wanted

out.

The law suddenly leaves Peregrine short
of the cash level required by

regulators.

I knew the industry was pretty well
stacked in the favor of the larger

and the smaller firms were being quickly
weeded out by the regulators.

We heard this a lot, you know, when we
talked to Russ. He was always talking

about the regulators being on his back.
Too much regulation.

Wozendorf accuses the Commodity Future
Trading Commission, or CFTC,

of putting him through the wringer after
his investor backs out.

The CFTC is demanding that he come up
with an even higher level of capital

before, or they'll force him to shut his
doors.

He felt that he was being persecuted by
the CFTC.

He did not feel that he should have had
to come up with this extra capital to

keep his business running.

Wozendor finds himself at a crossroads.

Doesn't have the money.

But what he does have is $2 million in
customer funds, money that belongs to

individual investors and speculators.

These are called segregated funds, and
the name is very much apt. They're not

your money to play with.

If he were to tap into these funds, he'd
be committing a federal crime and could

serve up to 10 years in prison.

But Wozendorf feels there is no other
choice.

He steals $200 ,000 of customers' money,
then hides the evidence.

You make a decision to take an action
that is against your morals, against

previous code of conduct. That was a
decision that I made simply to save the

company at that time.

Even he admitted that his ego was too
big to fail.

The gamble pays off.

He meets his required capital level, and
regulators leave Peregrine alone.

A lot of things go on in the financial
world, but touching those customer funds

is pretty rare and pretty extraordinary.

For Russell Wozendorf, it's only the
beginning of a criminal journey that

span two decades.

Once that decision was made, it became
irreversible.

Coming up on American Greed.

An entrepreneur with a groundbreaking
idea joins forces with paragraph and

burned.

This guy would get your business and he
would kill it from you.

And that was the truth. He did it over
and over again.

In the mid -1990s, Chicago's commodity
futures industry is on the brink of a

seismic change.

For almost 150 years, traders have
battled in the pit using open outcry,

shouting and signaling orders to buy and
sell everything from gold to soybeans

to pork bellies. But Russell Wozendorf,
CEO of Peregrine Financial Group, is

ready to invest in the next frontier.

I directed the resources towards...
online trading, which I thought was

the future of the industry.

It was a big step to go electronic at
the time when you had all of these

entrenched interests wanting to preserve
that open outcry trading.

A lot of the firms didn't want to trade
electronically right away.

But open pit trading is no match for the
Internet.

You could quickly see where things were
headed. The retail client wanted it to

happen because they wanted their orders
filled instantly. They didn't want to

wait three hours to get their fills
back.

In February 1998,

Russell Wozendorf meets another
entrepreneurial broker named Jerome

Bressert has developed one of the first
online trading programs for consumers to

send their orders directly to the
exchange floor.

Ressert software is ahead of its time,
and it's exactly what Wassendorf is

looking for.

We met at an office, and I logged in
with his computer, and we did trading

there for about five minutes.

And he was so impressed, he wanted to
buy my company the next day.

Ressert says his partners aren't ready
to sell, so Wassendorf makes him a

personal offer instead.

He promises Bressert a 50 % share of
Peregrine's online trading division if

joins the firm.

Bressert accepts the offer.

Russ came across as very wealthy. He
came across as someone that you would

trust. He put his arm around you. He
shook your hand.

He gave you that good feeling that
you're going to be safe with him.

In a few short months, Bressert and his
web programmer create a new online

trading platform for Peregrine. They
call it Best Direct, Best being short

Bressert Electronic Systems Trading.

It's among the first to connect
consumers directly to the Globex network

Chicago Mercantile Exchange.

Globex is international and allows
nearly round -the -clock trading.

Once we connected Best Direct to Globex,
it took half a second to go on.

It was amazing. People were shocked.
That was the very beginning that we knew

had something that was great.

Walsendorf realizes that he's hit the
jackpot when Best Direct goes online in

1998.

Kerrigan's trade volume explodes.

The online division became 95 % of all
PFG's business.

We went from making literally $500 a day
in commissions to $50 ,000 to $200 ,000

a day.

But as Wozendorf beefs up his staff and
moves Peregrine to a lavish new

headquarters, Bressard says the company
changes for the worse.

He grew too fast.

His ego...

was so big that he wanted this office
before we could actually afford the

office. He would start yelling at
people. He started yelling at me. This

beginning of where they were trying to
get me out of the company, and he was

trying to get his son in the company.

Bressert says that by December 2000,
Wassendorf strips him of his main

turning them over to his 30 -year -old
son, Russ Jr.

And then I was still asking, where's my
option agreement?

He did give me a 50 % option on the
company, but I never got the signed

I don't think his ego would allow me
just to have half his company.

He didn't expect this. It was a very
unexpected growth in the division.

Bresert resigns in April 2001.

He says he never got his fair share,
potentially tens of millions of dollars.

But he realizes he doesn't stand a
chance in court without a signed

He did steal my software.

He would bring people in, get all he
could from you, and then try to get you

and keep it for himself.

And that's what he did.

Next on American Greed, Wozendorff pours
a fortune into real estate, publishing,

and charity.

There's just one problem.

It was customer money, and he treated it
as though it was his.

By 2004, Russell Wasendorf, CEO of
Peregrine Financial Group, is riding

on the success of his firm's online
trading platform.

Peregrine's trade volume has shot up 400
% in the past four years.

It's a triumph for a relative newcomer
in Chicago's cutthroat futures industry.

So says Nick Ivarone, who served as
outside counsel for Peregrine since the

beginning. What mattered to Russ was to
appear to be the person that's built the

most successful firm.

At this point, the 56 -year -old is
launching one new business venture after

another, from a securities brokerage to
a glossy trade magazine to developing

commercial real estate in Romania.

I knew we had great opportunities. At
one time, Romania was the fastest

economy in Europe.

By the looks of it, Wozendorf has
finally arrived.

Wassendorf was definitely among the more
flashy people in the industry.

He wore a jeweled pinky ring. He always
had a big smile.

He brought in big -name speakers to
futures industry conferences.

He would bring in the likes of Ted
Koppel, Barbara Bush, Alan Greenspan.

Tell me, Frank, thank you.

Your nation thanks you. We thank you.
God bless you.

He could surround himself with these
people and elevate himself in the same

He establishes Peregrine Charities as
well, a foundation that donates

to children's medical research.

Russ came off as a very well -off man.

My perception was that, you know, he was
putting money into these other ventures

from his own money.

Broker Paul Cavanaugh joins Peregrine in
2005 when the firm appears to be on the

rise with a staff of about 75 people.

Peregrine was really a marketing
machine.

And that's really what's important to
opening accounts in the futures

You have to start with good leads. And
they had them. Not only does Peregrine

project wealth and industry savvy, it's
got a reputation for integrity as well.

When it comes to financial regulations,
Wozendorf is known to hold his employees

accountable.

PFC required all brokers and operations
people to maintain a very high standard.

And it was kind of above and beyond, I
think, what was needed. He was always

outspoken about how much better he ran
his firm and how

his firm followed the rules.

But Russell Wozendorf's carefully
crafted image is a cover for his

misdeeds behind the scenes.

He wanted to make it look as though he
was a wealthy and successful

in part in order to throw the regulators
and others off the scent, to make sure

that they didn't look too closely or
subject them to too much scrutiny.

According to Assistant U .S. Attorney
Peter Deegan, Wassendorf has been

customer funds from Peregrine since
1993, when he embezzled $200 ,000 to

his company afloat.

In the decades since, Peregrine's client
base has grown, and the firm now holds

more than $100 million of customer money
on deposit.

Money that Wozendorf continues to steal
to finance his Romanian real estate

deals, his celebrity events, and his
charities, among other pursuits.

Whenever he had any need or any desire
to pull millions of dollars out of his

company, he simply went right to
customer segregated funds, pulled it out

there, covered his tracks by phoning up
the bank statements.

Remarkably, he's become a one -man fraud
master, using the simplest tools to

deceive his entire accounting staff and
financial regulators.

He produces counterfeit bank documents
that inflate the balance in Peregrine's

customer -segregated account and hide
how much he's withdrawn.

He actually started by using a copy
machine and doing a literal cut -and

job. on bank records and bank
statements. As time went on, he started

computer software that allowed him to
make alterations digitally in order to

generate convincing fake bank
statements.

painfully simple. For one thing, the
regulators really weren't scrutinizing

to the degree that they should have.
Here I was depositing false deposits of

capital into the firm to the tune of
several million dollars a year, and at

point did they ever ask me where the
money was coming from.

It was literally coming from thin air.

From day one, he's kept the scheme his
secret and his alone.

No one else at Peregrine knows.

Not even his son, who was the company
president.

Wassendorf made it known that he was the
only one who was allowed to receive

statements from the bank.

Wassendorf's employees say that he had
an awful temper, that if anyone

questioned him about the bank
statements, he would explode.

And so through intimidation, he really
kept the secret under wraps.

Setting up that whole scam was too
simple, way too simple. What wasn't

was living with the guilt.

And that tore me apart. I was insomniac.
I drank too much. I did all

those things that are self -destructive.

Yet his conscience isn't enough to stop
him. As long as Peregrine continues

gaining new clients, Wassendorf uses the
customer -segregated account like it's

his own money.

We're providing customers great
technology.

Market analysis, and most importantly,
superlative customer service.

By 2008, Peregrine is bigger than ever
after buying out a rival firm.

It now holds almost $300 million in
customer funds.

But financial disaster is brewing in the
U .S.

When American Greed returns.

The economy goes into free fall and
Peregrine starts bleeding money while

Wozendorf continues to spend wealth.

People didn't understand where he was
getting all his money from.

It's May 2008, and Chicago brokerage
firm Peregrine Financial Group is

celebrating a milestone.

Sustaining your success is not only our
mission, it's our obsession.

Ten years after launching its online
trading platform, the company rebrands

itself as PFG Best.

The firm, led by Chairman and CEO
Russell Wozendorf, looks like a winner

in the futures industry, including
independent broker Carly Garner.

She's opening a small trading office in
Las Vegas and has to find a futures

commission merchant to clear her trades.

PFG, because it was a family operation,
was very appealing to us.

Our mission at PFG is to empower our
customers.

They worked hard to educate their
clients. They had magazines. They had

webinars. They had all these things
that...

let people know what the futures markets
were all about, and that's exactly what

we wanted to be a part of.

Garner wants a company that she can
trust, and she decides PFG looks like

best bet.

It wasn't a decision that was made
lightly. I had made a number of phone

around the industry, and everything that
I heard was, you know, fabulous.

She signed with the firm that summer.

But as careful as she is, Garner will
still get blindsided by the likes of

Russell Wozendorf.

Wall Street at least is bracing for a
bankruptcy by Lehman Brothers.

When September 2008 hits, everything
changes.

Financial powerhouses begin collapsing,
including Lehman Brothers and Washington

Mutual.

Anxious investors go on a selling spree,
and the Dow plunges more than 2 ,600

points in October.

It's a difficult time for anybody in the
financial services industry because...

Nobody has money to invest.

Customers were scared. They don't want
to trade, and they don't want to open

accounts. To make matters worse, the
Federal Reserve slashes interest rates

almost zero.

Typically, brokerage firms like PFG earn
interest on their customers' accounts,

and they rely on that for revenue, but
not anymore.

All the revenue streams went towards
zero.

The financial crisis torpedoes PFG's
bottom line.

And commodities traders suffer well into
2009.

For all of the proverbial blood in the
streets, however, Russell Wassendorf's

ambitions remain unabated.

In fact, he forges ahead with his
boldest plan yet, the construction of a

$24 million corporate headquarters in
Cedar Falls, Iowa.

Cedar Falls is near Marion, Iowa, where
Wassendorf grew up.

It has a main street that runs right
through the center of town with a barber

and a candy shop and an old hotel.

Russell Wassendorf is going to come into
Cedar Falls and build a sparkling new

headquarters, hire a bunch of people,
make Cedar Falls sort of the new

for a certain part of the futures
industry.

It's very much an audacious move.

In Chicago, he was one fish in a giant
pond.

When he moved his operation to Iowa, he
was the biggest fish in a small pond.

Wassendorf built a state -of -the -art
facility, large enough for 300 employees

on 22 acres of land.

He announces its grand opening in
September 2009.

I'm Russ Wassendorf.

I'm chairman and chief executive officer
of PFG Best. I want to welcome you to

One Baraboon West.

Within the structure itself. It was like
Field of Dreams.

He felt if he built it, the brokers
would come.

But they didn't.

Very few brokers followed him out to
Iowa.

So that building had a lot of space.

Most of PFG's brokers have chosen to
stay behind at the Chicago office, where

Wozendorf's 39 -year -old son, Russ Jr.,
runs the show.

There's growing strain between father
and son now.

Russ Jr.

has fought the Iowa move ever since his
father proposed it.

There's no business reason for doing it,
and Russ Sr. just summarily dismissed

Russ Jr.'s opinions and other people's
opinions.

Cedar Falls, meanwhile, gives Wozendorf
a hero's welcome.

He relishes playing the part of a local
boy made good and spends money

extravagantly to show it.

At his Cedar Falls home, he builds a
massive pool with a retractable glass

at a cost of more than $1 million.

He takes to the skies in a private jet
that he purchases for his trips to

Chicago. And he opens an Italian
restaurant called My Verona that uses

ingredients from his organic farm and
touts its upscale cuisine.

He took his restaurant staff on an all
-expenses -paid trip to Italy to learn

about medieval sausage -making
techniques and wine pairing.

He wanted to give a top -class
experience there in Iowa.

For anyone who inquires about the source
of his wealth, Wassendorf says that he

made a killing in Romanian real estate.

I remember him telling me that he had
the largest construction company in all

Eastern Europe, and he was worth
hundreds of millions of dollars.

But it's around this time that fate
deals Wassendorf an unexpected hand.

He's diagnosed with esophageal cancer,
and the news shakes him profoundly.

There's enough of a wake -up call that I
considered all aspects of my life,

including my marriage.

In December 2010, he and his wife of 34
years filed for divorce.

I always had the feeling I was living on
borrowed time anyway. My father died

when he was 50, and I guess that's one
of the reasons I lived a rather fast and

furious life.

As it turns out, the diagnosis is a
mistake.

Wassendorf is cancer -free.

And yet, his worst troubles are only
beginning.

When American Greed returns, see how an
employee's tiny slip -up almost exposes

his entire fraud.

Hear more about Russell Wassendorf's
motives at AmericanGreed .CNBC .com.

Feeling greedy?

Want more than your share of behind -the
-scenes dirt?

Follow at AmericanGreedTV on Twitter.

We'll be right back.

It's 2011 in Cedar Falls, Iowa.

Russell Wozendorf, chairman and CEO of
Peregrine Financial Group, has been

stealing money from his customers for
the past 18 years.

He's embezzled more than $200 million
and covered his tracks by switching real

bank statements with forgeries.

He told his staff that the bank
statements for the customer -segregated

were to be delivered to him unopened and
that only he would have access to

those. His scheme worked.

but only as long as he controls the
communication flow with the bank.

His iron grip finally slipped,
appropriately enough on Friday the 13th

2011.

The circumstances, utterly routine.

It's during an audit when a PFG employee
emails a request to U .S. Bank for an

account balance and helps to put the
bank in contact with a regulator at the

National Futures Association, or NFA.

Her intent is to make the audit go
faster, but she unwittingly exposes just

much customer money is missing from PFG.

U .S. Bank told the NFA and the
Peregrine employee that Peregrine's

balance was around $7 million.

That was about a $200 million shortfall.

For the first time in almost two
decades, a regulator gets a look at

account balance.

I found out it happened within minutes
after it happened. I obviously thought

the jig was up.

That afternoon, Wassendorf contacts his
bank to try to undo the damage.

I gave one of the bank officers the song
and dance that it was sent by accident.

It was just, you know, this happened.
Don't worry about it. It's nothing.

And they bought my story.

Meanwhile, he fabricates a new bank
statement showing a phony balance of

million.

He gets ready to fax that statement to
regulators the next business day.

On Monday morning, he called up the NFA
auditor and said the bank had made a

mistake. They're going to be sending you
a new verification form. And when he

sent it, he changed the fax header on
his fax machine to make it look like it

was coming from the bank.

The NFA accepts the forgery at face
value, and Wassendorf dodges a bullet.

Russ thought that the jig was up. He was
apparently shocked that the NFA didn't

catch him.

Another type of damage that Wassendorf
cannot seem to reverse, however, is

continuing drop in profits and sinking
morale.

He's transformed his Iowa headquarters
into a call center for opening online

accounts.

but at the expense of his brokers in
Chicago.

It felt like they wanted to phase out
the brokers and just become an online

trading house. All of the leads went to
Iowa, where the customer service reps

were. All the phone numbers on the
website rang in Iowa. So rather than

brokers a percentage of the commissions,
the house would keep all the

commissions. The last year, a lot of the
brokers were just fading away.

They were leaving.

By the end of 2011, even Wassendorf's
son and PFG president, Russ Jr., is

planning an exit strategy.

Russ Jr.

has been at odds with his father, both
professionally and personally, since his

parents divorced.

His father has also begun dating another
woman, whom he intends to marry.

The disagreements over how to run the
company had intensified.

The personal situation had really
deteriorated.

And so he wanted to get away from his
father.

But fate intervened, and suddenly the
Wassendorffs are faced with a potential

train wreck.

In February 2012,

financial regulators hit PFG with a $700
,000 fine accusing four of its brokers

of misconduct.

The charges stem from a federal
investigation into Minneapolis

trader Trevor Cook.

who's convicted of bilking investors of
$194 million in a foreign currency

fraud.

Cook has set up many accounts at PFG to
clear his trades and illegally

commingled funds between them.

Regulators said that PFG was clearly, at
the very least, not supervising its

brokers. These trades should not have
gone through.

You know, commingling of funds in the
futures industry is just a very bad

offense. It just shows that, you know,
you're having issues.

To make matters worse, regulators banned
PFG from signing up new brokers for a

period of two years.

So that's really when things got bad, in
my opinion. And, you know, some of my

associates left the firm because of
that. I almost went with them.

By early May, PFG is clearly struggling.

The company announces a 20 % pay cut for
all its employees and several layoffs.

The following month, regulators from the
National Futures Association begin

their annual audit.

This time, they tell Wozendorf they're
introducing a new auditing system.

It's electronic and will give them
direct access to PFG's bank accounts.

The online technology that helped make
Wozendorf now threatens to undo him.

For 20 years, he had been doctoring bank
statements with physical paper. He knew

the jig was up. With electronic account
verification, that really was the one

thing that he couldn't hide from.

But regulators need Wassendorf's consent
before they can proceed.

He refuses to give it to them and stalls
for time over the next week.

I could very easily have disappeared,
but in doing that...

I felt that the federal prosecutors
would have then gone to lay the blame

innocent people. And I didn't want to
put my past employees or my son in that

type of situation because they knew
nothing about what I was doing.

Wassendorf says he wants one last bit of
happiness before his time runs out.

So he takes his fiancée to Las Vegas on
the weekend of June 30th.

They elope at a private ceremony at the
Bellagio.

This was sort of the beginning of the
end for Wassendorf.

He was, you know, putting all his
affairs in order ahead of his planned

Eight days later, on Sunday, July 8th,
Russell Wassendorf emails financial

regulators. He finally gives them
consent to view PFG's bank accounts

Then he sets out a number of items in
his office for authorities to find.

I was very careful to keep all the
evidence of my crime. I kept all of the

original bank statements that I had
forged, and then I had a thumb drive

they could access and trace the money.

By 8 o 'clock the next morning, he
drives into a wooded area behind PFG.

A short time later, one of his employees
calls 911.

Up next.

There's a car behind our building with a
tube from the exhaust into the window,

and there's a person inside.

Okay. And the car's running.

July 9, 2012,

Cedar Falls, Iowa.

A desperate call to 911.

Okay, are you watching it from the...
Yes, I'm watching it right now. I've got

group of people out there.

Just before 8 a .m., employees at
Peregrine Financial Group make a

discovery.

Ma 'am, can you tell me what's going on?

Russell Wassendorf, chairman and CEO,
has attempted suicide.

He's overdosed on sleeping pills while
sealed inside a car full of exhaust

fumes.

Do you have contact with anybody to see
if he's breathing or not?

Oh, my God.

Paramedics rush him to the hospital, and
police recover a suicide note and

confession letter from inside the
vehicle.

I've committed fraud, the letter states.
I have been able to embezzle millions

of dollars from customer accounts at
Peregrine Financial.

At that point, a federal criminal
investigation begins.

He had laid out in some detail what he
had done.

Everyone was incredulous that this was
true, so the next thing to do was to go

down to the bank, and sure enough, it
was true.

Investigators find $5 million in PFG's
customer -segregated account.

That's $200 million short of what
Wassendorf had everyone believing was

Commissioner Bart Chilton of the
Commodity Futures Trading Commission is

notified immediately.

This is $200 million of customer funds.
This isn't big corporations. These are

average folks who had their money
invested with Peregrine. There was a lot

shock, but more importantly, I was
thinking, how are we going to get their

back? That afternoon, regulators freeze
PFG's trading positions.

The company doesn't have the capital to
stay open, and it declares bankruptcy

the next day.

More than 200 employees are suddenly
told their jobs are gone.

I think the hardest thing for Russ Jr.

was he had to explain to the employees
what was happening, that the company was

going down and that Peregrine was
finished.

We knew the firm was having issues, but
nothing of that nature. I mean, nobody,

I don't think anybody could comprehend
that, you know, he had taken over $200

million, attempted suicide. I mean, that
was just a blow, just a shock.

The damage spreads far and wide.

And in Las Vegas, broker Carly Garner
fears that it will jeopardize her own

business. She's among hundreds of
outside brokers that cleared trades

PFG and trusted the firm with their
clients' money.

Because all of our assets were at PFG, I
knew that we would be starting from

scratch. Our clients were left with, I
assumed it to be pennies on the dollar.

Garner, who opened her business with
zero clients four years ago, represents

more than 300 now.

Altogether, their assets amount to $4
million, all of which was on deposit at

PFG.

Garner knows they may never see that
money again.

It was a nightmare. There was nothing we
could do, but our clients wanted

answers, and we didn't have them to give
to them.

Getting very disoriented.

Wozendorf, seen here in video taken at
his bedside, is soon visited by FBI

agents. He's in stable condition after a
near -fatal overdose of sleeping pills.

Authorities later place him under arrest
on charges of making false statements

to federal regulators.

Eventually, Wozendorf leads them through
his 20 -year scare.

He sat down and was willing to talk
about how he'd done it.

but also to talk about AFCA and where
they were.

Unfortunately, when you would ask what
happened to all the money, the answer

too often was, well, it's gone.

The court appointed receiver and trustee
tally Wassendorf's remaining assets and

sell them off.

But they come nowhere close to recouping
the funds that he stole from 13 ,000

customers.

All told, PFG's customers have received
roughly 30 % of their money back so far,

but they don't expect to see the rest.

They include Carly Garner's clients.

Many of them have told me they'll never
trade commodities again, and I don't

blame them. This is something that
people don't bounce back from very

In September 2012, Wassendorf pleads
guilty to embezzlement, mail fraud, and

counts of lying to federal regulators.

He maintains that he acted alone, and
investigators haven't found the evidence

to prove otherwise.

At the time of his sentencing, we didn't
believe any other charges would be

brought against anybody.

In January 2013, a U .S. District Judge
sentences Russell Wozendorf to the

maximum prison term, 50 years in a
federal penitentiary.

He will be eligible for release by the
time he's 107.

But many say that punishing Wozendorf
isn't enough.

Investors need better protection.

It's mind -boggling how easy it was to
fool the regulators because they weren't

auditing electronically.

The fact that this was able to go on for
as long as it went on is as much an

indictment of the regulators as it is of
Russell Wassender.

The CFTC is taking steps to improve
oversight of customer funds.

The thing that we have in place now is
that we have electronic access to bank

records that we can check 24 -7, 365, to
ensure that customer funds are where

they're supposed to be all the time.
That doesn't mean that there's not more

be done. There is.

Today, the repercussions of PFG's
collapse are still being felt.

And customers aren't the only ones that
paid the price.

For brokers, you know, who played by the
rules, this really wasn't fair.

Not only do we lose our customers and
our customers lose their money, but we

have the additional taint or stigma of
being associated with Watzendorf.

And it's going to take a good amount of
time to get that off.

Every moment he was doing this, he was
playing with people's lives and careers

as well as people's money. And he didn't
care.

Wassendorf now expresses his remorse and
says he accepts the punishment he's

been given for his hubris and greed.

I'm deeply sorry for what has happened.
I feel very guilty for what I've done,

and I deserve the punishment I'm
getting.

I was a horrible hypocrite, and because
of that, I don't expect to be forgiven.

I've lost my son's trust. I've lost his
love.

I don't believe I'll ever see my
grandchildren again.

And I'm very, very sorry about that.

Next, an herbal enhancer promises
passion but delivers pain.

It wasn't about selling a product. It
was about exploiting people.

Snaring victims in a credit card fraud.

American Greed scams scoundrels and
suckers. Next on CNBC.

Restaurant Startup premieres Tuesday,
July 8th on CNBC.

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