Cedar Falls brokerage defaulted on state loan, officials say
Peregrine Financial had fallen short of job creation requirements
The Iowa Economic Development Authority wants payback of money it lent to Peregrine Financial Group in 2007.
IEDA said Monday it had asked for repayment of a $175,000 forgivable loan it had made to PFG and its CEO, Russell Wasendorf Sr., plus more than $13,376 in interest in penalties.
Wasendorf, PFG's founder, has been accused in a $200 million fraud scheme, and repotedly admitted in a suicide note that he stole millions from his customers for more than 20 years, according to court documents.
Russell Wasendorf Sr., 64, chief executive officer of Peregrine Financial Group Inc. was charged with making false statements in the scheme and made his initial appearance Friday in U.S. District Court.
The loan in question was part of an award of $350,000, plus more than $893,000 in tax incentives, the state agency handed PFG June 13, 2007, when the company, then based in Chicago, announced it was moving into a new $18 million building in rural Cedar Falls.
Terms of the loan mandated that PFG hire 74 full-time workers — or their equivalent — at a wage threshold of $19.74 and keep those employees a minimum of three years under that pay mandate.
The agency agreed to accept Wasendorf’s personal assets as collateral, IEDA spokeswoman Tina Hoffman said.
“Our security was a personal guarantee by Mr. Wasendorf Sr. based on his personal financials at the time of the award,” she said. “Our board found he was in a good financial position and that would serve as collateral in the event of default.”
PFG created jobs but not enough to keep the loan, Hoffman said.
“They did create the jobs, but only 25 at the wage obligation,” Hoffman said Monday. “Because they didn’t fulfill at least 50 percent of the job obligation — it was a 66 percent shortfall — the entire portion of the loan was to be paid back.”
The agency sent PFG a notice of default March 21, she said.
The company had not begun to repay the loan when the agency last communicated with it in May, Hoffman said.
“We continued to be in discussions with them,” she said. “Back in mid-May, we were talking with company representative who was wanting to look into the payroll to make sure the records we had received were correct. They were surprised they hadn’t met those obligations. They were doing some research on their side to see why that was.”
Hoffman said the agency had not communicated with the company since May.
PFG moved into its new 50,000-square-foot building in September 2009.
In a report in 2007, the agency — then called the Iowa Department of Economic Development — reported the $350,000 award and listed PFG as having created 59 jobs and retained an additional position, with an average hourly wage of $44.57.There were 12 other jobs listed as created or retained, but that were not eligible for funding.