Peregrine CFO Cuypers Subpoenaed in Fraud Investigation

By Jacob Bunge

The chief financial officer of Peregrine Financial Group Inc. has been subpoenaed to testify before a federal grand jury looking into the events leading up to the brokerage firm’s July 10 collapse, according to people familiar with the matter.

Brenda Cuypers is expected to appear before the grand jury in mid-August, the people said. Peregrine’s president and chief operating officer, Russell Wasendorf Jr., has received a similar subpoena, according to a person close to the situation.

Investigators are examining an alleged 20-year fraud perpetrated by Russell Wasendorf Sr., the founder and chief executive of Peregrine, which came to light after the elder Mr. Wasendorf attempted suicide near the firm’s Cedar Falls, Iowa, headquarters July 9.

Authorities said that Mr. Wasendorf Sr. left behind a confession detailing how he used client money to prop up his firm. About $215 million in customer money is missing from a Peregrine bank account, according to federal market regulators.

Wade Kisner, a law enforcement coordinator with the U.S. Attorney’s office in Cedar Rapids, Iowa, declined to comment. Ms. Cuypers declined to comment through Harris Kay, a partner with Chicago law firm Henderson & Lyman, which is representing her.

Neither Ms. Cuypers nor Mr. Wasendorf Jr. has been charged with any wrongdoing in the matter. Mr. Wasendorf Sr. claimed to have acted alone in his fraud, according to his alleged confession.

Both Ms. Cuypers and Mr. Wasendorf Jr., however, have been named in several class-action lawsuits filed on behalf of Peregrine customers in recent weeks.

A subpoena doesn’t necessarily indicate that authorities are planning to bring any charges against the recipient, according to Ken Springer, president of financial investigation firm Corporate Resolutions Inc. and a former agent with the Federal Bureau of Investigation.

“It’s a logical question to say to the CFO, ‘What did you know and when did you know it?'” Mr. Springer said. “If nothing else they’d want to get that testimony on the record.”

Ms. Cuypers was promoted to CFO at Peregrine in 2006, previously serving as controller, where she oversaw accounting and financial planning. She joined the firm in 1994, according to a news release from Peregrine at the time she was named CFO.

Mr. Wasendorf Sr., in his alleged confession, claimed to have begun his fraud in 1993.

A federal judge in Chicago last month authorized bankruptcy trustee Ira Bodenstein to retain Ms. Cuypers and 55 other Peregrine staff to help wind down the firm.

Mr. Bodenstein earlier this week sought court permission to subpoena financial records from 10 banks involved with the collapsed U.S. brokerage, seeking information related to open and closed Peregrine accounts at the institutions.

Write to Jacob Bunge at jacob.bunge@dowjones.com.

The chief financial officer of Peregrine Financial Group Inc. has been subpoenaed to testify before a federal grand jury looking into the events leading up to the brokerage firm’s July 10 collapse, according to people familiar with the matter.