Peregrine Financial Group (PFG), Inc. and Russell Wasendorf SR

Refer to the Professional Judgment in Context feature at the beginning of the chapter. Additional details on PFG and Wasendorf are presented below. On July 14, 2012, Russell Wasendorf Sr. attempted to commit suicide inside his vehicle in the parking lot of Peregrine Financial Group, Inc.’s (PFG) corporate offices, leaving a remarkable suicide note in his vehicle detailing a fraud scheme in which he embezzled over $200 million from PFG’s brokerage clients over a twenty-year period. Wasendorf led a very interesting and affluent lifestyle and ran the business in some unusual ways.

  1. Describe any inherent, fraud, or control risks that are evident from the facts in the case.
  2. Comment on your perceptions of the quality of the NFA’s oversight of PFG.
  3. Do you think it is ethically problematic that Wasendorf served on an advisory committee of the NFA? Why might NFA have wanted Wasendorf to serve on its advisory committee? What conflict might that have caused?
  4. Comment on your perceptions of the quality of Veraja-Snelling’s certification of PFG’s compliance status. Is a sole practitioner likely capable of sufficiently overseeing a large, complex entity like PFG? Was it acceptable for Veraja-Snelling to accept a paper copy of the bank confirmation, which she would have believed came directly from U.S. Bank? Why might Veraja-Snelling have lacked professional skepticism for this engagement?

Having the CEO personally involved in receiving bank statements and in limiting the bank’s access to other individuals within the company would be very unusual for a large company such as PFG. Further, U.S. Bank should have expected to receive an auditor’s confirmation request annually, but did not because Wasendorf circumvented the process. Using the ethical decision making framework from Chapter 4, comment on whether you think that U.S. Bank is responsible in any way for this fraud. Explain. Recall that the steps are as follows: (1) identify the ethical issue, (2) determine the affected