Fraud: Iowa brokerage raided customer funds
Regulators were scrambling this week to locate at least $215 million in missing customer funds from a collapsed Iowa futures brokerage, echoing last year’s MF Global scandal, said Gregory Meyer and Arash Massoudi in the Financial Times. Cedar Falls–based Peregrine Financial Group is accused of defrauding customers and falsifying records for at least two years. Regulators said they had found that Peregrine held only $5 million of the more than $220 million that it claimed was in customer accounts. The firm filed for liquidation this week a day after its 64-year-old founder, Russell Wasendorf Sr., attempted suicide by piping exhaust into his car.
The tight-knit U.S. futures industry was left reeling by the news that a second brokerage firm had apparently misused sacrosanct customer funds, just nine months after the collapse of MF Global, said Ann Saphir in Reuters.com. But unlike MF Global, which lost $1.6 billion in customer money in a scramble to meet margin calls, fraud at the widely respected Peregrine appears to go back years, raising questions about why regulators did not manage to detect the irregularities sooner. “The fear is the funds are gone,” said Lauren Nelson of Chicago-based broker Attain Capital. “The regulators have really dropped the ball.”
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
SUBSCRIBE & SAVE
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Latest Videos FromThe Week
Euro crisis: EU speeds aid to Spanish banks
With Spain’s borrowing costs climbing to dangerous levels, the EU agreed this week to speed up a bailout of the country’s struggling banks, said Paul Geitner and Stephen Castle in The New York Times. An initial $37 billion of the $120 billion in pledged aid will be disbursed by the end of the month. Spain will also have an extra year—until 2014—to lower its budget deficit from last year’s 8.9 percent to the EU target of 3 percent. The government announced that it would raise taxes and slash government wages to save $80 billion.
Health: Record fraud penalty for GlaxoSmithKline
British drugmaker GlaxoSmithKline was hit with a $3 billion fine last week, the biggest health-care-fraud penalty in U.S. history, said Charles Riley and Emily Jane Fox in CNNMoney.com. The Justice Department accused the company of promoting its antidepressant drugs for unapproved uses, including marketing Wellbutrin as a weight-loss aid and Paxil for use by children and teens. Glaxo also failed to report safety data on its diabetes drug, Avandia. Glaxo sold at least $27 billion worth of the drugs during the years covered by the settlement.
Economy: Credit card debt jumps
In another sign that many Americans are struggling to make ends meet, credit card debt increased by $8 billion in May, the biggest jump in five years, said Martin Crutsinger in the Associated Press. Overall, consumer borrowing increased by $17 billion, more than any other month in 2012, the Federal Reserve said this week. Although increasing consumer debt can be seen as a sign of a healthier economy, the rise in credit card debt is likely a response to weak hiring. Households may be “relying more and more on credit cards to cover everyday expenses,” said Paul Edelstein of IHS Global Insight.
Tech: Google poised to settle privacy case
Google may soon pay $22.5 million to settle charges that it bypassed the privacy settings of millions of Apple users, said Julia Angwin in The Wall Street Journal. If finalized, the settlement would be “the largest penalty ever levied on a single company by the U.S. Federal Trade Commission.” Google has been charged with overriding security defaults in order to track and target ads to users of Apple’s Safari browser. Google officials have said the intrusions were inadvertent. The settlement is awaiting approval by the FTC.
