Submitted by Fox First at Ten on January 4th
By RYAN J. FOLEYAssociated Press
IOWA CITY, Iowa (AP) - Russ Wasendorf Sr. duped customers, regulators and his colleagues as he pulled off a 20-year, $100 million fraud at his Iowa-based brokerage. The state's tax collectors say he and his ex-wife also duped them, and that the former couple owes Iowa more than $14.1 million in unpaid taxes, interest and penalties.
The Iowa Department of Revenue filed an assessment in November against Russ and Connie Wasendorf, alleging they underreported their taxable income between 2001 and 2009 by about $75 million and dodged $6.6 million in taxes as a result, according to court records released this week.
Wasendorf is in jail awaiting sentencing after pleading guilty to misusing more than $100 million in funds that customers invested with his now-bankrupt brokerage, Peregrine Financial Group. He was arrested last year after attempting suicide in his car outside the company's headquarters in Cedar Falls and left a note confessing to a scheme in which he misused customer funds to support his financial empire and created phony documents to cover his tracks.
The details of Wasendorf's tax liability were made public in a filing in federal court in Chicago by a receiver that is in the process of liquidating Wasendorf's far-flung personal and business assets to reimburse his victims. The assessment alleges that the Wasendorfs underreported their income by about $8.3 million per year.
U.S. District Judge Rebecca Pallmeyer granted the receiver's request Friday to suspend any efforts by the department to enforce the assessment rather than litigate the issue now. The revenue department had agreed to the court order, which puts the process on hold until further notice by Pallmeyer. The order "preserves all rights the department and State of Iowa may have with respect to assessing and collecting any amounts lawfully due."
Randall Lending, an attorney for the receiver, said legal proceedings involving Wasendorf's assets had been suspended earlier in the case to prevent a rush to win judgments against Wasendorf that could give "one set of potential creditors preference over others." He said it's not clear how the department's tax bill would be treated compared to claims from others.
"That would have to be dealt with at a later date. There's a question even as to whether it's a valid claim. Just because they made a notice of assessment, doesn't mean it's valid," he said. "That would have to be looked into, adjudicated and determined."
Once the stay is lifted, the Wasendorfs would have 60 days to appeal the assessment. The couple was divorced in 2010, and Russ Wasendorf remarried another woman shortly before his attempted suicide.
Iowa Department of Revenue spokeswoman Victoria Daniels said Friday that the agency had no choice but to agree to the stay, which is routine in such cases.
"We wanted to assert our rights to collect any taxes that are due to the state of Iowa," she said.
Lending said the receiver has sold off Wasendorf's condominimum in Chicago and other properties, and continues efforts to locate and liquidate his other assets, including his partial ownership of Romanian development firms.
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