Exclusive: U.S. probing failed broker PFGBest's use of small auditor

Thu Jul 12, 2012 1:12am EDT
 
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By Sarah N. Lynch and Nick Carey

WASHINGTON/CHICAGO (Reuters) - U.S. futures industry investigators are looking into why Iowa-based collapsed brokerage PFGBest used a tiny accounting firm that appears to be operating from inside a suburban Chicago home to audit its books, according to a person familiar with the matter.

Experts said the use of such an auditor should have been a red flag to regulators of a futures brokerage with more than $500 million in assets and several hundred employees across the United States as well as in Shanghai and Canada.

There are comparisons with the way convicted Ponzi schemer Bernard Madoff used an auditor operating out of a strip mall in suburban New York and convicted swindler Allen Stanford's investment firm retained a little-known auditor on the Caribbean island of Antigua.

PFGBest's financial statement ended December 31, 2010, shows that a firm called Veraja-Snelling Company, based in Glendale Heights, Illinois, certified that the futures broker was in compliance with federal commodities regulations governing the segregation of customer money.

On Tuesday, the U.S. Commodity Futures Trading Commission accused the now-bankrupt brokerage and its founder Russell Wasendorf Sr. of misappropriating roughly $200 million of customer money in a fraud it said dates back to at least February 2010, and then lying to cover it up.

The alleged fraud came to light after Wasendorf's apparent suicide attempt on Monday morning outside the firm's Cedar Falls, Iowa, offices.

The CFTC is looking into the role of the auditor as it continues to investigate PFGBest, said the person familiar with the matter, who was not authorized to speak publicly.

When reached at her Glendale Heights home on Tuesday night, Jeannie Veraja-Snelling, who listed herself an officer of the firm when she registered with the Public Company Accounting Oversight Board in February 2010, said she could not talk about PFGBest.   Continued...

 
Jeannie Veraja-Snelling, sole proprietor of the firm Veraja-Snelling Company, is based in this home in Glendale Heights, Illinois, July 10, 2012. PFGBest's financial statement ended Dec. 31, 2010, shows that a firm called Veraja-Snelling Company, based in Glendale Heights, Ill., certified that the futures broker was in compliance with federal commodities regulations governing the segregation of customer money. Picture taken July 10, 2012. REUTERS/Nick Carey