CHICAGO (Reuters) - The bankruptcy trustee for Peregrine Financial Group may use lawsuits to try to recover funds missing from customer accounts at the collapsed brokerage, according to papers filed in court Tuesday.
“The trustee believes that there are significant causes of action that have to be investigated and may have to be pursued,” Ira Bodenstein, the trustee, said in a seven-page document submitted to federal bankruptcy court in Chicago.
Nearly two months have passed since Peregrine Financial’s CEO Russell Wasendorf Sr. was found incoherent in his car with a hose hooked up his exhaust pipe and a note detailing years of bilking clients out of more than $100 million.
The firm filed for Chapter 7 bankruptcy on July 10. But so far, none of the firm’s 24,000 customers have had any of their money returned as part of the liquidation process.
Lawsuits are a tried and true method for recovering funds after bankruptcy, said Fred Grede, who filed a series of lawsuits to recover funds in his role as trustee for failed brokerage Sentinel Management Group.
“I think he should be looking at anyone and everyone who has touched this thing,” Grede said of Bodenstein during a phone interview.
Targets could include insiders at the firm, its accountants, and banks, Grede said: “The bottom line is, you are trying to maximize the recovery to the creditors.”
Bodenstein, the trustee, and his lawyer did not immediately return calls requesting comment.
The document filed Tuesday lays out Bodenstein’s reasons for wanting to boost the pay of Peregrine’s general counsel. Some former customers objected, saying the trustee should work on returning money to clients before giving the firm’s in-house counsel, Rebecca Wing, a raise.
Bodenstein, in his reply, said Wing has already helped with the recovery of assets from Wasendorf to the estate and could be helpful in recovering other assets.
“The trustee believes that Wing has important knowledge of both facts and applicable law respecting these causes of action and that her continued participation in the case is important to maximizing the recoveries that the trustee is able to make for the benefit of customers and creditors,” he wrote in the filing.
Judge Carol Doyle hears arguments on the issue on Wednesday.
The case is In re Peregrine Financial Group Inc 12-27488 U.S. Bankruptcy Court, Northern District of Illinois
Reporting by Ann Saphir; Editing by Dan Grebler