Peregrine Financial Group's former Chief Executive Russell Wasendorf Sr. pleaded guilty on Monday to embezzling more than $100 million from customers of his futures brokerage, lying to regulators to cover his tracks, and mail fraud.
Previously expected to be set free from jail pending his sentencing, Wasendorf was told he will remain behind bars while a judge determines whether he is a flight risk.
Wasendorf, 64, agreed earlier this month to plead guilty after confessing in July to stealing from his customers for nearly 20 years.
In a small courtroom in Cedar Rapids, Iowa, Magistrate Judge Jon Scoles confirmed that Wasendorf wanted to plead guilty to each of four charges.
"Are you pleading guilty because you are guilty?" Scoles asked the former futures-industry executive, who was wearing an orange prison jumpsuit and shackled at the wrists and ankles.
"Yes, your honor," Wasendorf replied.
Prosecutors said in court that Wasendorf, who faces up to 50 years in prison, should spend the rest of his life behind bars. Wasendorf's public defender argued for a sentence of about 24 to 30 years, which could be a life sentence given his age.
A date for his sentencing was not set.
Wasendorf attempted to kill himself on July 9 near the headquarters of his Cedar Falls, Iowa, brokerage. He was arrested on July 13 and charged with 31 counts of lying to federal regulators.
The search continues for the money he stole. Former clients are still unable to access funds frozen since the firm's bankruptcy on July 10.
Wasendorf previously was expected to be released from the Linn County Jail in Iowa, where he has been held in isolation and under suicide watch since his arrest, after he pleaded guilty on Monday.
In approving the release last week, Scoles said Wasendorf's chances to flee were limited because he had surrendered his passport and assets to authorities.
However, prosecutors on Monday objected to the plan and Chief Judge Linda Reade of the U.S. District Court of the Northern District of Iowa ruled that Wasendorf "shall remain detained pending further order of the court," according to a court filing.
A date for the next order was not released.
The public defender representing Wasendorf has declined to comment.
Prosecutors argued Wasendorf should stay behind bars because there is a "serious risk" he might flee.
"Defendant's crime is nothing short of breathtaking," prosecutors said in a court filing.
The total amount Wasendorf stole is not clear.
Prosecutors said Wasendorf stole about $200 million and that they were worried he could access assets that may be hidden from authorities.
"If even the smallest portion of such a vast amount of money were hidden away, it could be all (the) incentive and means that defendant might need to flee a probable life sentence," prosecutors said in a filing.
The Commodity Futures Trading Commission has filed a lawsuit against Wasendorf and his firm, saying the CEO misappropriated more than $200 million in customer funds over several years.
Wasendorf claimed he acted alone in the fraud.
However, a civil lawsuit filed on Friday by the CEO's son, who was Peregrine's president, said Wasendorf had help from a woman who claimed to work for U.S. Bank, which held the account from which the elder Wasendorf stole. The woman told regulators in 2011 to disregard account balances that had been supplied directly by the bank in favor of inflated figures, supplied unbeknownst to them by Wasendorf, according to the lawsuit.
U.S. Bank said the lawsuit has no merit.
Wasendorf has met with authorities working to piece together his crime and track down his assets. Prosecutors said in a filing that his cooperation was "primarily designed to bolster his argument for release."
Wasendorf was set to move in with Linda Livingston, a pastor in Iowa who has counseled him in prison, if he was released. She attended the court hearing on Monday but did not speak to reporters.
Wasendorf has told authorities he is no longer suicidal.
Prosecutors said in a filing that "none of what defendant says can be taken at face value."
Copyright 2010 by Reuters. All rights reserved.