‘No matter How Cynical I get, I Can’t Keep Up’
Lily Tomlin said it best years ago: “No matter how cynical you become, it's never enough to keep up”. I’m referring to the news last week that Russell Wasendorf Sr, confessed to a 20-year fraud at his now-bankrupt Iowa brokerage, saying business troubles and his "big" ego left him no choice so he cheated.
In the signed statement, left along with a suicide note and released as part of the criminal complaint, Wasendorf said he began forging bank documents after the business he built from his basement risked failing without additional capital. The timeline suggests his deceit lasted almost the entire life of his brokerage.
"I was forced into a difficult decision: Should I go out of business or cheat?" he wrote.
"I guess my ego was too big to admit failure. So I cheated," the note said. It was discovered last Monday in his car outside the company's new Iowa headquarters, where Wasendorf had tried to kill himself by funneling in tailpipe exhaust.
In an stunning disclosure to an event that has shaken trader confidence in the trillion-dollar U.S. futures markets, authorities released parts of a detailed statement in which one of the industry's best-known veterans explained how he used little more than a rented P.O. Box, Photoshop and inkjet printers to dupe regulators in a more than $100 million scheme.
Wasendorf's downfall has shocked his family and colleagues and has shattered his image in his adopted hometown of Cedar Falls, Iowa, where he moved PFGBest's headquarters in 2009 after building an $18 million complex that included day-care, a four-star cafeteria and state of the art geothermal climate control. Moreover, his fall from grace has shaken investors’ confidence in the very foundation of the futures markets: brokers' safeguarding of client money, and, equally important, regulators' ability to police the industry.
The prolonged nature of the fraud is sharpening criticism of regulators like the National Futures Association, the industry group that had first-line responsibility for overseeing non-exchange brokers like PFG. In a previous blog I wrote about MF Global that tapped into client funds in a desperate bid to keep itself afloat during its final days. In that case the regulators also were asleep at the wheel.
It’s amazing to me that in an era of failed companies like Enron and WorldCom, uber-Ponzi schemes such as that pulled off by Bernie Madoff, and housing schemes that has affected millions of homeowners, new and disturbing examples of fraud continue to come to light some years after they were first perpetrated, such as the one by Wasendorf.
What are we to make of this latest incident of personal greed, irresponsibility, and narcissistic behavior? I’ve come to the conclusion that workplace fraud has become so endemic that nothing short of a sea-change in our ability and willingness to act as an ethical society can save us from ourselves. Unfortunately, no one seems to recognize the problem and deal with the root cause, which is that we have lost our moral compass.
Blog posted by Steven Mintz, aka Ethics Sage, on July 18, 2012