Peregrine Financial Group Inc Finance Essay

Peregrine Financial Group inc. known as PFGBest. This company is investing for a long term probability of success for customers, it offering different group of products, technologies and services  including futures, forex, futures options, full-service brokerage, precious metals, trader education, and, of course, direct online trading with emphasis the opportunities of lower barrier to entry. This company is one of the largest non-clearing U.S. Futures Commission Merchants, with customers, affiliates and brokerage offices in more than 80 countries.

With the article, Russ Wasendorf, Sr., CEO of Peregrine Financial Group, Inc. in Cedar Rapids, Iowa.  Monday, Sept. 17, 2012, he was arrested by FBI, judge's order that would free the disgraced businessman while he awaits sentencing for a $200 million fraud scheme at his Iowa-based brokerage. Wasendorf admitted to the $200 million fraud that he first confessed in a note found on him after an unsuccessful suicide attempt in July.  Wasendorf likely will face a recommended minimum sentence of at least 24 years in prison at his sentencing hearing, which was not immediately scheduled. The guilty plea marks the latest step in the stunning downfall of a businessman and philanthropist who was well-known in financial circles and a major player in Cedar Falls. Wasendorf built over decades to pay back the 24,000 customers who are missing money. The receiver has already gotten rid of Wasendorf's corporate jet, and is trying to sell the company that published Wasendorf's books and magazines on investing and also sell Wasendorf's homes, his 4,000-bottle wine collection, the upscale restaurant he owned in Cedar Falls, and the $20 million company headquarters that stood as a symbol of Wasendorf's home-grown success with a firm he started in an Iowa basement 30 years ago.

Stakeholders Analysis

Primary stakeholders - shareholders

The shareholders had trusted by the false information or agent. The shareholders will be facing a significant loss. Wasendorf actually fraud the shareholders and caused the crisis of the investment of the company within 20 years. Wasendorf affected the company's reputation and caused the company had to compensate those who deceived by Wasendorf for all these years which is counted as 24,000 customers and this incident led the official defunct.

Primary stakeholders - employee

Due to the Wasendorf fraud, the company had official defunct because of uncover the loss on the 24,000 of customer. In this case, the employees will be losing the job.

Primary stockholders -creditors

Besides that, the creditors had trusted by the wrong information, the creditors will be affected and the creditors can only get back 30% to 40% of the funds which was invested for the company. Additional payments are expected but the bankruptcy trustee has warned they will fall short of making customers whole.

Secondary stakeholder - Investors

The investors had trusted the wrong financial information on this company. The investors will affected the investors because was cheated by Wasendoft. The investment which invested on the company was loss because of the company defunct. The investors can't get back the funds and it may be caused some of investors having the cash flow problem or bankrupt. It also caused the investors loss on confidence on investing on other company.

The ethical violations

By the view of utilitarianism principles, the consequence must benefit to greatest number of people. But the action of Wasendoft was more harm than good to most number of people. The 24000 of investors have been harm by lose their money. Shareholder also been harm by lose their money due to the share price of the company drop after the news of the company CEO Wasendoft fraud break up. It also may influence other people to follow his back step to check and other investors or company. It also will occur more and more problem after the company bankup and it employee losing their job. Such as, thief, investor of the company bankup, economics of the country been affected. But it only benefit Wasendoft by prop up his struggling firm's finances. At the conclusion, the harms are more the good so it breads the utilitarianism principles.

Based on universal principles, the duty must be justice, right, fairness, honesty and respect. But Wasendoft's duty was dishonesty to his investors by cheating their money to generate the company monthly reports for showing the company was holding more than 200 million in customer funds than it actually had. At the same time, his also use the money to personal and other business interests.

Continue for formula of humanity of Kant's ethical theory as an end in itself ensures that the motivation behind every action must be the good of humanity, but Wasendoft's duty was breaking this theory by itself motivation behind the action is bad of humanity. Wasendoft cheating his investors money to his personal use and other business interests.

According to the right principle the Peregrine Financial Group CEO Russ Wasendorf Sr was break two categories of right when he is the CEO of the company. He breaks the legal right because he gave fraudulent statements to his accounting department showing fictitious deposits and balances. The false numbers were used to generate monthly reports to regulators showing the company was holding more than $200 million in customer funds than it actually had. According to the law the action that he did was guilty. Other than that he also breaks the moral right, he use his position right and authority to embezzling the investors' money for a range of personal and other business interests. Under the right principle there are two types of right. There are positive right and negative right. Under the positive right the CEO Russ Wasendorf Sr must help the investors to gain more profit as more as possible but he did not do it. The CEO also breaks the negative right of the investors. The investors have the right to check the account of the bank without interfere by others but Russ Wasendorf Sr was changing the bank's address in the statements to a post office box he controlled and send back false documents purporting to be from the bank.

Furthermore, under justice principle the CEO Russ Wasendorf Sr was breaking the principle of equal liberty of the investors. This is because he changing the bank's address so that the investors have no the equal right to get the information.

The method to avoid such problem in the future

Set a fix appointment period for CEO and avoid to renewal.

From the case, we know that defender commit in fraud in a company for 20 years and it never found by anyone until he lapse at the last time he commit the fraud.

The reason he can hidden his fraud is he was familiar day-to-day operation of the company include the procedure of money transfer, time, date and also the preparation of financial report. With their identity as CEO, he also can access into the company high confidential secret profile and get the information the company had. In additional, we should keep in mind that the most loyal employees can take advantage over company.

So by provision the period that a CEO can be appointment and refuse to renewal the contract of CEO can create a better secured for company to prevent fraud made by high management levels' staff.

Hiring outside Certified Public Accountant firm to audit financial report.

Although each corporation has their own professional accountant to manage their financial account but hiring the professional CPA from outside to audit company account can help to prevent fraud and also bring advantages to the company. The following are the advantages of hiring outsider accountant.

Internal accountant will more caution when prepared their report because it will be audited by external accountant hiring from outside company which is more professional.

Fraud can be prevent because the financial report is monitor, filtered and keep track by the professional CPA firm.

They are trained and experienced and that makes them the perfect choice to trust all of company's accounts with. 

Because of professional, the CPA has skill and ability to identify the problem in an account and thus can help organization to detect fraud in the company.

As an outsider, they act as just and doesn't has conflict interest with the company.

Strictly requirement to recruit CEO

In this case, the CEO is responsibility to all the fraud made by it so the requirement for recruit a CEO should be highly strict and prudent. There are several important term and condition can be made to CEO.

Require a CEO to open their personal financial report to B.O.D of the company by annual to make sure their financial is health.

Make sure there is no conflict interest between CEO with the company. It is preferable if the CEO doesn't own any company with a clear background.

The accuracy schedule of the CEO journey should be recorded. Including where he goes, who he meets and what he does.

Provision the CEO to attend the ethic program per annual set by company to upgrade the moral ethic of CEO personality.

The ways prevent such problem in the future.

1. The criminal may be ordered to do community service, such as giving speeches about business crime. It will be more helpful which the speakers have the experience before. The criminal can share his experience to other people, at the same time, it also as a type of reminder to him himself for prevent do any business crime in future. People will more believe that other people real experience compare to only study form book. For instance, junk-bond king Michael Milliken was compelled to give speeches about corporate crime after he was convicted of insider trading. By the speech given by Michael Milliken, people will believe and prevent they self from do such miss take in future.

2. Next, judges may disqualify the individual from employment. Judges can prohibit criminal from engaging them in same or similar occupation. It can prevent which person that judges believe he will danger for the social from prohibit them occupation in same of similar job after they relieve from jail. This ways also can prevent his or his members follow or continue doing the same thing and it will become a type of reminder for the criminal and other people doing the same miss take occur in future again. Other people also will afraid doing business crime in future.

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