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Iowa seeks back taxes from jailed Peregrine Financial founder

Russell Wasendorf Sr. and his ex-wife received a notice from Iowa in November saying they owed $14.1-million in back taxes and penalties, according to documents filed in federal court in Chicago.

Waterloo Courier/Reuters

Peregrine Financial Group's former chief executive officer, who has pleaded guilty to embezzling more than $100-million (U.S.) from customers of his futures brokerage, is accused of cheating Iowa out of millions in unpaid income taxes, according to court documents.

Russell Wasendorf Sr., who founded the now-defunct firm, and his ex-wife, Connie, received a notice from the state in November saying they owed $14.1-million in back taxes and penalties, according to documents filed in federal court in Chicago by the receiver charged with liquidating Mr. Wasendorf Sr.'s assets.

The couple allegedly underreported their income from 2001 to 2009, when they lived in Cedar Falls, Iowa.

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The unpaid tax bill came to light after the receiver filed a motion on Thursday asking the federal court to suspend a deadline for Mr. Wasendorf Sr. to respond to the state's notice. A 60-day window for appealing the notice is set to close on Monday.

Mr. Wasendorf Sr., 64, pleaded guilty in September to embezzling from customers, lying to regulators to cover his tracks, and to mail fraud. He is in jail awaiting sentencing.

Iowa tax officials have said the Wasendorfs "should have reported about $8.3-million per year more in income" from 2001 to 2009, Randall Lending, an attorney for the receiver, said in an interview. He did not know why the state tax notice did not appear to reflect all of the allegedly unpaid taxes.

A spokeswoman for the Iowa Department of Revenue had no immediate comment. The department did not object to an extension of the deadline to appeal the notice, according to court documents.

The public defender representing Mr. Wasendorf Sr. in his embezzlement case declined to comment.

Connie Wasendorf, whose divorce was finalized in 2010, could not be reached for comment.

Mr. Wasendorf Sr.'s life unravelled in July when he attempted to kill himself and confessed his crimes in a suicide note.

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Peregrine Financial, known as PFGBest, quickly collapsed and thousands of former customers are still missing money.

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