With each new story about PFGBEST and Russell Wasendorf, Sr., new red flags are springing up. In yesterday’s story from Bloomberg we found out a bunch of PFG employees were taken on a trip to Italy where they stayed at luxury hotels.

Then there is the jet, and the $18 million corporate compound built after the financial crisis caused interest rates to plummet along with trading volumes.

There is the social climbing, along with the expensive celebrity sponsorships at FIA and CME Group events. There is the expensive glossy “vanity” magazine which cost $100,000 a month just to print, Russ Jr. once told me.

The sole practitioner accountant working from a home office is a nice touch and a genuine red flag.

The cake topper is the P.O. box for the bank statements, which is so confounding as to be mind boggling.

Yep, more red flags are blowing with each new story about Wasendorf Sr.

As I mentioned in another commentary, Wasendorf, Sr. was notorious for suing brokers who tried to take their customer business with them to their new firms. If you think about this, it falls into place. He did not want to lose customer seg funds – not because of the lost commission potential, but for other now obvious reasons.

The really scary thing about this part though is that this legal history goes back 10 years or more, as I recount various conversations with brokers over the years. I want to know how far this fraud went back. I expect the truth to come out.

Spending a lot of money on litigation should be a red flag. There should be a reason for it, one that makes economic sense.  

Spending a lot of money on marketing, as PFG did through SFO, event celebrity sponsorships and endless CNBC commercials, should be a red flag. If I had asked any of my brokerage employers over the years to spend this kind of money, I would have been taken away in a white jacket. It is just too far off the charts not to be a red flag.

There are all kinds of red flags, some we know well, some that are new. I am just tired of this industry missing those red flags and learning those lessons the hard way.

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