Former Refco Senior Executives Plead Guilty to $2.4 Billion Fraud-Related Criminal Charges

Former Refco CEO and company co-owner Phillip Bennett has pled guilty to 20 criminal charges related to the $2.4 billion fraud-related downfall of his company. Former CFO Robert Trosten has also pled guilty to five counts stemming from similar criminal activities.

Under Bennett’s supervision, Refco lost millions of dollars while trading in securities and derivatives in the 1990’s. Bennett tried to hide the losses by making them appear as if they were debts owed to Refco by Refco Group Holdings Inc., which is a company that Bennett controlled. Trosten helped direct these fraudulent transfers to the holding company.

The scam came to light after the company was purchased in 2004 and went public. Thomas H. Lee Partners LP had bought a majority interest in Refco. In 2005, Refco announced the discovery that an entity owned by Bennett owed Refco $430 million.

The Securities and Exchange Commission has also filed a civil enforcement act against Refco Group Ltd. and Bennett. The SEC is holding Bennett responsible for coordinating the scheme.

The SEC says that Bennett and several others directed a number of short-term transactions over a six-year period. They would conceal the receivable by paying it down temporarily and replacing it with another receivable.

Debts owed to Refco from the holding company would be converted into a debt owed by a customer to Refco. Transactions were later “unwound” and debts given back to the holding company.

U.S. Attorney Michael Garcia says the debt owned to Refco by the holding company includes hundreds of millions of dollars incurred by customer trading losses.

Shepherd Smith Edwards & Kantas LTD LLP is dedicated to helping the victims of investor fraud recover their financial losses. Contact our investor fraud law firm today to schedule your free consultation.

Related Web Resources:

Ex-Refco Chief Bennett’s Guilty Plea May Help Former Deputies, Bloomberg.com, February 16, 2008
Watching a $4 Billion Company Fall Apart in a week, Slate.com, October 17, 2005