Friday, November 11, 2005
The former CEO of Refco, Inc., Phillip R. Bennett, was indicted today. (See Wall Street Jrl here; NYTimes here) The indictment charges him with Count I - Conspiracy to Commit Securities Fraud, Wire Fraud, and to Make False Filings With the SEC; Count II - Securities Fraud; Count III - False Filing With the SEC-Exchange Act; Counts IV & V - False Filing With the SEC - Securities Act; and Counts VI, VIII, VIII - Wire Fraud. The indictment also contains a forfeiture allegation.
The essence of the alleged conspiracy charge is that:
"Bennett, ...together with others. . . sought to hide from, among others, Refco's auditors and investors, losses sustained by Refco through its own and its customers' trading in the financial markets. To that end, Bennett transferred losses from Refco to a company controlled by Bennett, directed a repeated series of transactions designed to conceal those losses at year - and quarter-end from Refco's auditors and others, and caused Refco to make false and fraudulent public filings with the United States Securities and Exchange Commission ("SEC").This fraudulent scheme culminated in the August 2005 initial public offering of stock ("IPO") in Refco, Inc., in which the public purchased approximately $583 million of Refco common stock based on a false and fraudulent registration statement."