Sunday, February 17, 2008

Former Refco CEO Pleads Guilty

Phillip Bennett, former CEO of collapsed futures and commodities trading firm Refco, entered a guilty plea to conspiracy, securities fraud, false statements to the SEC, wire fraud, false statements to Refco’s auditors, bank fraud, and money laundering charges.  Refco's demise in 2005 came only two months after the firm went public, probably the quickest collapse of a public company ever.  The markets reacted almost immediately after disclosure that its financial statements failed to disclose large liabilities that Bennett moved off its books periodically to avoid detection by the auditors.  Add Bennett's name to the list of corporate chieftains convicted of significant fraud. 

According to a press release issued by the U.S. Attorney's Office for the Southern District of New York (here), the total loss from Refco's collapse was over $2.4 billion, and the crimes for which Bennett pleaded guilty triggered losses of over $400 million.  Under the Sentencing Guidelines, Bennett is looking at what would amount to a life term in prison if the government does not move for a lower sentence due to cooperation and the district court adheres to the Guidelines range.  Given the size of the loss, the Guidelines call for an increase of thirty over the base offense level of seven, and add in the four-level enhancement for being the CEO of a publicly-traded company, and Bennett's offense level is at least 41.  That triggers a sentencing range of 324 to 405 months, which is well over twenty-five years in prison.  Bennett is 59 years old, and with sentencing set for May 20, 2008, he could easily receive a sentence that will put him in jail into his eighties, which means possibly for life. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2008/02/former-refco-ce.html

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