Refco
In late 2005, securities fraud class action law suits were launched against Refco, Inc., a New York-based firm.
Refco supplied execution and clearing services for exchange traded derivatives and brokerage services in the fixed income and foreign exchange markets in the United States, Bermuda, and the United Kingdom.
The company toppled when it was known that CEO Phillip Bennett hid US$430 million in bad debts. He was sued for eight counts of felony that included making false reports with the SEC and the intent to commit fraud.
The complaint charged Refco with violating federal securities laws. The defendants in the case are: Phillip Bennett; Refco’s former board of directors; former auditor Grant Thornton LLP; majority owner Thomas H. Lee Partners L.P., a private equity firm; several investment banks, like Bank of America, Credit Suisse and Goldman Sachs, which sold Refco securities to public investors.
The plaintiffs are: Refco bond buyer Pacific Investment Management Company LLC, and RH Capital Associates LLC, an equity purchaser. Others include, Stuart Grant, James Sabella and Megan McIntyre of Grant & Eisenhofer and Max Berger and Sean Coffey of Bernstein Litowitz.
Austrian bank BAWAG was also under investigation for being involved in the Refco debacle. The bank loaned US$420 million to Bennett right before the bad debt scandal news broke out. In response to being sued by investors, BAWAG chose to pay US$108 million to Refco stock and bond buyers, plus an extra US$32 million, which depends on a possible sale of the bank in future.
Related posts:
Sphere: Related Content
Leave a Reply