Wednesday, October 12, 2005
Refco CEO And Hedge Fund Hid Losses
More detail is emerging about the derivative and commodity trading firm Refco. "Refco Inc. shares fell sharply Wednesday, after The Wall Street Journal reported that an investment firm controlled by Chief Executive Phillip Bennett paid a New Jersey hedge fund to help him hide a debt to Refco of hundreds of millions of dollars."
"Liberty Corner Capital was paid for telling Refco's auditors that it owed the debts even though Bennett's companies owed the money, a source familiar with the company told MarketWatch. "
"Shares of Refco dropped $3.15, or 23 percent, to $10.70 in late-morning trading on the New York Stock Exchange. Volume was heavy, and Wednesday's weakest level of $9.82, at that time, was a 52-week low surpassing the prior low of $12.79 set Tuesday. There was a 52-week high of $30.55 on Sept. 7."
"The investigation of derivatives brokerage Refco has turned criminal, a person familiar with the matter said. The U.S. attorney for the southern district of New York has scheduled a press conference in a 'major securities fraud scheme,' a spokeswoman for the office said. Sources say Phillip Bennett, Refco's CEO who was ousted on Monday amid an apparent scheme to hide bad debts at the company, has retained criminal counsel."
"A person familiar with the situation at Refco says the obligations transferred by Bennett most likely were unpaid margin loans made by Refco to its customers, including hedge funds."
"Refco's shares are down about 63 percent since closing at $28.56 Friday. The company went public in early August at $22 a share."
"Liberty Corner Capital was paid for telling Refco's auditors that it owed the debts even though Bennett's companies owed the money, a source familiar with the company told MarketWatch. "
"Shares of Refco dropped $3.15, or 23 percent, to $10.70 in late-morning trading on the New York Stock Exchange. Volume was heavy, and Wednesday's weakest level of $9.82, at that time, was a 52-week low surpassing the prior low of $12.79 set Tuesday. There was a 52-week high of $30.55 on Sept. 7."
"The investigation of derivatives brokerage Refco has turned criminal, a person familiar with the matter said. The U.S. attorney for the southern district of New York has scheduled a press conference in a 'major securities fraud scheme,' a spokeswoman for the office said. Sources say Phillip Bennett, Refco's CEO who was ousted on Monday amid an apparent scheme to hide bad debts at the company, has retained criminal counsel."
"A person familiar with the situation at Refco says the obligations transferred by Bennett most likely were unpaid margin loans made by Refco to its customers, including hedge funds."
"Refco's shares are down about 63 percent since closing at $28.56 Friday. The company went public in early August at $22 a share."
# posted by Ben Jones @ 9:25 AM 
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This story gets bigger everyday and the major press isn't making a headline out of it. Liberty Corner reportedly manages $15 billion in assets and Refco has more than $1 billion in bonds outstanding. This might end up being the hedge fund scandal that tips the canoe!
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