Refco CEO Pleads Guilty To Massive Fraud

     MANHATTAN – Phillip Bennett, former CEO and half owner of Refco, pleaded guilty on Friday to all 20 federal counts involving Refco’s $2.4 billion financial fraud.



     He faces more than a century in jail and millions of dollars in fines at his May 20 sentencing for conspiracy, securities fraud, wire fraud, bank fraud, money laundering and making false statements to auditors and to the SEC.
     In running Refco, which dealt in securities, derivatives and commodities, Bennett hid hundreds of millions of dollars in losses by reporting them as debt owed to Refco by Refco Group Holdings, the holding company that controlled Refco that was itself controlled by Bennett.
     Bennett ran his fraud from 1999 through 2005, deceiving his own auditors. At the end of each financial year, Bennett juggled the books to make it appear these huge losses were actually owed to Refco by a customer; then when the new year started, the books were juggled again, the U.S. Attorney’s Office said.
     After Bennett executed more than $100 million in these frauds, the house of cards toppled when Thomas H. Lee Partners bought a majority interest in Refco for $.9 billion in August 2004. In connection with that leveraged buyout, Refco sold $600 million in securities to the public, borrowed $800 from banks, and in August 2005 it conducted an IPO for $583 million in common stock.
     But in October 2006, Refco announced that “it had discovered that it was owed a debt of approximately $430 million by an entity controlled by Bennett,” the U.S. Attorney’s Office said. Refco stock crashed and many of its subsidiaries filed for bankruptcy that month.
     Bennett pleaded guilty to conspiracy, securities fraud, wire fraud, bank fraud, money laundering, and making false statements to auditors and to the SEC.
     Bennett, 59, of Gladstone, N.J., is free on bail pending his May 20 sentencing.

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