Former Refco Inc. chief executive Phillip R. Bennett was indicted Thursday on charges that he engaged in a conspiracy that caused the commodities giant to sell $583 million in stock to the public based on “false and fraudulent” statements of its finances, reported the Associated Press.
The indictment came the same day that Refco officials announced they would sell substantially all of the assets of the company’s regulated commodities futures business to Man Financial Inc. for $282 million in cash and roughly $41 million of assumed liabilities and other considerations.
The indictment alleges that since the late 1990s, Bennett and others hid losses in the financial markets, which led Refco to file false and fraudulent financial documents with the Securities and Exchange Commission, noted the wire service.
Refco was also accused of extending credit to customers so the clients could trade securities and commodities in accounts held at the company. When customers were unable to make payments on huge losses, Refco allegedly liquidated the positions and assumed the resulting losses. However, these losses were not written off. Rather, Bennett is accused of transferring the losses to a privately held Delaware corporation he controlled so that it looked like the corporation owed Refco the money, said the AP, citing the indictment.
The indictment also accuses Bennett of directing others to hide the money owed to Refco from Refco’s auditors through a series of transactions, said the AP.
Defense attorney Gary P. Naftalis noted that “Mr. Bennett welcomes the opportunity to face these charges in a court of law and to clear his good name,” reported the AP.
U.S. District Magistrate Judge Frank Maas allowed Bennett to remain free on a $50 million bond, noting that Bennett was entitled to be free under the least-restrictive conditions that will ensure his presence in court since he is not considered a danger to the community.