New charges of bank fraud and money laundering in connection with alleged fraud at Refco have been lodged against former financial officers of the company, according to the North County Gazette in New York.
An indictment has been returned against Tone N. Grant, former owner of Refco; Phillip R. Bennett, former CEO and Robert C. Trosten, former chief financial officer.
Starting in the mid-1990s Refco, which was than partly controlled by Bennett and Grant, lost hundreds of millions of dollars through its own trading and its customers’ trading, according to the indictment. Bennett and Grant transferred the losses so they would appear as debt owed to Refco by Refco Group Holdings, Inc. The holding company was controlled by the two.
Thomas H. Lee Partners, L.P., bought a majority stake in Refco in 2004. The purchase was for approximately $1.9 billion, and through a leveraged buyout transaction.
The indictment charges that Grant helped Bennett and Trosten defraud participants in the 2004 leveraged buyout by misleading the Lee fund and the purchasers about the true financial health of Refco. Also $600 million in notes and $800 million in bank debt was involved. Grant allegedly received $16 million in processed from the buyout transaction, along with the right to share half of Bennett’s profits from any future sale of Bennett’s Refco stock holdings.