Refco Chief Sexton Resigns His Position
Dangremond to Take Reins As the Firm's Interim CEO;
Auditor Defends Its Actions
By PETER A. MCKAY and JOSEPH REBELLO
Staff Reporters of THE WALL STREET JOURNAL
November 16, 2005; Page C3
Refco Inc. Chief Executive William Sexton abruptly resigned, quickly reversing his career plans for a second time at the brokerage.
Mr. Sexton originally announced plans in late September to leave as an executive vice president. But on Oct. 10, he agreed to stay on as the top executive after Refco announced that then-CEO Phillip Bennett had improperly taken on $430 million in bad debts owed to the company. Mr. Sexton couldn't be reached to comment.
It was unclear yesterday why Mr. Sexton changed his mind again, although in the past few weeks Refco has remained in tumult, as more customers fled and the brokerage put its unregulated operations into bankruptcy and auctioned off its main trading business.
Refco said Robert Dangremond, a managing director at the turnaround-management firm Alix Partners LLC who was overseeing Refco's restructuring, will take over as interim CEO.
Separately, Refco Inc.'s auditor, Grant Thornton LLP, told the judge overseeing the bankruptcy that it played a crucial role in uncovering the fraud that led to the brokerage's collapse.
Refco creditors have alleged that Grant Thornton failed to discover Mr. Bennett's actions despite obvious red flags. But the auditing firm, which has done Refco's books since 2003, said it raised questions with Refco's top executives in September about a transaction between an investment firm controlled by Mr. Bennett and a New Jersey hedge fund that the former Refco executive allegedly used to hide the bad debt.
The questions mostly went unanswered, Grant Thornton said in papers filed with the U.S. Bankruptcy Court in Manhattan. The auditor, a defendant in five Refco-related lawsuits, is cooperating with investigators but asked Judge Robert Drain to block creditors' requests for Refco-related documents, saying those requests were intended mainly to "'bolster litigation claims" against Grant Thornton.
Write to Peter A. McKay at peter.mckay@wsj.com and Joseph Rebello at joseph.rebello@dowjones.com
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