"The government has now confirmed, for instance, that it may seek to hold Mr. Bennett accountable for allegedly fraudulent transactions stretching back almost a decade before Refco issued public securities - not a single one ofwhich is identified in the current indictment," the lawyers said in court papers.
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Ex-Refco CEO: Prosecutors Probing Decade-Old Transactions
WASHINGTON (Dow Jones)--Former Refco Inc.(RFXCQ) chief executive Phillip Bennett complained that federal prosecutors are trying to hold him accountable for allegedly fraudulent transactions that occurred nearly a decade before the company's initial public offering last August.
In papers filed with the U.S. District Court in Manhattan, Bennett's lawyers have sought to get prosecutors to spell out exactly which transactions are being investigated. Prosecutors have said they intend to specify those details in a revised indictment, but they haven't said when the new indictment will be filed.
That's unfair to their client, Bennett's lawyers said Tuesday.
"The government has now confirmed, for instance, that it may seek to hold Mr. Bennett accountable for allegedly fraudulent transactions stretching back almost a decade before Refco issued public securities - not a single one ofwhich is identified in the current indictment," the lawyers said in court papers.
David Esseks, an assistant U.S. attorney in Manhattan who is prosecuting Bennett's case, couldn't be reached for comment Wednesday. Bennett's attorney, Gary Naftalis, also couldn't be reached.
In the wake of Refco's collapse into bankruptcy last October, federal prosecutors charged Bennett with securities fraud and wire fraud over what they called a conspiracy to hide bad debt. The collapse occurred just months after Refco completed a $583 million IPO of its stock. Refco's stock is now almost worthless.
In their indictment, prosecutors said Bennett's conspiracy lasted from "the mid-1990s" until Bennett was arrested and charged in October. But this month they said the conspiracy involved more categories of wire-fraud victims than are spelled out in the indictment.
They said they're investigating transactions that victimized, among others, "purchasers of Refco's privately issued bonds prior to 2004, banks that provided financing to Refco in reliance of false information and other credit counterparties that did business with Refco in reliance on the soundness of its financial position."
"A future superseding indictment will flesh out these categories of investors and others defrauded by Bennett's scheme to hide the massive and growing related-party indebtedness from various classes of investors and others," prosecutors said in court papers filed April 14.
On Tuesday, Bennett's lawyers said prosecutors shouldn't be allowed to withhold that information from them pending the revised indictment. They said prosecutors have investigated Bennett's activities for seven months and recently told a judge they were ready to go to trial "as early as July 2006."
Under the circumstances, the lawyers said, prosecutors should let Bennett know exactly what he will have to defend himself against.
"Given that the government has charged a decade-long conspiracy - which, we are now told, potentially includes many more securities transactions and victims than those described in the indictment - it cannot claim that Mr. Bennett can easily ascertain whom he is alleged to have conspired with," the lawyers said.
Bennett's lawyers also complained they haven't received enough information about Bennett assets that prosecutors may target for forfeiture. Prosecutors have said they're targeting at least $700 million in bank and investment accounts controlled by the former CEO. So far, they said, prosecutors have frozen assets in an amount "far short" of $700 million.
"If the government continues to believe that Mr. Bennett received $700 million in illicit proceeds, then the bill of particulars it has provided is incomplete, and we ask that the government be required to supplement it by identifying additional accounts or other assets it believes are subject to forfeiture," the lawyers said.
Source: Joseph Rebello, Dow Jones Newswires; 202-862-9279; joseph.rebello@dowjones.com
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