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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: StockDung who wrote (93372)	11/16/2005 8:28:47 PM
From: scion	Respond to of 122087

Bawag Sues Refco and Ex-CEO, Citing Fraud in Getting Loan By PETER A. MCKAY Staff Reporter of THE WALL STREET JOURNAL November 17, 2005 NEW YORK -- Bawag P.S.K. Group sued commodity brokerage firm Refco Inc. and its ousted chief, Phillip R. Bennett, seeking more than $420 million, saying they fraudulently obtained a loan from the Austrian bank just hours before Refco's rapid implosion began. The lawsuit, filed in U.S. Bankruptcy Court for the Southern District of New York, offers a different take on a key episode in the Refco scandal, which began last month when the brokerage firm revealed that Mr. Bennett had moved about $430 million in bad debts from Refco to an entity he controlled. He immediately repaid the money, in large part using the loan from Bawag. (Refco has filed for protection from creditors and is under authority of a U.S. bankruptcy judge.) Refco representatives have portrayed Mr. Bennett, who has been indicted on federal securities-fraud charges, as a rogue operating through a closely held entity whose workings Refco had no knowledge of or authority to examine. In its suit, Bawag -- which has its own complicated ties to the brokerage firm -- says Refco treated the Bennett-controlled entity, Refco Group Holdings Inc., as one of its own units. The suit says: "Both entities shared the same mailing address at the World Financial Center in New York. In addition, Refco paid Refco Group Holdings' legal expenses, and Refco executives and lawyers worked on behalf of Refco Group Holdings in connection with its transactions with third parties." A spokesman for Refco declined to comment. Mr. Bennett's lawyer couldn't be reached for comment. Bawag, a former minority Refco owner, faces scrutiny from Austrian regulators over whether the bank followed proper procedures in making the loan. The debts Mr. Bennett shuffled, including unrecoverable customer-trading losses at Refco, date back perhaps to the late 1990s, according to the filings. They were noticed by accountants this fall. According to Bawag's suit, as Mr. Bennett was trying to obtain a loan in early October to repay the debts, neither he nor Refco disclosed what was then a continuing in-house probe of the matter. The bank says if it had known of the probe, it wouldn't have made the loan, for which Mr. Bennett used as collateral his own Refco stock -- then valued at about $1.2 billion. The suit says Mr. Bennett and Refco arranged to have the loan money sent straight to a Refco account. The brokerage firm's representatives in New York called Bawag several times early on Oct. 10 to make sure the money was wired over. Hours later, the company publicly announced Mr. Bennett's dealings. That set off a chain reaction, including a customer exodus from Refco's trading arms, Mr. Bennett's arrest and the firm's bankruptcy filing for its unregulated units. Refco's stock has since plunged 97%. Write to Peter A. McKay at peter.mckay@wsj.com online.wsj.com

To: StockDung who wrote (93372)	11/16/2005 8:35:13 PM
From: scion	Read Replies (1) \| Respond to of 122087

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 online.wsj.com