The former chief executive of Refco Inc., one of the world's biggest commodities brokerages, cried as he pleaded guilty Friday to conspiracy and fraud charges that carry a possible prison term of more than 300
Phillip R. Bennett, 59, the company's former chairman and chief executive officer, pleaded guilty before U.S. District Judge Naomi Reice Buchwald to 20 counts of conspiracy to commit securities fraud, wire fraud, bank fraud, money laundering and making false filings to the SEC.
Prosecutors charged that Bennett hid losses by his firm and its customers from its auditors and investors.
"I knew failing to disclose these filings was wrong," Bennett told the court as he cried. "I know I was wrong. I deeply regret it."
He added: "I take full responsibility for my actions and would like to apologize to my family and all those who were harmed by my conduct."
The Gladstone, N.J., resident left court, declined to comment as he left court.
"Mr. Bennett has candidly acknowledged his involvement in the matter," said his lawyer, Gary Naftalis. "He was forthcoming and candid and wants to put this matter behind him."Refco went public in August 2005. It filed for bankruptcy just weeks later after disclosing that a $430 million debt owed to the company by a firm controlled by Bennett had been concealed. The disclosure caused Refco's stock value to plummet.
Refco was one of the world's biggest commodities brokerages, employing some 2,400 employees in 14 countries. Prosecutors said Bennett, a British citizen, likely will spend the rest of his life in prison, given that he is 59 and federal guidelines call for a maximum 315-year sentence. His sentencing was set for May 20.
The government said Bennett and others had concealed losses in the financial markets and caused the company to make false filings with the Securities and Exchange Commission since the late 1990s.
Bennett must also turn over $2.4 billion in assets to the government, prosecutors said. Prosecutors also called for Bennett to be jailed immediately, saying that the $50 million bail he had already posted was insufficient, but Buchwald said she would not immediately jail him.
His whereabouts are being monitored electronically, and he has been limited to his homes in New Jersey and Manhattan.
Lawyer for Refco Charged in Fraud Case
Federal prosecutors charged the former outside counsel for the bankrupt commodities brokerage firm Refco on Tuesday with fraud tied to the eventual collapse of the commodities and futures brokerage.
Joseph P. Collins, 57, of the law firm Mayer Brown, faces 11 counts including securities fraud, wire fraud and filing false statements with federal regulators. Separately, the Securities and Exchange Commission filed a civil suit against Mr. Collins on Tuesday.
“Mr. Collins’s role in this fraud was vital,” Michael J. Garcia, the United States attorney for the Southern District of New York, said at a news conference.
It is rare for outside counsel to be charged for fraud supposedly committed by their clients; not even Enron’s outside lawyers faced criminal charges.
“Joe Collins is an innocent victim of the Refco fraud,” Mr. Collins’s lawyer, William Schwartz, said in a statement. “This indictment should send a chill down the spine of every transactional lawyer who believes he or she is representing an honest client.”
But Mr. Garcia said that the charges did not signal a new trend of prosecuting outside lawyers. “The vast majority of outside counsel is law-abiding,” he said.
The announcement is the latest twist in the two-year-old fraud case, which arose in the wake of Refco’s demise. Once one of the world’s largest commodities brokerage firms, Refco went public in 2005, only to begin crumbling two months later after it disclosed that Philip R. Bennett, then its chief executive, had hidden $430 million in loans owed to the company.
Prosecutors say that Mr. Collins, who oversaw Mayer Brown’s work for Refco from the mid-1990s to 2005, supervised the structuring of transactions in which Refco temporarily shuffled debt to related companies and third parties. Those loans were reversed shortly after Refco’s quarterly periods ended.
Mr. Collins also drafted documents that misrepresented that debt to Thomas H. Lee Partners, the private equity firm that bought a stake in the company in 2004, and to the S.E.C. before Refco went public, according to the complaint.
Mr. Bennett, who has pleaded not guilty to fraud charges, is scheduled to go on trial next year. Others facing criminal charges include Robert C. Trosten, Refco’s former chief financial officer, and Tone N. Grant, the firm’s former president.
Mayer Brown, based in Chicago and formerly known as Mayer, Brown, Rowe & Maw, said in a statement that Mr. Collins was on leave and that the firm was cooperating with federal authorities. It is facing lawsuits by trusts representing Refco’s creditors.
“Our review of the evidence available to us shows that the firm acted in a professional, competent and ethical manner in its work on behalf of Refco,” Mayer Brown said in its statement.
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