By: Moderatore on Martedì 11 Ottobre 2005 11:50
Stock:
Refco
FRESH SCANDAL AT REFCO
(By TSC Staff 10/10/2005 11:09 AM EDT)
Shares of Refco, the big New York derivatives broker that has been dogged by controversy since going public two months ago, blew up in the face of their loyalists Monday.
Phillip Bennett, the company's CEO and chairman, took a leave of absence after Refco realized it was carrying a $430 million receivable from him without labeling it as a related-party transaction. A Bennett-controlled company owed Refco the money after assuming some iffy debt from the brokerage, Refco said.
Bennett repaid the $430 million plus interest on Monday. Nevertheless, Refco hired independent counsel and "forensic auditors" to investigate the matter, and requested Bennett go on leave. The company named chief operating officer William Sexton -- who was in the process of resigning -- to the position of chief executive.
Refco said its financial statements going back five years should no longer be relied upon. It also expects to delay filing a 10-Q due with the Securities and Exchange Commission next week.
In early trading, Refco shares were down $8.77, or 31%, to $19.79. It's the first time they've traded below their $22 offering price of Aug. 10. Refco's shares touched a high of $30.55 on Sept. 7.
Also at the request of the board, Santo C. Maggio, the president and chief executive of Refco Securities and Refco Capital Markets, has taken a leave of absence. Peter McCarthy has been appointed President of Refco Securities, the company said.
Before its August IPO, Refco warned that Maggio could face a stiff penalty from regulators related to a stock manipulation scheme. Refco had previously said Maggio was likely to accept a settlement that would prohibit him from serving in a supervisory role for one year.
