[JURIST] The US Securities and Exchange Commission (SEC) [official website] on Tuesday filed a complaint [PDF text; SEC litigation release] accusing former Refco Inc. CEO Phillip R. Bennett of committing civil fraud in connection with allegations that he reported false information about the futures trader's financial health. The civil fraud charges follow Bennett's guilty plea [Bloomberg report; DOJ press release] last week to every charge in his 20-count indictment, including bank fraud, conspiracy, securities fraud, making false filings with the SEC, money laundering and more. The criminal charges, for which Bennett faces life in prison, also stem from an accounting fraud that stretched over eight years and cost investors approximately $2.4 billion by artificially enhancing the company's financial situation through false reports of foreign transactions and fictitious interest income. The complaint also alleges that Bennett orchestrated a debt-shifting scheme between Refco and Refco Group Holdings Inc., a separate entity controlled by Bennett, that totaled hundreds of millions of dollars. The SEC is seeking an injunction prohibiting Bennett from serving as a director or officer of a public company, requesting disgorgement of all profits and pre-judgment interest acquired by Bennett, and demanding monetary penalties.
In June 2006, Austrian bank Bawag PSK Bank settled lawsuits [SEC litigation release] with the US Department of Justice, the SEC, and private investors for over $675 million, which allowed the bank to avoid criminal prosecution [DOJ press release]. Allegedly, Bawag assisted Bennett in the scheme to misrepresent Refco's financial health. The DOJ plans to move forward with the prosecution of former Refco executives Robert C. Trosten and Tone N. Grant, who maintain their innocence. Former Refco vice-president Santo C. Maggio pleaded guilty to criminal charges [DOJ press release] and settled civil charges filed by the SEC [SEC litigation release] in December 2007, and agreed to testify in any upcoming criminal trials as well as to forfeit $23 million in compensation. AP has more.