Phillip R. Bennett

Phillip Bennett (*1948) is the embattled former CEO of Refco, Inc.. He is a British citizen who was educated at Cambridge University.

In the 1970s, he worked for Chase Manhattan Bank. He joined Refco in 1981 and became the firm's Chief Financial Officer in 1983. In 1998, Chief Executive Officer Thomas Dittmer retired and Bennett took the job.

Refco Scandal

On October 10th of 2005, it was revealed that Bennett had hidden away roughly $430 million of bad debt from the company's auditors and investors. On October 12th, Phillip Bennett was charged and arrested for Securities Fraud. Shares in Refco then proceeded to drop from $28 per share to $.08 per share, before being halted and then delisted from the NYSE.The shares are not now traded at all, not even on the pink sheets.

Bennett had been buying bad debts from Refco in order to prevent the company from needing to write them off, and was paying for the bad loans with money borrowed by Refco itself. Between 2002 and 2005 [http://en.wikipedia.org/wiki/Refco] , he arranged at the end of every quarter for a Refco subsidiary to lend money to a hedge fund called Liberty Corner Capital Strategy, which then lent the money to Refco Group Holdings, Inc (a company controlled and owned by Phillip Bennett).

Bennett's company then paid the money back to Refco, leaving Liberty as the apparent borrower when financial statements were prepared. Upon maturity of the loans -- which was timed to occur after the end of Refco's reporting period -- the loans were "unwound" (supposedly without the knowledge Refco's auditors). This meant that Refco Group Holdings. Inc. was put back in the position of owning the same amount of debt to Refco that it owed before it borrowed the money from Liberty Corner. Thus on paper, these debts remained hidden from one quarter to another.

In April 2006, papers filed by creditors of Refco indicated that Bennett had run a similar scam going back at least to 2000, using Bawag P.S.K. Group in the place of Liberty Corner Capital Strategy.

On February 15, 2008, facing a 20-count indictment, Bennett pleaded guilty to all 20 charges of securities fraud and other criminal charges before U.S. District Judge Naomi Reice Buchwald. Bennett, a U.K. citizen, who has lived in the New Jersey towns of Summit and Gladstone, said tearfully, "I knew failing to disclose these filings was wrong. I know I was wrong. I deeply regret it.” Facing a sentence of 315 years in prison with sentencing on the 19th. of June, 2008, Bennett added in February, 2008, "Your Honor, I take full responsibility for my actions,I wish to publicly apologize to my family and to all those I've harmed." Buchwald responded by saying that the prison term likely faced by Mr. Bennett was not unusual for an older defendant in the post-Enron era and that his residence in prison would undoubtedly be his last. In addition to demanding that Phil be jailed immediately, prosecutors applied for the embattled CEO and former little-league soccer coach to turn over $2.4 billion dollars in assets to the government. [http://en.wikipedia.org/wiki/Refco]

On July 3, 2008, Judge Naomi Reice Buchwald sentenced Bennett to 16 years in federal prison and ordered him to report to prison on September 4, 2008. After serving his sentence, Bennett is likely to be deported to the United Kingdom as is customary under United States law in the case of resident aliens convicted of a felony.

Sources

* "Bennett's Refco Scheme Exposed by Late-Night Hunch: 'It Hit Me'", Bloomberg News, October 27, 2005

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