Of all the July 4ths that Bennett hates, he’ll hate July 4, 2008, the most. While the nation rejoiced on this day, he had already been sentenced to 16 years in Federal prison the day before... all thanks to his Dark Knight acts at Refco
He was finally caught by Refco’s newly hired controller, Peter James on October 10, 2005. As James told Bloomberg, the only reason why he perhaps caught him was because he “was a fresh pair of eyes”. What James discovered was hideous – between 2002 and 2005, Bennett made quarterly arrangements 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. This way, Refco prevented write-offs of bad debts. Worst, Bennett was paying for them with money borrowed by Refco itself!
Bennett stepped down after being confronted by an internal audit for the $430 million debt to the firm and on October 12, 2005, was charged with one criminal count of securities fraud for allegedly manipulating Refco’s financial statements. After years of appeals and re-appeals, July 3, 2008, saw Judge Naomi Reice Buchwald sentence Bennett to 16 years in federal prison and ordered him to report to prison on September 4, 2008. Post 2002, there have been many cases of fraudulent corporate acts, and there have been many indicted. The July 3 event raises a question again – is investor trust worth so little? The answer we believe is ‘no’; but then Bennett believes otherwise. Or maybe he’d rethink in peace, in prison; 16 years are enough we hope!
He was finally caught by Refco’s newly hired controller, Peter James on October 10, 2005. As James told Bloomberg, the only reason why he perhaps caught him was because he “was a fresh pair of eyes”. What James discovered was hideous – between 2002 and 2005, Bennett made quarterly arrangements 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. This way, Refco prevented write-offs of bad debts. Worst, Bennett was paying for them with money borrowed by Refco itself!
Bennett stepped down after being confronted by an internal audit for the $430 million debt to the firm and on October 12, 2005, was charged with one criminal count of securities fraud for allegedly manipulating Refco’s financial statements. After years of appeals and re-appeals, July 3, 2008, saw Judge Naomi Reice Buchwald sentence Bennett to 16 years in federal prison and ordered him to report to prison on September 4, 2008. Post 2002, there have been many cases of fraudulent corporate acts, and there have been many indicted. The July 3 event raises a question again – is investor trust worth so little? The answer we believe is ‘no’; but then Bennett believes otherwise. Or maybe he’d rethink in peace, in prison; 16 years are enough we hope!
Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).
and Arindam Chaudhuri (Renowned Management Guru and Economist).
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