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Refco Ex-CEO Gets 16-Year Sentence
wsj ^ | July 5, 2008 | CHAD BRAY

Posted on 07/08/2008 4:52:04 AM PDT by prairiebreeze

NEW YORK -- Phillip R. Bennett, Refco Inc.'s former chief executive officer, was sentenced to 16 years in prison Thursday for his role in a scheme to hide the commodities broker's financial troubles.

At a hearing, U.S. District Judge Naomi Reice Buchwald in Manhattan said white-collar defendants such as Mr. Bennett often "just don't think they'll get caught."

"You and others like you play a truly high-stakes poker game," the judge said.

The judge didn't impose a fine and said restitution will be discussed at a later date. Mr. Bennett has agreed to forfeit essentially all of his assets. The government sought forfeiture of up to $2.4 billion.

Mr. Bennett had pleaded guilty to a 20-count indictment in February just before a trial was to begin. A U.K. citizen, Mr. Bennett will be deported upon completing his prison term.

"Despite the best of intentions, I made an unacceptable and appalling error," Mr. Bennett said.

Prosecutors had alleged that Mr. Bennett and others at Refco schemed to hide the commodity broker's dismal financial picture from its banks, auditors and investors from the mid-1990s to about October 2005.

Mr. Bennett, 59 years old, is expected to report to prison on Sept. 4. Three other former Refco executives have either pleaded guilty or been convicted of criminal charges in the matter. A longtime lawyer for Refco also is facing criminal charges.

Refco sought bankruptcy protection in 2005, shortly after the company announced it had discovered $430 million in debt owed to a private entity controlled by Mr. Bennett, who was arrested on fraud charges.

Austrian bank Bawag PSK reached a deal in June 2006 to settle Justice Department and Securities and Exchange Commission charges that the bank helped Mr. Bennett and others conceal Refco's true financial picture.

(Excerpt) Read more at online.wsj.com ...


TOPICS: Business/Economy; Crime/Corruption; Front Page News; News/Current Events
KEYWORDS: bennett; commodity; corruption; fraud; phillipbennett; refco
"Despite the best of intentions, I made an unacceptable and appalling error," Mr. Bennett said.

Although many at Refco were seriously trying and succeeding in turning around the firm's negative image, I don't believe for one second you were one of them, Mr. Bennett.

Your intentions were mostly fueled by greed and did harm to some innocent hard working people. You got precisely what you deserved.

1 posted on 07/08/2008 4:52:04 AM PDT by prairiebreeze
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To: prairiebreeze
Prosecutors had alleged that Mr. Bennett and others at Refco schemed to hide the commodity broker's dismal financial picture from its banks, auditors and investors from the mid-1990s to about October 2005

As I've heard the story, this was done via the quarterly reports. It was actually a newly employed comptroller, hired at just the right (or wrong, depending on your perspective) time of the fiscal quarter, who was burning the midnight oil getting up to speed with his new job that uncovered the irregularities in the accounting.

Interestingly, the two or three firms that were called in to perform due diligence just a couple of months prior to this when Refco stock went public somehow didn't see a thing.

Hmmm...

2 posted on 07/08/2008 5:04:27 AM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze
Bingo... I love it when the Rats up top are busted. It's a good way to preserve integrity in our Markets. Now only if congress and judges could have integrity. Then we might be on the right track. I would love to see random drug test for congressmen and judges. After all they are driving this nation. I want to make sure they are doing not impaired.
3 posted on 07/08/2008 5:10:09 AM PDT by Sprite518
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To: Sprite518
I would love to see random drug test for congressmen and judges.

Test results can be bought. But I share your desire for accountability and integrity in elected / appointed officials.

4 posted on 07/08/2008 5:24:32 AM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze

Former Refco Chief Executive Phillip Bennett arrived for his sentencing hearing at Manhattan federal court in New York Thursday


Phillip Bennett departed federal court Thursday.

5 posted on 07/08/2008 5:28:50 AM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze

hy not lock him up there and then, he has to be a flight risk with 16 years hanging over his head and plenty of hidden assets to enjoy! Obama’s buddy, Tony Rezko asked to be immediately locked up, an incredibly unsual demand, WHY??? to protect Obama? or more importantly to protect his own life??


6 posted on 07/08/2008 6:01:05 AM PDT by True Republican Patriot (mericThe Republicaa dodgedns)
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To: prairiebreeze

I’d like to see more goons in suits getting jail terms. A criminal with a position like that can do a lot more damage than a kid boosting stereos.


7 posted on 07/08/2008 6:06:21 AM PDT by DemonDeac
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To: True Republican Patriot

He’s been ankle-braceleted on house arrest since his arraignment. I’m betting his assets are frozen or being/been liquidated. I don’t believe he’s going anywhere.


8 posted on 07/08/2008 6:27:04 AM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze
[It was actually a newly employed comptroller, hired at just the right (or wrong, depending on your perspective) time of the fiscal quarter, who was burning the midnight oil getting up to speed with his new job that uncovered the irregularities in the accounting.]
 
Some people just ignore the posted signs... and focus on the truth.  Good for him.
 

9 posted on 07/08/2008 8:24:11 AM PDT by LomanBill (A bird flies because the right wing opposes the left.)
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To: prairiebreeze; Travis McGee

>>A U.K. citizen, Mr. Bennett will be deported
>>upon completing his prison term.

Good riddance and send the rest of the NyLon quisling traders with him.

Which reminds me...

Hey BP, GTHOOMC!, ‘cause WE didn’t vote for your monarchies.


10 posted on 07/08/2008 8:29:43 AM PDT by LomanBill (A bird flies because the right wing opposes the left.)
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To: prairiebreeze
Couldn't have happened to a nicer bunch of guys. LOL!
11 posted on 07/08/2008 9:40:19 AM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: LomanBill

Marthat Stewart wasn’t much different IMO. Smaller dollar amount I suppose.

American, UK, Asian, whatever...not so important as integrity.


12 posted on 07/08/2008 11:10:46 AM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze
Marthat Stewart wasn’t much different IMO. Smaller dollar amount I suppose.

These guys hid losses and filed false financial statements. What do you think Martha did?

13 posted on 07/08/2008 12:28:02 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: prairiebreeze
>>American, UK, Asian, whatever...
>>not so important as integrity.
 
That seems to be a popular, politically correct, notion - that Americans, and America, are no different from the UK, or Asian, or other countries.
 
I remember a time when the difference was clearer; when the USA was recognized as THE champion of individual freedom.
 
American Ideals, symbolized by the flame of the statue of liberty - Lighting the way for the world.
 
Individual Freedom is not something the collective British or Asian empires have EVER been particularly well known for - quite the tyrannical opposite, in fact.
 
Martha Stewart is a sad example, a symptom of how far America has fallen.  Though the dollar amount involved is less, to me her offense is just as repugnant - maybe even more so.  Benedict Martha and her ilk are responsible for desensitizing our culture to the corruption of its financial, and moral, systems. 
 
As to Mr. Bennett, well, allowing foreign agents into our National and Financial infrastructure - that's just plain suicidal.   You might as well let former military officers of the Soviet Union work on loan origination systems in the U.S.. ehem.  Now that would be really stupid, wouldn't it?
 
British arrogance, tethered to the quaint Rhodesian idea of re-acquiring the United States for the Anglo Woyal Cwown,  has not gone unnoticed.
 
So...
 
Hey BP, GTHOOMC!, 'cause WE didn't vote for your monarchies.

14 posted on 07/08/2008 1:09:04 PM PDT by LomanBill (A bird flies because the right wing opposes the left.)
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To: prairiebreeze; Congressman Billybob; Doctor Raoul; dirtboy; Toddsterpatriot; Grampa Dave; SAJ

...and now, the rest of the story:

Refco was Hillary Clinton’s silent partner in her $100,000 cattle futures miracle in Arkansas.

Refco went down after a large sum of forged bearer bonds were found in its vaults, in addition to almost half a billion in hidden debt on its books.

Now, here’s a simple mental experiment...ask yourself: IF PRESIDENT BUSH WAS INVOLVED WITH REFCO, WOULD THE REPORTER HAVE MENTIONED THAT FACT?!

No mention of Hillary in that article, though. Double standard.


15 posted on 07/08/2008 3:16:35 PM PDT by Southack (Media Bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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To: Southack
Not so much, Southack. REFCO was in bed with Stevens, big political powerhouse in AK, absolutely, but stayed well away from politics generally in the 1970s.

The Clinton cattle-trading scheme, well, let's just say that Hitlery was not the only beneficiary. This was a routine way for Stevens to route payoffs.

The tactic used to do this was called ''allocation''. Oh, yes, it was improper as hell, and later became outright illegal, but in the 1970s allocation was pretty common in certain areas. Works like this:

During a trading session, a broker buys, say, 500 lots of Dec Live Cattle futures on several tickets. He gets filled at prices ranging from, say, 78.62 to 80.05. The mkt, say, closes at 79.75. AFTER THE CLOSE, the broker assigns whichever contracts are now profitable to favoured accounts, and the contracts that are currently losing to less-favoured accounts.

Now, ultimately, these contracts must be offset (i.e. a sale must be made against them to close them out, because nobody in a payoff scheme wants delivery). So, whether the next day or a couple of weeks hence, the broker does the same thing in reverse: selling 500 lots, then after the close parceling them out to clients involved in the scheme, most favoured getting, again, the best prices.

Please note that, during the 1970s, a LOT of trading accounts were entirely DTN, that is, the citizen gave -- in writing -- the broker complete discretion over how to trade his/her account. Thus, in a number of these allocation schemes, the account holder was completely unaware of what was happening (and, had he/she known about it, probably would have raised holy Hell.)

Almost every abuse of this type has been stopped; 'allocation', particularly, is just a dim historical memory.

Side note: I knew Hitlery's broker, ''Red'' Bone, personally for a number of years. He was as charming a man (except when losing at gin rummy, but that's another story) as you've ever met...as long as you were in some way contributing to his profit. Other than that, his tombstone should read: ''Shake my hand? Count your fingers.''

One other thing: in its early days, REFCO gave many local offices an **enormous** amount of autonomy. In these more-autonomous offices, as long as the books balanced and nobody in the office ran afoul of CFTC, REFCO usually acted as if they couldn't have cared less what else might be going on/have gone on in the office.

16 posted on 07/08/2008 3:36:02 PM PDT by SAJ
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To: Southack

Pinging the double standard which is SOP for the left wing mediots in America.

“Refco was Hillary Clinton’s silent partner in her $100,000 cattle futures miracle in Arkansas.

Refco went down after a large sum of forged bearer bonds were found in its vaults, in addition to almost half a billion in hidden debt on its books.

Now, here’s a simple mental experiment...ask yourself: IF PRESIDENT BUSH WAS INVOLVED WITH REFCO, WOULD THE REPORTER HAVE MENTIONED THAT FACT?!

No mention of Hillary in that article, though. Double standard.”


17 posted on 07/08/2008 3:38:26 PM PDT by Grampa Dave (America's Mugabe, the Obamination.will bring Mugabe Change to America!)
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To: Toddsterpatriot

Martha Stewart was a licensed individual in a heavily regulated industry. She used knowlege that wasn’t public to influence trading decisions. She then ordered the jr. broker to hide the trade (cover up) and then lied to the feds about doing it.

She knew better.

I expect a lot better from somebody on the NYSE Board of Governors.


18 posted on 07/08/2008 4:38:26 PM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: SAJ; Southack

Thanks for adding the description of 1970’s trading practices to the thread.


19 posted on 07/08/2008 4:46:18 PM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze
She used knowlege that wasn’t public to influence trading decisions.

Where did she get that information? How is that close to what the Refco guys did?

20 posted on 07/08/2008 6:05:51 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: Toddsterpatriot

IIRC, from Sam Waxel or whatever his name is. She found out some drug wasn’t going to be FDA approved, ordered her stock sold on this insider knowlege. She would’ve lost just a pittance considering her Omnimedia corporation was at its zenith at the time.

Waxel went to prison for longer than Stewart did.

What’s similar is the lack of integrity and illegality of mandated procedures in a highly regulated industry. My point in bringing up Stewart to the other poster was that Americans are as capable at committing fraud as this Brit was.


21 posted on 07/08/2008 7:04:23 PM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze
IIRC, from Sam Waxel or whatever his name is.

So she didn't trade on inside info of her own company? You mean she traded on info that an insider of another company gave her? How is that illegal?

Waxel went to prison for longer than Stewart did.

He traded on inside info, she didn't. He should have done more time than she did.

What’s similar is the lack of integrity and illegality of mandated procedures in a highly regulated industry.

What's different is lying on financial statements and loan documents is not the same thing as trading on info that an insider tells you is "inside" information.

My point in bringing up Stewart to the other poster was that Americans are as capable at committing fraud as this Brit was.

She didn't commit fraud in her trading. The Refco guys did commit fraud.

22 posted on 07/08/2008 7:10:38 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: Toddsterpatriot

Why no, it wasn’t about her company. She called the broker, placed the instruction to sell before it was made public based on info Waxel fed to her about the FDA decision.

Why did the Justice Dept. initiate an investigation and why did she attempt to cover up what she did and subsequently lie about it if she did nothing wrong?


23 posted on 07/08/2008 7:20:26 PM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze
Why no, it wasn’t about her company. She called the broker, placed the instruction to sell before it was made public based on info Waxel fed to her about the FDA decision.

If Martha was not an Imclone insider, she could not have traded on inside information.

Why did the Justice Dept. initiate an investigation

Out of control prosecutor who doesn't know what insider trading is?

why did she attempt to cover up what she did and subsequently lie about it if she did nothing wrong?

She didn't know what insider trading was and stupidly lied to the FBI. She went to jail for lying about a crime she didn't commit. LOL!

24 posted on 07/08/2008 7:25:59 PM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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To: Toddsterpatriot

I disagree, but guess we’ll just have to agree to that.


25 posted on 07/09/2008 7:08:03 AM PDT by prairiebreeze (I didn't leave the republicans, they left me.)
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To: prairiebreeze

You disagree that she had no fiduciary responsibility to Imclone? What if she got bad info? What if he lied about the FDA approval? Do you still want to charge her with insider trading? LOL!


26 posted on 07/09/2008 7:17:05 AM PDT by Toddsterpatriot (Why are doom and gloomers, union members and liberals so bad at math?)
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