The U.S. Attorney's Office for the Southern District of New York charged
The news came after the company's board of trustees put Bennett on indefinite leave Monday, for paying a hedge fund to hide the fact that an investment firm Bennett controlled owed Refco $430 million, The Wall Street Journal reports. However, Bennett has since reimbursed the money, the company said.
Although it is believed Bennett's company owed Refco money as far back as 1998, Refco said its financial statements since 2002 are no longer valid. Due to this, Refco shares tanked to $10.47 Wednesday, down markedly from their $28.56 close Friday.
At issue were "receivables" that Bennett's company had assumed responsibility for paying to Refco. Instead, the hedge fund, Liberty Corner, told auditors on numerous occasions that it had assumed responsibility for portions of these receivables, and periodically paid down some of the balances. Since hiding the debt boosted Refco's stock, which went public Aug. 11, it is believed this could have been Bennett's motivation. Shortly after Refco's IPO, Bennett sold 5.3 million shares for $116.6 million, and he still owns 43 million shares of the company valued at around $596 million, or 34% of its total market capitalization.
The firm also put Santo C. Maggio, head of the firm's securities arm, on a leave of absence. In light of the shakeup, the company has asked William Sexton to stay on as CEO, although he had just announced his resignation as executive vice president and chief operating officer, and Joseph J. Murphy has been selected to replace Maggio as well as serve as president.
According to unnamed sources, the company CFO office was examining the company's financial records following its IPO and had questions about the company's $1.3 billion in revenues in the second quarter, which he then brought to the board.
