ipl-logo

Fraud Case Study: Refco Inc.

1393 Words6 Pages

Timeline:
Refco Inc. announced on October 10, 2005 that it’s CEO and chairman, Phillip R. Bennett had hidden information about $430 million in bad debts from the company's auditors and investors, and that now he had agreed to take a leave of absence.
It was discovered through an internal review over the preceding weekend that a receivable was owed to the company by an unnamed entity that eventually turned out to be controlled by Mr Bennett, as much as approximately US$430 million. It was later known that, Bennett had been buying bad debts from Refco so that it would need to write them off, and he was paying for the bad loans with money borrowed by Refco itself.
How he managed to pull this off is, at the end of every quarter he had arranged for a certain Refco subsidiary to lend money to a hedge fund called Liberty Corner Capital Strategy. Liberty then lent the money back to Refco Group Holdings. It was an independent offshore company secretly owned by Phillip Bennett himself and had no direct legal or official connection to Refco. This company would then pay money again back to Refco, and would make Liberty look like a borrower when financial statements were prepared and reported. It is still not perfectly clear if Liberty Co. really was guilty of hiding scam transactions for Bennett or not. Later on, senior …show more content…

Phillip Bennett was arrested on October 12 and charged with number of counts of securities fraud for using interstate commerce and securities exchanges to lie and not to be ethically truthful to his investors. After his arrest, his lawyer said that Bennett planned to appeal against the charges. Trading of Refco's shares was halted on the New York Stock Exchange on October 19, which later resulted into Refco getting delisted from NYSE. Before the halt, Refco shares were trading for more than $28 per share, while as of October 19, they had dropped (on the pink sheets) to as low as $0.80 per

Show More
Related

  • What Is The Name Of Initial Board Of Director Of Henry Wells Fargo

    337 Words  | 2 Pages

    It provides financial services to California. The Name of initial board of directors of the Company were Wells, Fargo, Johnston Livingston, Elijah P, Edwin B. Morgan, James McKay, Alpheus Reynolds, Alexander M.C. Smith and Henry D. Rice. The Company faced the first

    Read More

  • Foreclosure Issues In The CIBC Wood Gundy Case

    824 Words  | 4 Pages

    There were a number of serious disclosure issues in this case that had to be resolved which in turn led to other, fairly large, party discoveries. CIBC’s defense to the wrongful dismissal of Mr. Saturley is just cause. Mr. Saturley was accused of causing trades for many clients without their consent, and that he had performed a task which was outside of his duties to perform. Throughout the trial Mr. Saturley had been pushing for details of the accusations towards him.

    Read More

  • Lindner Fund V. Abney Case

    251 Words  | 2 Pages

    In the case Lindner Fund v. Abney there was a corporation located in Phoenix, Arizona called Texscan Corporation. This company was audited by Coopers & Lybrand (Cooper) in which reviewed financial records. One of the investors of Texscan was Lindner Funds and after receiving and reviewing the audited financial material from Texscan, Lindner Funds made the decision to invest in Texscan. But there was an unknown reason Texsca, suffered financial difficulties and Lindner suffered as well.

    Read More

  • Corinthian College Fraud Case Study

    1649 Words  | 7 Pages

    The Corinthian Colleges Debacle: Holding For Profit Colleges Accountable The Corinthian Colleges Debacle unveiled many areas of non-compliance, not only by the for profit private postsecondary education institutions, but also by the control agencies at the state and federal level. The closure of the Corinthian Colleges revealed the inefficiency of the states to provide oversight and enforcement to mandate compliance based on their authority as outlined in existing state laws. The Corinthian Colleges is just one of many for profit private postsecondary education institutions that have faced or will be facing closures. We’ll provide background on what happened that lead to the closures, the impact this has had on student loans, and what factors have

    Read More

  • Mark Everson Candidacy

    580 Words  | 3 Pages

    They claimed "the company had coached clients on improper tax workarounds that cost the agency as much as $712 million in wrongly awarded refunds"

    Read More

  • John D Rockefeller Impact On Society

    1265 Words  | 6 Pages

    Weather this was a business strategy or wanting moral superiority, writers repetitively targeted Rockefeller. The rumors of borrowing materials from others enhanced the credibility of the accusations (Oil & Ideology). Eventually, Rockefeller became vulnerable, and his trust agreement created a huge mess of legal issues. The company was being convicted of spying on fellow competition, crushing partnerships, threatening to shut down other rivals, and becoming rich off other people's ruins. This went against Federal Law of the Sherman Antitrust Act for monopolizing.

    Read More

  • What Is Leslie Fay Accounting Fraud

    709 Words  | 3 Pages

    Fred Pomerantz, a war veteran was a very proud and successful man, founded Leslie Fay. Leslie Fay was a women’s clothing store located in the heart of Manhattan’s business clothing district. In addition, Leslie Fay focused on stylishly conservative dresses for women in the 30 to 55--age bracket. In the late 1980s, Leslie Fay was the largest supplier of women’s dresses to department stores.

    Read More

  • Medicare Fraud Research Paper

    301 Words  | 2 Pages

    Medicare fraud is a very common occurrence in the United States. However, there are whistleblowers who are working hard to stop Medicare fraud. The vast majority of people who report Medicare fraud are healthcare professionals. This includes people such as ambulance drivers, physicians, nursing home workers, hospice workers and nurses. There have been some changes recently to the United States whistleblower laws.

    Read More

  • Fraud Case Of Wykesha Reid

    506 Words  | 3 Pages

    A sad day for the family of a young woman named Wykesha Reid, evidence conducted from an ongoing investigation lead to her death from butt-injections. The suspect being charged with the Homicide of Mykesha are Jimmy Clarke and Denise Rochelle. The two suspect operate a business which provide eyelash extensions to the public. Nevertheless, up until the death of Wykesh Reid it seems their business have been performing butt-injections on the Black Market. Upon questioning Jimmy Clarke a transgender woman told detectives that.

    Read More

  • Economic Effects Of The Market Basket Strike

    2385 Words  | 10 Pages

    2014) Arthur T. originally found himself in hot water with the company’s board five years ago when he was held accountable for losing $46 million because of an investment in Fannie Mae and Freddie Mac. Arthur T. and two other trustees approved putting $46 million of the employee profit-sharing plan into the two housing agencies just months before the two companies got caught up in economic downturn. When the money was lost Arthur T. made sure the company made up for a loss by putting the $46 million back in the profit-sharing

    Read More

  • Eileen Foster Case Summary

    428 Words  | 2 Pages

    Eileen Foster was the Executive Vice President of Fraud Risk Management at Countrywide, and later served in the role of Senior Vice President of the Mortgage Fraud Investigation Division at Bank of America after the two companies merged (Foster, n.d.). It was her responsibility to investigate mortgage origination fraud and reporting suspicious activity to regulators and the company’s Board of Directors. After several years of seeing a lot of suspicious activity and blatant acts of fraud she found that the company was playing party to this activity. Any employee who reported fraud and wrongdoing to Employee Relations were being transferred, demoted, harassed or terminated. When Foster reported her concerns to Countrywide’s Internal audit to investigate, the company not only chose to conceal her allegations from Bank of America, but it also directed employee relations to investigate Foster for wrong doing.

    Read More

  • Describe The Rationalizations Used By Mr Pavlo

    425 Words  | 2 Pages

    1. From the excerpt and article, describe the rationalizations used by Mr. Pavlo? Pavlo said in an interview that he wanted to advance his career and was very eager to make his way to the top level position of the management of the organization (Portal, 2008). He also told that he was rewarded always by doing bad things. Although, he was at pressure in meeting the company’s goals; but he managed his superiors and made sure that he was doing good in fulfilling the company’s goals.

    Read More

  • Lehman Brothers: Financial Fraud In 2008

    2178 Words  | 9 Pages

    Conclusion After reviewing the information obtained through this report, it highlights the lack of regulation and their accounting practices which took place within Lehman Brothers. The accounting practices that were used within the bank were set by the tone at the top and show that the CFO’s during the 2000’s and going forward had plenty of knowledge of the Repo 105 transactions and had no great will to do anything about. The thinking at the time seemed to be, that the company had used this accounting practice for so long, that if there was something wrong it would have come up by now no point rocking the boat.

    Read More

  • Worldcom Case Study

    902 Words  | 4 Pages

    1. What factors in the WorldCom case support the conclusion that CEO Bernie Ebbers Knew about the financial statement fraud? What factors support his defense that he did not know about the fraud? Bernie Ebbers Knew about the financial statement fraud because he was the one who encourage others to go into financial fraud because of the stock prices were going down, which was affecting his marginal loan. For that reason, he was trying to sell his stock, but the board of Directors lent him $341 million, along with 2% interest rate.

    Read More

  • The Worldcom Fraud Case

    2107 Words  | 9 Pages

    Background WorldCom, once known as one of the most powerful telecommunication organizations of the world, is now studied as a case of a fraudulent company that carried out unethical financial activities to cover its weakening position in the market. After some aggressive investment decisions, the company started to witness huge financial pressure. The management used various forged accounting entries to conceal its weakening position. Cynthia Cooper, Vice President Internal Audit, discovered the unethical activities and raised the issue with the management and relevant departments and received bitter responses. She carried out internal audits in her own capacity with her colleagues and compiled evidence against fraudulent activities.

    Read More

More about Fraud Case Study: Refco Inc.

Open Document