Your first paragraph is extremely obvious. What you have stated is by no means anything new. Of course the CEO was in a position of power to ruin the company, not unlike many CEO's that have done so before Sarbannes-Oaxley. How does the multi-million dollar compensated CEO go about preventing such a fraud WHEN IT WAS HE HIMSELF THAT PERPETUATED THE FRAUD? Aside from the fact that in the case of REFCO, the CEO was the one that apparently did not care that he signed-off on the financial statements per the Sarbannes-Oaxley Era, thus setting himself up for criminal accountability - - - I really don't see what your point is. Moreover, I fail to see what CEO compensation has to do with this, or what some sort of "reforms" could have been instituted to prevent the situation that occured at REFCO. The accountants at Grant Thornton missed the fraud, as did the auditors who conducted due-diligence for the private equity firm, Thomas Lee that brought REFCO public in a recent IPO. Compensation has nothing to do with whether or not a senior manager such as a CEO or CFO will commit fraud. The CFO at REFCO, Gerald Sherer makes $166,000 per year. What does his salary/compensation have to do with whether or not a fraud has been committed, or whether or not he should have been aware of such a fraud by the CEO? One would have thought that being criminally accountable per Sarbannes-Oaxley would have been a VERY STRONG and SUFFICIENT deterent, but it was clearly not in this case. As for your second paragraph, I strongly DISAGREE with your statement that employees and shareholders of REFCO will be getting what they deserve. Is the retail compliance manager suppose to be privy to the CEO's fraud? Is the guy in Prime Brokerage clearing operations suppose to know about the CEO's fraud? How about the retail broker on the Refco LLC side of the business that handles Refco Pro Electronic Platform Trading Accounts? Is he suppose to also know about the CEO's fraudulent activities? The clerk in payroll? The HR manager? Why do all of these employees need to suffer at the expense of a fraud perpetuated by the CEO? Your logic escapes me. It makes no sense whatsoever.
The Refco that comes out of this situation will be much different than the one that was known as the 8th largest futures broker and the largest independent futures broker in the United States for the simple reason that close to 2/3rd's of the income of REFCO HOLDINGS came from the Capital Markets Group that uses an extensive credit line from banks in order to conduct Prime Brokerage transactions, foreign-exchange, fixed-income over the counter transactions, as well as securities and securities lending transactions. REFCO LLC and its segregated accounts can most likely exist on its own, or be sold out to another FCM. Just because the bonds are discounting a BK isn't necessarily reflective that the futures group (REFCO LLC) will not be able to continue doing business as an ongoing, profitable entity.
Your point is taken. However, the employees, at this point anyways, loses very little in direct pocket hit. Their paychecks would still clear every pay period. I would think all of the current stock option plans would be underwater at the current stock price, but these employee option holders would be no different from the stock holders in that they put their trust in the management team in deliverying shareholder value, and the CEO has allegely commited fraud to pump up the Refco market value, therefore wiping out most of the shareholding value. The employees at Refco are no different from employees at Enron, MCI, Andersen, even United, in that they put their income and future in the hands of failed management. Their trust is betrayed, and it is too bad. The market punishes the firm as a whole, not individuals. I am sure there are plenty of Enron power plant workers that worked 30+ years hoping for a pension, and then turn out to the street penniless in their pensions. But that's the way the markets work, and has been for 100 years. Refco is certainly not singled out for any special punishment, no different from Enron, MCI and Andersen. Particuarly in the case of Andersen, the wrong-doing was at one office, with 2-3 partners, the executive board was not even involved. And the importance of securities trust is no less important from auditor trust.
Have you ever been a low level employee of a big corporation? Would you personally 'deserve' the consequences, if some big shot suit who'd never give you the time of day, decides to cook the books and fuck up the entire operation? Ebbers' 25 year sentence was a good start. Benett (if found guilty) deserves no less.... and I see no reason for these guys to be doing (relatively comfortable) federal time. Let them do state time with all the other thieves.
I would say; they may not be. For example: To say; "Refco's bonds are at 33, and Delphi's (bankrupt) are at 33. Therefore Refco is bankrupt.â IMO, Is an incorrect resolution, or a logical fallacy. I personally do not have the answer, but to get the answer one would need a closer inspection of each companyâs debt, and of course each companies assets (ongoing operations). For example, I know Delphi has substantial physical assets. I am not sure about Refco... How is the debt secured ... etc.
looks like Refco runs a big hedge fund too. is this the next hedge fund to blow up? http://rai.refco.com wait till the SEC sinks their teeth in Refco's hedge fund. the blood's gonna flow
On what basis?!?!?!?!?! REFCO consists of lots of, for all purposes, self sufficient companies - to conduct business to the levels required some of those companies (like RCM) conduct their business via lines of credit and based on group credit rating (rather than their own), these companies are naturally going to suffer as the group name gets dragged through the mud. There is absolutely no need for REFCO to collapse (although I suspect the vultures will ensure logic will not win the day here). Jolly glad it amuses you though.
You seem pretty heartless towards the employees. I assume you'd take the same view that if innocent people die in a terrorist attack in the US they got what they deserved because they put their faith in their leader Bush. They obviously should have got on top of their leader and not allowed his foreign policy, Bush earns a big salary and anyone who lives under his rule gets what they deserve!?? Perhaps signing off false accounts is they same as conning the population into false intelligence on wmds. I think it's not so clear cut and it's terrible these people will lose their livelihood due to one man's selfishness.
Exactly. I never said it was fair, far from it. The corporate executive system in public companies is very corrupt and getting worse with time. But nothing gets done about it so if you're a shareholder or employee, well that's the game unless you want to step up and push for reforms. Don't expect this administration to do anything, they are more concerned with doing the exact opposite The Refcos, Enrons, MCI, etc. are publicized because they pushed the envelope far enough to make themselves examples and provide PR for the prosecutors as they "fight for the little guy". The fact is that this type of corruption is commonplace among public corporation, the whole system of executive compensation & selection by a board of directors is so crooked. A CEO can run a company like crap, run it into the ground, yet still get paid his millions, his options & pension and then go get a new CEO position at some other firm or just jump on a board of directors. IMO, the bastards caught doing this type of fraud should be left penniless to compensate for the losses and thrown into real prisons, not some country clubs with curfews.