I dont care that much about it, and am not going to sift through 2,000 headlines, but if it helps, the article qoutes an attorney for IB sharing some interesting thoughts. I dont want to mis-qoute him, so I leave it to those interested to go find it.
Refco scandal exposes market faults, feeds unease for economy: James Baer is a 36-year veteran of the financial services industry, but the situation at Refco Inc. has him baffled. Baer, 62, managing director of Uhlmann Price Securities LLC in Chicago, was the lead broker for a James Rogers investment fund in which he invested his own money and that of his family, friends and customers. In September, Rogers shifted the assets in the fund from Uhlmann to Refco. Soon after, things turned strange at Refco, and stranger for Rogers and other investors. On Oct. 10, Refco put Chief Executive Phillip Bennett, who would later be charged with securities fraud, on a leave of absence amid hints of a scandal. When Rogers tried to get his money back, he claims it had been shifted without authorization into an unregulated account that was soon frozen. A few days later Refco and its 23 unregulated affiliates filed for bankruptcy protection. If Rogers' claims--spelled out in a lawsuit--are true, experts say it would make it almost impossible to get an accurate accounting of assets in the regulated Refco affiliates that are being auctioned off Wednesday in one of the first major corporate cases to come under the nation's new bankruptcy code. "How do I explain the inexplicable?" Baer said. "I can't comprehend this. Explain to me how all this money was transferred to an unregulated Refco affiliate on Oct. 7, the Friday before a bank holiday [Columbus Day], and it isn't available to customers on Tuesday?" He's not the only one perplexed. Antonio Uribe, president of Colombia-based Bancafe International Bank Ltd. in Miami, said his bank has mistakenly been listed among Refco's top 50 creditors. "We can't borrow or lend in the U.S. because years ago institutions like ours were used as vehicles for tax avoidance," Uribe said. Because Bancafe has only about $190 million a day on deposit, he added, "a $176 million credit to Refco would have been difficult." Refco declined to comment. The Rogers lawsuit and three other complaints allege that a total of at least $1.1 billion was either improperly transferred between Refco affiliates or appeared on its books mysteriously. "There's nothing to show who owes what to whom," said Michael Greenberger, a former official at the Commodity Futures Trading Commission. "Regulators are playing blind man's bluff." These discrepancies may reflect sloppy bookkeeping or criminal mismanagement. But what troubles some observers is that, left uncorrected, such lapses shake confidence in the financial system and could eventually hurt capital markets, the economy, investors and consumers. These lawsuits "raise all sorts of questions that have to be answered," said Patrick Arbor, chairman of United Financial Holdings Inc. and a former chairman of the Chicago Board of Trade. "Day by day, my initial happy reaction that Refco's failure would not make huge ripples seems less plausible," said David Skeel, a law professor at the University of Pennsylvania. And selling a firm with such murky accounting could be risky, said Ryan Caldwell, co-manager of the Asset Strategy Fund of Kansas-based Waddell & Reed. "We have to learn whose money this was," he said. "The brokerage community has had its problems, but it has to be above reproach now. With the linkage of global markets, if risk isn't spread, problems become systemic." Greenberger, now a law professor at the University of Maryland, said, "There's more at work in Refco's failure than accounting problems, and it's in the financial community's interest to investigate." But, he said, that's unlikely because Refco's books are unreliable, and that would include its accounting at the time of its initial public offering in August when it raised $585 million. "If the markets take a hit, confidence in the U.S. economy softens," Greenberger said. "If the foreigners who hold U.S. debt stop lending, interest rates rise, and that touches everyone." Refco's case also highlights the weakness of the 2002 Sarbanes-Oxley law that requires CEOs to sign off on corporate financial statements to stem fraudulent accounting, said Robert Heim, a former enforcement official with the Securities and Exchange Commission. But Heim said auditors and underwriters also should be held responsible because "they're the gatekeepers to the capital markets." Lynn LoPucki, a law professor at UCLA, said another Refco victim is the nation's new bankruptcy code, which went into effect Oct. 17, the day Refco filed for Chapter 11 bankruptcy protection. "It's dead law," he said. The new law requires that a Chapter 11 trustee be requested to run a company if management fraud is suspected. But that hasn't been done, according to Jane Limprecht, a spokeswoman for the U.S. Trustees Office of the Justice Department. Some of the same managers in place during Bennett's tenure are still running Refco and overseeing the dispersal of its assets at auction, the company said. So Jim Baer will continue to worry. "Goldman Sachs took Refco public. Grant Thornton audited the books. Sarbanes-Oxley is supposed to make sure this doesn't happen," he said. "If the industry loses confidence in the system, there will be long-term ramifications." By Susan Diesenhouse Tribune staff reporter Published November 9, 2005
Refco scandal exposes market faults, feeds unease for economy: James Baer is a 36-year veteran of the financial services industry, but the situation at Refco Inc. has him baffled. Baer, 62, managing director of Uhlmann Price Securities LLC in Chicago, was the lead broker for a James Rogers investment fund in which he invested his own money and that of his family, friends and customers. In September, Rogers shifted the assets in the fund from Uhlmann to Refco. Soon after, things turned strange at Refco, and stranger for Rogers and other investors. On Oct. 10, Refco put Chief Executive Phillip Bennett, who would later be charged with securities fraud, on a leave of absence amid hints of a scandal. When Rogers tried to get his money back, he claims it had been shifted without authorization into an unregulated account that was soon frozen. A few days later Refco and its 23 unregulated affiliates filed for bankruptcy protection. If Rogers' claims--spelled out in a lawsuit--are true, experts say it would make it almost impossible to get an accurate accounting of assets in the regulated Refco affiliates that are being auctioned off Wednesday in one of the first major corporate cases to come under the nation's new bankruptcy code. "How do I explain the inexplicable?" Baer said. "I can't comprehend this. Explain to me how all this money was transferred to an unregulated Refco affiliate on Oct. 7, the Friday before a bank holiday [Columbus Day], and it isn't available to customers on Tuesday?" He's not the only one perplexed. Antonio Uribe, president of Colombia-based Bancafe International Bank Ltd. in Miami, said his bank has mistakenly been listed among Refco's top 50 creditors. "We can't borrow or lend in the U.S. because years ago institutions like ours were used as vehicles for tax avoidance," Uribe said. Because Bancafe has only about $190 million a day on deposit, he added, "a $176 million credit to Refco would have been difficult." Refco declined to comment. The Rogers lawsuit and three other complaints allege that a total of at least $1.1 billion was either improperly transferred between Refco affiliates or appeared on its books mysteriously. "There's nothing to show who owes what to whom," said Michael Greenberger, a former official at the Commodity Futures Trading Commission. "Regulators are playing blind man's bluff." These discrepancies may reflect sloppy bookkeeping or criminal mismanagement. But what troubles some observers is that, left uncorrected, such lapses shake confidence in the financial system and could eventually hurt capital markets, the economy, investors and consumers. These lawsuits "raise all sorts of questions that have to be answered," said Patrick Arbor, chairman of United Financial Holdings Inc. and a former chairman of the Chicago Board of Trade. "Day by day, my initial happy reaction that Refco's failure would not make huge ripples seems less plausible," said David Skeel, a law professor at the University of Pennsylvania. And selling a firm with such murky accounting could be risky, said Ryan Caldwell, co-manager of the Asset Strategy Fund of Kansas-based Waddell & Reed. "We have to learn whose money this was," he said. "The brokerage community has had its problems, but it has to be above reproach now. With the linkage of global markets, if risk isn't spread, problems become systemic." Greenberger, now a law professor at the University of Maryland, said, "There's more at work in Refco's failure than accounting problems, and it's in the financial community's interest to investigate." But, he said, that's unlikely because Refco's books are unreliable, and that would include its accounting at the time of its initial public offering in August when it raised $585 million. "If the markets take a hit, confidence in the U.S. economy softens," Greenberger said. "If the foreigners who hold U.S. debt stop lending, interest rates rise, and that touches everyone." Refco's case also highlights the weakness of the 2002 Sarbanes-Oxley law that requires CEOs to sign off on corporate financial statements to stem fraudulent accounting, said Robert Heim, a former enforcement official with the Securities and Exchange Commission. But Heim said auditors and underwriters also should be held responsible because "they're the gatekeepers to the capital markets." Lynn LoPucki, a law professor at UCLA, said another Refco victim is the nation's new bankruptcy code, which went into effect Oct. 17, the day Refco filed for Chapter 11 bankruptcy protection. "It's dead law," he said. The new law requires that a Chapter 11 trustee be requested to run a company if management fraud is suspected. But that hasn't been done, according to Jane Limprecht, a spokeswoman for the U.S. Trustees Office of the Justice Department. Some of the same managers in place during Bennett's tenure are still running Refco and overseeing the dispersal of its assets at auction, the company said. So Jim Baer will continue to worry. "Goldman Sachs took Refco public. Grant Thornton audited the books. Sarbanes-Oxley is supposed to make sure this doesn't happen," he said. "If the industry loses confidence in the system, there will be long-term ramifications." By Susan Diesenhouse Tribune staff reporter Published November 9, 2005
It is a confusing mess with all the Refco subsidiaries. From what Iâve read it appears that Refco Inc. caused the problem with cooked books and then launching an IPO. Then after they got found out, Refco Inc. and all their unregulated subsidiaries declared bankruptcy; Bersec International LLC Kroeck & Associates, LLC Marshall Metals LLC New Refco Group Ltd., LLC Refco Administration LLC Refco Capital LLC Refco Capital Holdings LLC Refco Capital Management LLC Refco Capital Markets, LTD Refco Capital Trading LLC Refco Finance Inc. Refco Financial LLC Refco Fixed Assets Management LLC Refco FX Associates LLC Refco Global Capital Management LLC Refco Global Finance Ltd. Refco Global Futures LLC Refco Global Holdings LLC Refco Group Ltd., LLC Refco Information Services LLC Refco Mortgage Securities, LLC Refco Regulated Companies LLC All the regulated subsidiaries, Refco LLC, Refco Overseas Ltd., Refco Singapore Ltd. and a few others, did not declare bankruptcy and remained going concerns. All the subsidiaries regulated and unregulated are assets of Refco Inc. and will be sold or liquidated to pay their creditors. The real question is did Refco Inc. loot the unregulated subsidiaries before they all declared bankruptcy, they are all separate legal entities and while all proceeds, if any, after their sale or liquidation would go to service Refco Inc. debt, each will be sold or liquidated based on their assets and debts not the debt of Refco Inc. So for example Refco FX account holders will not be competing with debt holders of Refco Inc. or any other Refco subsidiary, just fellow Refco FX creditors.
Relax everybody. The story will unfold. Let's enjoy some history. Here's something on the company founder. He went to prison for bad chickens. http://www.usatoday.com/money/industries/brokerage/2005-11-08-refco-usat_x.htm Here's another ex coming back to life: http://www.usatoday.com/money/industries/brokerage/2005-11-08-dittmer-usat_x.htm I'll bet he knows nothing about 1998 and 1999 problems. He's "angered" at situation with Refco now. Ha ha. And then we have the current beauty at home wearing jewelry supplied by the Marshall Service. Oh man. I gotta go change my diaper.
Correct. But as one of the stipulations of the sale of Refco LLC to the highest bidder, the regulated futures business will most likely undergo a Chapter 7 liquidation. "For Refco LLC, ( the regulated futures commission merchant ) this is merely the most efficient procedure for immediately transferring Refco's open customer accounts in bulk to an appropriate buyer of Refco's business that will be the result of a transaction that will be approved by the Court. This action will expedite the process and quickly move accounts that will continue to be handled by their same brokers on the same platforms on which they currently trade. This situation does not mean that customer accounts are being liquidated or that employees or brokers are losing their jobs. This is the most expeditious mechanism for implementing the sale of Refco's business as a going concern."
It seems that this Refco is quite the mess. There was a post somewhere that listed the companies under the "Refco" umbrella. Looks like about 15 - 20, Refco This, Refco That, Refco Big Widgets, Refco Little Widgets, etc. I think it's going to take longer than a few months to sort this out, maybe 1 year or more.