In response to his request for a separate trial and assertion that he was a minor participant in the fraud at Refco, prosecutors have detailed some of the case that they are bringing against Tone N. Grant, former president of Refco Inc.
According to the March 30 memorandum filed by prosecutor Michael J. Garcia, by February 1999, “Grant was fully briefed, in Refco’s offices, on the core issues of the fraud.” In addition, Garcia asserts that Grant increased his ownership of Refco Group Holdings Inc., the company used to hide $450 million in debt, to 50%. It also says that Grant never owned less than 24.5% of the company through 2004 when, as a condition of the leveraged buy out, Thomas H. Lee insisted that Grant’s ownership be eliminated.
Garcia says evidence will demonstrate that Grant received “$16 million and 50% of the profits that would be reaped by [former Refco CEO Phillip R.] Bennett (up to $275 million) in the event that Bennett sold his surviving interest in Refco.”
Aitan Goelman, of Zuckerman Spaeder LLP and Grant’s defense attorney, argues that Grant’s indictment is an afterthought, coming more than a year after Bennett’s arrest, and precipitated by Grant’s submission of two pages of handwritten notes, purportedly taken by Grant at a meeting with Bennett on May 17, 2004. Goelman writes that prosecutors have “interpreted a few financial terms and figures contained within the notes as evidence that Mr. Grant knew that Bennett was providing inaccurate information to Thomas H. Lee in connection with the contemplated LBO.”
Refco collapsed into bankruptcy in October 2005, just months after its initial public offering, when it was discovered that Refco Group Holdings Inc., a subsidiary then owned by Bennett, owed Refco Inc. $430 million.
In other Refco news, in late March Refco Capital Markets trustee Marc Kirschner sought authorization to distribute $428 million to Refco Capital Markets customers. This would be a second distribution, leaving RCM with about $144 million in cash and securities.
Also, founder of the RefCoed Customer Coalition Michael McNeil has settled his claims against the company for $60,000 according to court documents. McNeil had appealed the firm’s Chapter 11 status, arguing that Refco FX Associates was a commodities broker and therefore only eligible for Chapter 7 status. A win would have given retail customers priority over creditors in a so-called stockbroker’s liquidation.
