US watchdog probes CSFB role in Refco

Robert Lea
Evening Standard
November 9, 2005

INVESTMENT bank CSFB is under investigation by the US Securities and Exchange Commission over its role in the doomed float of commodities and futures broker Refco. Refco collapsed last month, just two months after it floated and raised nearly $600m (£345m).

Analysts have predicted that Refco's banking advisers could face claims of up to $200m in the scandal. CSFB was one of three banks that underwrote the Refco flotation. The others were Goldman Sachs and Bank of America. CSFB also handled the $600m sale of Refco junk bonds alongside Bank of America and Deutsche Bank.

New York-based Refco, which also has offices in London, collapsed after it emerged that its former boss, Philip Bennett, had hidden $430m of bad debts at the time of the float.

British-born Bennett was sacked a week before the firm filed for bankruptcy protection. While industry regulators say the collapse of Refco has damaged the derivatives brokerage industry, five bidders have lined up to pick over the broker's carcass, including Man Group, the London-based FTSE 100 hedge fund manager.

Shareholders have already begun legal actions against Refco's advisers including its auditors Grant Thornton. It has emerged that major accountancy firms KPMG and PricewaterhouseCoopers also advised Refco.

Labels: Grant Thornton, KPMG, Refco