Labels: Grant Thornton, Parmalat

Labels: Deloitte, Dianthus, Grant Thornton, Parmalat

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

PwC dragged into Refco controversy - Big Four firm's US arm advised futures brokerage on financial reporting ahead of collapse

Nicholas Neveling
Accountancy Age
Nov 7, 2005

PwC's US arm has been dragged into the controversy surrounding collapsed futures brokerage Refco after it emerged that the Big Four firm advised it about financial reporting when it changed from a private to public company.

According to the Financial Times PwC advised Refco on accounting issues and preparing more detailed financial statements. Prosecutors and regulators have not spoken to PwC, but Refco's other advisers, including auditors Grant Thornton, are facing shareholder lawsuits.

The FT reports that PwC was appointed in April last year to advise Refco on $600m (£343.2m) debt offering as part of a deal that saw private equity group Thomas H Lee pay $450m for a majority stake in Refco.

PwC is believed to have had one partner and three staff working for Refco. They advised the group on financial reporting and SEC filing requirements for public companies. Refco collapsed last month when CEO Phillip Bennett allegedly used a hedge fund to conceal a $430m debt from investors.

Labels: Grant Thornton, Phillip Bennett, Refco

Refco debacle widens and now involves Austrian bank

By : Joe Lauria in New York
October 30, 2005
The Business, Online

AUSTRIAN bank BAWAG is set to file lawsuits against Refco, as the widening scandal involving the US futures trader has prompted a former Refco executive to co-operate with US authorities trying to get to the bottom of the affair.

Austrian regulators last week also launched an investigation into the Refco debacle and expect to release a first report in a fortnight on BAWAG’s role in the accounting scandal. BAWAG is Austria’s fourth-largest bank. It was listed as Refco’s biggest creditor in papers filed by Refco in the US bankruptcy court this month. BAWAG is owed E350m ($424m, £238m) by Refco’s former chief executive, Briton Phillip Bennet, as well as E75m by Refco itself.

BAWAG, owned by Austria’s trade unions, is working with a battery of US?lawyers preparing the lawsuits against several targets, the bank said. The main target is Bennett, to whom BAWAG continued to lend money until 9 October, the day he was suspended by Refco. The next day he was arrested and charged with securities fraud and hiding $430m in debt from the company and its shareholders...

...The US probe was given a boost last week when Santo Maggio, president of the Refco Capital Markets unit, agreed to co-operate with the Justice Department and the Securities and Exchange Commission (SEC). Maggio had been put on leave by the Refco board on 10 October, the same day Bennett was arrested. As a Refco insider, Maggio’s participation is expected to help investigators pressure other executives to co-operate as they build their case. A judge last week gave prosecutors only until Monday to get an indictment against Bennet from a Grand Jury. The deadline could be extended.The US investigators have broadened their probe beyond the original charges against Bennett for hiding debt. They are also looking into the connections between Bennett and BAWAG. The SEC is also probing the role played by Grant Thornton, the accounting firm, which had audited Refco’s books. The investment banks that underwrote Refco’s $583m initial public offering (IPO) in August are also under investigation...

Labels: Department of Justice, Grant Thornton, Phillip Bennett, Refco

Grant Thornton facing huge claims over Refco collapse

By Katherine Griffiths in New York
October 19, 2005
The Independent

Grant Thornton, the international accountancy firm which audited the scandal-ridden futures trader Refco, defended its reputation yesterday in the face of possible multimillion-dollar claims from investors hit by the dramatic collapse of the firm.

Edward Nusbaum, the chief executive of Grant Thornton, admitted that the company would be sued for its involvement in signing off Refco's accounts when it floated on the New York Stock Exchange in August. But he insisted the firm had been misled, just as Refco shareholders had been, by the company's former management.

Refco filed for bankruptcy for two parts of its business yesterday and tentatively agreed to a fire sale of a third part, which trades financial futures, to a consortium led by the private investment group JC Flowers for $768m (£439m). JC Flowers, which is run by Christopher Flowers, a former Goldman Sachs banker, must get the deal approved by a Manhattan bankruptcy court.

The move marks an extraordinarily swift demise for Refco, which revealed last Monday that its chief executive and chairman, Phillip Bennett, was departing after the brokerage found he had covered up millions of dollars of bad debts. Mr Bennett was arrested the following day on criminal charges that he misled investors about the true state of Refco's finances at the time of its flotation.

Grant Thornton took over as Refco's auditor from the defunct accounting giant Arthur Andersen. The firm, as well as Refco's banking underwriters Goldman Sachs, Credit Suisse First Boston and Banc of America Securities, are likely to be the focus of lawsuits brought by shareholders whose investments may be entirely wiped out by the revelations of alleged fraud.

Mr Nusbaum said: "If we had known about the situation before, we would have conducted an investigation and made the implications [known] as it related to the financial statements. Everything we have seen so far indicates we complied with professional standards. Certainly we will be sued. There will be significant legal costs. We believe the cost will be absorbed by the firm."

Lawsuits are being prepared against various parties involved with Refco by heavyweight law firms such as Milberg Weiss and Lerach Coughlin.

In its defence, Grant Thornton will be able to say that it reported two serious deficiencies in Refco's internal financial controls, which were included in the company's IPO prospectus. The auditor noted at the time that there was a shortage of people to prepare Refco's financial statements and a lack of formalised procedures for closing the company's books.

Refco is the latest corporate scandal to engulf Grant Thornton. The Chicago-based firm was also the auditor of Parmalat, which collapsed after an accounting fraud. In the Refco case, the role of Goldman is also being scrutinised because of the number of relationships it has to parties involved in the rapidly evolving situation. As well as being an underwriter in the float, Goldman was hired last week to offer crisis management advice to Refco. Mr Flowers, who emerged as a buyer for Refco's futures arm over the weekend, was a partner at the bank. He has hired Matt Winkelman, formerly joint head of Goldman Sachs fixed-income division, as the new chairman of the futures business.

Mr Flowers said: "I left Goldman Sachs a long time ago and no longer have any association with it." He added that his consortium has an option to buy the rest of Refco. A possible deal will depend on how the Manhattan bankruptcy court divides the company's assets among creditors and investors.

Grant Thornton, the international accountancy firm which audited the scandal-ridden futures trader Refco, defended its reputation yesterday in the face of possible multimillion-dollar claims from investors hit by the dramatic collapse of the firm.

Edward Nusbaum, the chief executive of Grant Thornton, admitted that the company would be sued for its involvement in signing off Refco's accounts when it floated on the New York Stock Exchange in August. But he insisted the firm had been misled, just as Refco shareholders had been, by the company's former management.

Refco filed for bankruptcy for two parts of its business yesterday and tentatively agreed to a fire sale of a third part, which trades financial futures, to a consortium led by the private investment group JC Flowers for $768m (£439m). JC Flowers, which is run by Christopher Flowers, a former Goldman Sachs banker, must get the deal approved by a Manhattan bankruptcy court.

The move marks an extraordinarily swift demise for Refco, which revealed last Monday that its chief executive and chairman, Phillip Bennett, was departing after the brokerage found he had covered up millions of dollars of bad debts. Mr Bennett was arrested the following day on criminal charges that he misled investors about the true state of Refco's finances at the time of its flotation.

Grant Thornton took over as Refco's auditor from the defunct accounting giant Arthur Andersen. The firm, as well as Refco's banking underwriters Goldman Sachs, Credit Suisse First Boston and Banc of America Securities, are likely to be the focus of lawsuits brought by shareholders whose investments may be entirely wiped out by the revelations of alleged fraud.

Mr Nusbaum said: "If we had known about the situation before, we would have conducted an investigation and made the implications [known] as it related to the financial statements. Everything we have seen so far indicates we complied with professional standards. Certainly we will be sued. There will be significant legal costs. We believe the cost will be absorbed by the firm."

Lawsuits are being prepared against various parties involved with Refco by heavyweight law firms such as Milberg Weiss and Lerach Coughlin.

In its defence, Grant Thornton will be able to say that it reported two serious deficiencies in Refco's internal financial controls, which were included in the company's IPO prospectus. The auditor noted at the time that there was a shortage of people to prepare Refco's financial statements and a lack of formalised procedures for closing the company's books.

Refco is the latest corporate scandal to engulf Grant Thornton. The Chicago-based firm was also the auditor of Parmalat, which collapsed after an accounting fraud. In the Refco case, the role of Goldman is also being scrutinised because of the number of relationships it has to parties involved in the rapidly evolving situation. As well as being an underwriter in the float, Goldman was hired last week to offer crisis management advice to Refco. Mr Flowers, who emerged as a buyer for Refco's futures arm over the weekend, was a partner at the bank. He has hired Matt Winkelman, formerly joint head of Goldman Sachs fixed-income division, as the new chairman of the futures business.

Mr Flowers said: "I left Goldman Sachs a long time ago and no longer have any association with it." He added that his consortium has an option to buy the rest of Refco. A possible deal will depend on how the Manhattan bankruptcy court divides the company's assets among creditors and investors.

Labels: Grant Thornton, Parmalat, Phillip Bennett, Refco

Labels: Grant Thornton, Parmalat, Phillip Bennett, Refco

Parmalat founder fraud trial opens

September 29, 2005
CNN.com
Alessio Vinci, Contributor

MILAN, Italy (CNN) -- The founder and former boss of Parmalat has appeared in a Milan court in the first major trial over the Italian dairy giant's collapse almost two years ago in one of Europe's biggest corporate fraud scandals. Calisto Tanzi and 15 others face charges of market rigging, false auditing and misleading Italy's stock market regulator and investors.

Dozens of those investors gathered outside the Milan courthouse hearing the trial as the proceedings opened. Tanzi arrived one hour late and assumed a seat in the front row. One of his lawyers said he had been caught in traffic. After about an hour in court, Tanzi left.

The trial was adjourned to December 2 to allow the court time to consider a request from investors to join a civil suit linked to the criminal case. Also on trial are three bank executives and two auditors from the Italian branch of Deloitte & Touche and the former Italian branch of Grant Thornton.

One of the defendants, Giovanni Bonici -- former chairman of Parmalat Venezuela and the Cayman Islands-based subsidiary at the center of the bankruptcy -- was one of the few of the other accused to appear in the court. "I am as much of a victim as the investors," he was quoted as saying by the ANSA news agency.

The defendants face up to 10 years in prison if found guilty. Defense lawyers said on Tuesday that Tanzi would cooperate during the trial. "He knows what his responsibilities are," Giampiero Biancolella, one of Tanzi's attorneys, told the Associated Press. "What we want is to help reconstruct faithfully what happened at Parmalat so the judge can make a decision based on that reconstruction."

The Parmalat scandal, dubbed "Europe's Enron", erupted in December 2003 when the company admitted that an account worth nearly &euro4 billion ($4.8 billion) it claimed it held in a Bank of America account in the Cayman Islands did not exist. Months of investigation followed, uncovering a tangle of offshore companies and accounts.

Prosecutors said Parmalat's old management created them to paper over a gaping debt of nearly 14 billion euros ($16.9 billion). Authorities declared the company bankrupt and overnight, tens of thousands of stocks and bonds holders were left holding worthless paper. Italian Prime Minister Silvio Berlusconi called an emergency cabinet meeting in the wake of the collapse, but measures agreed then have still not been passed into law.
Blame

As the trial began, Tanzi's lawyers submitted a list of witnesses to Judge Luisa Ponti which included the heads of such banks as Capitalia and Mediobanca, as well as market regulators Consob and the Bank of Italy. Reports had claimed Tanzi would try to shift blame for the scandal on to the banks, but Biancolella denied that. "We cannot transform ourselves from the accused into accusers," he said.

The banks have denied any wrongdoing. Earlier this year Tanzi asked for forgiveness from those who suffered as a result of the scandal. But Paolo Vivian, a pensioner who lost 25,000 euros, was not impressed. "It is ridiculous, he should have thought about it before the fraud," he said. "He could have spared us his apology because no-one has accepted it." As compensation, Vivian received shares in the new Parmalat worth around 10 percent of his original investment.

In June, 11 others including three of Parmalat's former chief financial officers, accepted plea bargains that saw them sentenced to two-and-a-half years in prison for their parts in the fraud. A fast track trial of two accountants from Grant Thornton began in January.

A government-appointed administrator, Enrico Bondi, now runs Parmalat. He has launched a series of lawsuits against banks aimed at recouping some of the investors' money lost in the crash. He also instigated a tough restructuring of the company that has seen it shake off the scandal and remain a prime player in the Italian dairy market.

Gabriel Kahn, Rome correspondent of the Wall Street Journal, told CNN: "Parmalat has come back stronger than many people might have expected. "The real hit was when the scandal broke two years ago so I'm not sure putting Tanzi on trial now will hurt the brand. It may even help by putting it back in the news."

Shares in Parmalat were suspended shortly after the collapse, but are due to be relisted next month. Anaylsts said they would be indicated to open between 2.38 euros and 2.45 euros.

Labels: Enron, Grant Thornton, Parmalat

Labels: Enron, Grant Thornton, Parmalat