SEC Press press_release 8 KB 4,261 chars

Press Release: SEC Charges Mayer Brown Partner Joseph P. Collins with Aiding and Abetting Refco Fraud (Press Release No. 2007-266; December 18, 2007)

Release: 2007-266
Caption: Securities and Exchange Commission v. Linda Chatman Thomsen, et al.

summary

Joseph P. Collins, a Mayer Brown partner and Refco’s longtime outside counsel, was charged by the SEC and U.S. Attorney with aiding and abetting securities fraud by concealing over $600 million in related-party indebtedness and sham end-of-period transactions involving CEO Phillip Bennett’s entity RGHI, enabling Refco’s deceptive IPO before its collapse.

paragraph

The SEC charged Joseph P. Collins with aiding and abetting securities fraud for knowingly failing to disclose hundreds of millions of dollars in related-party indebtedness and fraudulent period-end transactions involving RGHI, a company controlled by Refco CEO Phillip Bennett. Collins reviewed and revised critical disclosure documents—including the 2004 offering circular for $600 million in senior subordinated notes and the 2005 IPO registration statement—without including any mention of the hidden liabilities or sham loan structures designed to inflate Refco’s balance sheet. The SEC seeks a permanent injunction and civil penalties, while the U.S. Attorney’s Office filed parallel criminal charges against him; the investigation remains ongoing.

narrative

Joseph P. Collins, a partner at Mayer Brown LLP and Refco’s primary outside counsel, was charged by the SEC and the U.S. Attorney’s Office with aiding and abetting securities fraud for his role in concealing over $600 million in related-party indebtedness and fraudulent end-of-period transactions involving RGHI, a company controlled by Refco CEO Phillip R. Bennett. Collins was aware that RGHI owed Refco hundreds of millions of dollars and oversaw legal work on sham transactions in which Refco subsidiaries loaned funds to third parties, who simultaneously lent the same amounts to RGHI—loans reversed immediately after fiscal periods, leaving Refco with undisclosed guaranties and indemnification liabilities. Despite this knowledge, Collins reviewed and revised key disclosure documents for the 2004 senior subordinated notes offering and the 2005 IPO registration statement, deliberately omitting all material information about RGHI’s indebtedness and the related-party transactions. These omissions allowed Refco to raise capital from investors under false pretenses, contributing to the firm’s catastrophic collapse shortly after its public offering. The SEC’s civil complaint seeks a permanent injunction and civil monetary penalties, while the U.S. Attorney’s Office filed criminal charges against Collins for his role in the deception. The Commission emphasized that professionals like Collins serve as gatekeepers to financial markets and that their complicity in fraud undermines investor trust. The investigation into Refco’s broader fraud remains active, with further actions potentially pending.

Enriched metadata

Scheme: unregistered-securities (100%)
Court: Southern District of New York

Classified unregistered-securities(confidence 100%). EDGAR detection: forms Form D/S-1· recall 41% / precision 30%. detection rule →

Extracted insights

Dollar amounts 1

$600.00M $600 million $100M–$1B

Entities 4

person linda chatman thomsen
person Scott W. Friestad
agency Securities and Exchange Commission
agency the sec’s complaint

Triples 12

Sec Charge Mayer Brown Partner Joseph P. Collins with Aiding and Abetting Refco Fraud
Sec File Civil Injunctive Action in the U.S. District Court for the Southern District of New York Against Joseph P. Collins
Linda Chatman Thomsen Say Financial and Disclosure Frauds Are Often Possible Only If an Attorney, an Accountant, or Some Other Outside Professional Assists
Scott W. Friestad Say Collins Was in a Perfect Position to Protect Investors from Being Harmed, but Chose Instead to Perpetuate the Deception by Actively Assisting Refco’s Fraud
The Commission’s Complaint Allege Collins, in the Course of Representing Refco, Learned That Refco Group Holdings, Inc. (Rghi) Owed Refco Hundreds of Millions of Dollars
The Commission’s Complaint Allege Collins Worked on, and Oversaw Other Attorneys’ Work on, Short-Term Related Party Transactions That Occurred Regularly at the End of Refco Fiscal Periods from February 2000 Through May 2005
The Commission’s Complaint Allege The Offering Circular Failed to Disclose Rghi’s Indebtedness, the Period End Transactions, and the Related Potential Liabilities
The Commission’s Complaint Allege The Registration Statement Failed to Disclose the Indebtedness and the Potential Liabilities
The Commission’s Complaint Allege Collins, While Aware of the Indebtedness and the Transactions, Reviewed and Revised Sections of the Offering Circular and the Registration Statement Without Inserting Requisite Disclosures Regarding the Indebtedness, the Period-End Transactions, and the Potential Liabilities
The Sec’s Complaint Seek A Permanent Injunction Enjoining Collins from Violating the Antifraud Provisions of the Federal Securities Laws
The Sec’s Complaint Seek Civil Money Penalties Against Collins
The U.S. Attorney’s Office for the Southern District of New York Announce The Filing of Criminal Charges Against Collins for His Role in the Refco Fraud

View original SEC press releasesec.gov

Extracted body text (4,261c)

SEC Charges Mayer Brown Partner Joseph P. Collins with Aiding and Abetting Refco Fraud FOR IMMEDIATE RELEASE 2007-266 Washington, D.C., Dec. 18, 2007 — The Securities and Exchange Commission today charged the longtime, primary outside attorney for Refco Group Ltd. with aiding and abetting securities fraud violations at the now-defunct New York-based financial services and commodities brokerage firm. The SEC filed a civil injunctive action in the U.S. District Court for the Southern District of New York against Joseph P. Collins, a partner at the law firm of Mayer Brown LLP, alleging that he substantially assisted Refco and its corporate successor, Refco Inc., as they failed to disclose hundreds of millions of dollars in related party indebtedness and related party transactions. “Financial and disclosure frauds are often possible only if an attorney, an accountant, or some other outside professional assists,” said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement. “The Commission relies on these professionals to act as gatekeepers to our markets. We will aggressively pursue individuals who ignore their professional obligations and instead assist in their clients’ violation of the federal securities laws.” Scott W. Friestad, Associate Director of the SEC’s Division of Enforcement, said, “As a result of his longstanding relationship with his client, Collins was aware that Refco was hiding important facts from potential investors. Collins was in a perfect position to protect investors from being harmed, but chose instead to perpetuate the deception by actively assisting Refco’s fraud.” The Commission’s complaint alleges that Collins, in the course of representing Refco, learned that Refco Group Holdings, Inc. (RGHI) owed Refco hundreds of millions of dollars. RGHI was a non-Refco entity controlled by Phillip R. Bennett, Refco’s chief executive officer. The complaint further alleges that Collins worked on, and oversaw other attorneys’ work on, short-term related party transactions that occurred regularly at the end of Refco fiscal periods from February 2000 through May 2005. In these transactions, a Refco subsidiary loaned hundreds of millions of dollars to third parties that, in turn, were obligated to loan equal amounts simultaneously to RGHI. Shortly after the ends of fiscal periods, the loans were reversed. Refco assumed hundreds of millions of dollars in potential liabilities in these transactions, in the form of guaranties and indemnification that it extended to the third parties to protect them from a default by RGHI or claims that might arise out of the loans. In 2004, Refco placed $600 million in senior subordinated notes with certain financial institutions pursuant to an offering circular. In 2005, Refco commenced its initial public offering of common stock pursuant to a registration statement filed with the Commission. The SEC’s complaint alleges that the offering circular failed to disclose RGHI’s indebtedness, the period end transactions, and the related potential liabilities. It also is alleged that the registration statement failed to disclose the indebtedness and the potential liabilities. The complaint further alleges that Collins, while aware of the indebtedness and the transactions, reviewed and revised sections of the offering circular and the registration statement without inserting requisite disclosures regarding the indebtedness, the period-end transactions, and the potential liabilities. The SEC’s complaint seeks a permanent injunction enjoining Collins from violating the antifraud provisions of the federal securities laws. The complaint also seeks civil money penalties against Collins. In a related action, the U.S. Attorney’s Office for the Southern District of New York today announced the filing of criminal charges against Collins for his role in the Refco fraud. The Commission’s investigation is continuing. # # # For more information, contact: Scott W. Friestad Associate Director SEC’s Division of Enforcement (202) 551-4962 David Frohlich Assistant Director SEC’s Division of Enforcement (202) 551-4963 Additional materials: Litigation Release No. LR-20402 http://www.sec.gov/news/press/2007/2007-266.htm Home | Previous Page Modified: 12/18/2007

OCR text (4,261c · plain-text · 99% conf)