AND ITS AFTERMATH
It took Refco, the giant commodities and securities firm,
only four years to implode after arbitrators in a case handled
by Eppenstein and Eppenstein awarded over $42 million to 13
of its customers for their losses in a huge fraudulent trading
scheme. The New York State Supreme Court confirmed the arbitrators'
decisions a year later, Engel
v. Refco, and tacked on another $4 million in additional
interest. The Wall Street Journal called it the largest arbitration
award for customers.
Only weeks after partying over its IPO, the global giant Refco
was reeling from the effects of inaccurately reporting its
finances to the public, the regulators, its banks and its investors.
Refco tossed out on so-called "leave of absence" its
CEO, Phillip Bennett, who the U.S. attorney indicted virtually
overnight for the alleged securities fraud. The company was
shedding divisions, and its lenders were deciding what to do.
In the wake of this spectacular collapse, Refco's creditors
and investors were searching for whom to blame for their staggering
losses. The auditors who approved the faulty financial statements,
the hedge fund which reportedly had dealings with Bennett,
the underwriters who had due diligence to perform, the board
of directors, and other players (who turned a blind eye) --
were all feeling the heat as the drama unfolded.