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Last Updated: Thursday, 13 October 2005, 17:31 GMT 18:31 UK
Refco freezes debt-scandal unit
Refco's former CEO Phillip Bennett leaves a Manhattan court after being charges with fraud
Refco's problems have come two months after its stock market listing
Refco, the brokerage whose former boss has been charged with fraud, has frozen accounts at a scandal-hit subsidiary at the heart of the allegations.

Shares in the firm were suspended in New York after they plunged 27%.

Refco - which only listed on the stock exchange in August - has lost three quarters of its market value this week.

Former chief executive Phillip Bennett is accused of padding Refco's finances by hiding millions of dollars of debts it was owed by the troubled subsidiary.

On Wednesday, the British-born Mr Bennett was accused of hiding the fact that Refco Capital Markets - an unregulated subsidiary he controlled - owed more than $550m (285m) to its parent, Refco.

US Attorney Michael Garcia alleges that Mr Bennett wanted to make Refco look stronger ahead of August's $583m stock market listing.

Mr Bennett is now confined to his penthouse on New York's Park Avenue, under a $50m bond. He was labelled a flight risk by prosecutors and had his passport confiscated.

Safety measures

On Thursday, the firm said that Refco Capital Markets did not have enough capital to keep operating and explained it would freeze accounts and block withdrawals for 15 days to prevent the subsidiary from collapsing.

Refco Capital Markets is a bond, share and currency broker, which also lends securities and acts as a prime broker.

"This company is in serious jeopardy," said Kevin Starke, an analyst at Weeden & Co.

Refco is one of the world's largest commodities and futures brokerages.

Mr Bennett first joined the group in 1991 and was appointed chief executive in 1998. He also was chairman.

The US Attorney's Office for the Southern District of New York charged Mr Bennett with securities fraud on Wednesday. If found guilty, he could face up to 20 years in jail.

Former Refco boss on fraud charge
12 Oct 05 |  Business

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