Refco Inc. Monday said it placed its chief executive on leave after the discovery of his involvement in a $430 million debt rendered years of financial statements unreliable, sending its share price down sharply.
The company, which went public in August and is one of the world’s largest and most powerful commodities dealers, also said it would probably delay filing its 10-Q quarterly financial statement with securities regulators for the quarter ended Aug. 31.
Refco said it asked CEO Phillip Bennett, who is also chairman, to take the leave of absence after discovering a receivable of about $430 million owed by an entity he controlled. The debt has since been repaid with interest.
Santo Maggio, president and chief executive of Refco Securities LLC and Refco Capital Markets, Ltd., was also asked to take a leave of absence.
A company spokeswoman could not provide further details on Maggio’s departure.
Refco has hired independent counsel and forensic auditors to help its board investigate issues related to Bennett.
An internal review thus far has shown Bennett, without telling the company, gained control of the $430 million receivable it had considered possibly uncollectable.
Had Bennett disclosed his control of the receivable, the company’s financial statements would have reflected that.
But given the way the debt was accounted for, Refco said it determined that financial statements for 2002, 2003, 2004 and 2005 are not reliable.
The broker said it cannot estimate when its 10-Q filing will be made or when the audit committee will finish its investigation.
William Sexton, who recently announced his resignation as Refco’s chief operating officer, will instead remain with the company and has been appointed CEO.
Refco said it believes all customer funds on deposit are unaffected by the issues surrounding the receivable.
