Former Refco Inc. Chief Executive Officer Phillip Bennett was sentenced to 16 years in prison for defrauding investors out of $2.4 billion in what U.S. prosecutors said was “among the very worst” white-collar crimes.
Bennett was also ordered to forfeit the $2.4 billion. U.S. District Judge Naomi Buchwald in Manhattan rejected a government request that Bennett surrender to prison immediately and told him to report on Sept. 4. Until then, he must remain at his home in Somerset County, New Jersey, subject to electronic monitoring.
“You are the architect of the Refco fraud,” Buchwald told Bennett on Thursday at his sentencing in Manhattan federal court. “Individuals who commit crimes like yours are often staggeringly arrogant.”
Bennett, who turns 60 this month, pleaded guilty in February to bank fraud and money laundering stemming from his eight-year scheme to deceive banks, auditors and investors, including Boston-based buyout firm Thomas H. Lee Partners LP.
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Once the biggest independent U.S. futures trader, New York- based Refco collapsed in October 2005, two months after raising $670 million in an initial public offering. The company, which provided clearing and prime-brokerage services, filed for bankruptcy after disclosing that a Bennett-controlled firm owed hundreds of millions of dollars to Refco.
Some 16 corporate executives have been sentenced to 20 years or more in prison since 2003. Former WorldCom Inc. Chairman Bernard Ebbers is serving 25 years for accounting fraud, and Enron Corp. ex-CEO Jeffrey Skilling got a 24-year term for the same crime. Bayou Group LLC's Samuel Israel was sentenced in April to 20 years for fraud.
“I made an unacceptable and appalling error in judgment,” Bennett told the judge. “I took the wrong path and crossed a line I never should have crossed.”
A graduate of Cambridge University in England, Bennett built Refco into the largest independent futures brokerage in the U.S. He joined the firm in 1981 and had served as president, chief executive officer and chairman since September 1998.
With partner Tone Grant, Bennett transformed Refco from a firm that focused on trading for itself to one that executed transactions for clients. He grew rich along the way, becoming a billionaire with a $20 million plane, an $11 million car collection, and works of art worth more than $29 million, the government said.
Today, Bennett sought leniency, citing his cooperation with investors who have sued Refco's banks, his offer to cooperate with prosecutors and his willingness to take responsibility for his crimes. He said his scheme stemmed from an effort to save the company from bankruptcy long before the fraud was uncovered.
Bennett has paid $1.2 billion to eliminate Refco's debt and repay investors, defense attorney Gary Naftalis said today.
Deported after term
“Did he do wrong things? Absolutely,” Naftalis told Buchwald. “Has he stood tall and admitted it? Yes.”
In court, Bennett's voice quavered as he apologized. He'll be deported to his native England after he completes his term. Under federal sentencing guidelines, he faced life behind bars.
Assistant U.S. Attorney Neil Barofsky compared Bennett to white-collar offenders such as Ebbers and Bayou Group LLC Chief Financial Officer Daniel Marino, who is serving 20 years for his role in the $400 million fraud at that hedge-fund firm. He said the 20-year sentence Israel received should be a “guidepost” in the Bennett case.
“The scope and duration of the fraud, the loss that resulted from it, and Bennett's conduct in service of that fraud places him among the very worst white-collar defendants in this jurisdiction,” Barofsky and Assistant U.S. Attorney Christopher Garcia wrote Buchwald on June 30.