NEW YORK, Oct 13 (Reuters) - A multimillion dollar penthouse on New York's ritzy Park Avenue was once a sign of success for the British-born chief executive of Refco Inc. <RFX.N> one of the world's largest commodities and future brokerages.
But Phillip Bennett is now a prisoner of that success, confined to his apartment and monitored electronically after being charged in a U.S. court with securities fraud.
Authorities says Bennett, 57, hid at least $430 million in bad debts from investors which boosted Refco's financial strength as the company went public this summer, raising $583 million in an initial public offering in August.
Bennett, a former Cambridge University rugby player, walked away with bulging pockets for his 34 percent stake in Refco following the company's share sale at $22 each.
His shares were estimated to be worth about $1.6 billion before Refco's stock nosedived over 72 percent this week from last Friday's closing price of $28.56 as the scandal widened.
"It seems to me that the board of directors was not really investigating what Bennett was doing in this situation," said Edward Ketz, an associate professor of accounting at Penn State's Smeal College of Business.
In court, Assistant U.S. Attorney David Esseks fought bail, calling Bennett a flight risk, worth up to $1 billion with homes on Park Avenue and in Gladstone, New Jersey and funds possibly overseas. The court took away his passport.
Bennett, who took over as chief executive at Refco in 1998, told a colleague in a taped conversation on Monday that he was going to Europe within two days.
But on Tuesday night he was arrested and appeared in court Wednesday, dressed in green pants and a blue sweat shirt.
Bennett's lawyers argued there is no case. Bennett repaid the $430 million debt with interest on Monday and had received no personal profits, they said.
"There is no indication that this man is going anywhere," said his lawyer Gary Naftalis at a bail hearing, adding: "His assets and life are here in the U.S.". Bennett has been in the U.S. since 1978.
The rain-soaked figure who left court huddled under an umbrella was a far cry from the dapper, high-flying executive described by colleagues as never having wrinkled shirts and who rang the opening bell at the New York Stock Exchange on Aug. 11.
The case has drawn comparisons to the furor over telecoms giant WorldCom Inc.'s massive fraud, the biggest Wall Street scandal to date. It resulted in former chief executive Bernard Ebbers being sentenced to 25 years in prison for his role in the fraud that led to the largest U.S. corporate bankruptcy.
Former colleagues who did not want to be named described Bennett as a workaholic who arrived at the office early and did not tend to socialize much within the firm.
Married with two children, Bennett joined Refco in 1981 from Chase Manhattan Bank, where he worked in lending.
By 1983, he was chief financial officer at Refco Group and in 1998 took over the top job, helping continue an aggressive drive that built a small futures broker into the global Refco empire with operations in 14 countries, 2,400 staff, and a huge global derivative clearing operation.
At that time Refco's then-Chairman Thomas Dittmer described Bennett as having a "bullet proof" track record of sound decision making and a "recognized financial stature."
The Wall Street Journal said he was known as "the closer".
But his years at the helm of Refco have not been without their troubles and traders said the scandal would dent Refco's reputation, already marred by numerous run-ins with the authorities and rivals due to its aggressive acquisitions.
But Phillip Bennett is now a prisoner of that success, confined to his apartment and monitored electronically after being charged in a U.S. court with securities fraud.
Authorities says Bennett, 57, hid at least $430 million in bad debts from investors which boosted Refco's financial strength as the company went public this summer, raising $583 million in an initial public offering in August.
Bennett, a former Cambridge University rugby player, walked away with bulging pockets for his 34 percent stake in Refco following the company's share sale at $22 each.
His shares were estimated to be worth about $1.6 billion before Refco's stock nosedived over 72 percent this week from last Friday's closing price of $28.56 as the scandal widened.
"It seems to me that the board of directors was not really investigating what Bennett was doing in this situation," said Edward Ketz, an associate professor of accounting at Penn State's Smeal College of Business.
In court, Assistant U.S. Attorney David Esseks fought bail, calling Bennett a flight risk, worth up to $1 billion with homes on Park Avenue and in Gladstone, New Jersey and funds possibly overseas. The court took away his passport.
Bennett, who took over as chief executive at Refco in 1998, told a colleague in a taped conversation on Monday that he was going to Europe within two days.
But on Tuesday night he was arrested and appeared in court Wednesday, dressed in green pants and a blue sweat shirt.
Bennett's lawyers argued there is no case. Bennett repaid the $430 million debt with interest on Monday and had received no personal profits, they said.
"There is no indication that this man is going anywhere," said his lawyer Gary Naftalis at a bail hearing, adding: "His assets and life are here in the U.S.". Bennett has been in the U.S. since 1978.
The rain-soaked figure who left court huddled under an umbrella was a far cry from the dapper, high-flying executive described by colleagues as never having wrinkled shirts and who rang the opening bell at the New York Stock Exchange on Aug. 11.
The case has drawn comparisons to the furor over telecoms giant WorldCom Inc.'s massive fraud, the biggest Wall Street scandal to date. It resulted in former chief executive Bernard Ebbers being sentenced to 25 years in prison for his role in the fraud that led to the largest U.S. corporate bankruptcy.
Former colleagues who did not want to be named described Bennett as a workaholic who arrived at the office early and did not tend to socialize much within the firm.
Married with two children, Bennett joined Refco in 1981 from Chase Manhattan Bank, where he worked in lending.
By 1983, he was chief financial officer at Refco Group and in 1998 took over the top job, helping continue an aggressive drive that built a small futures broker into the global Refco empire with operations in 14 countries, 2,400 staff, and a huge global derivative clearing operation.
At that time Refco's then-Chairman Thomas Dittmer described Bennett as having a "bullet proof" track record of sound decision making and a "recognized financial stature."
The Wall Street Journal said he was known as "the closer".
But his years at the helm of Refco have not been without their troubles and traders said the scandal would dent Refco's reputation, already marred by numerous run-ins with the authorities and rivals due to its aggressive acquisitions.