NEW YORK (Reuters) - Phillip Bennett, the former chief executive of Refco, was sentenced to 16 years in prison on Thursday for fleecing investors of more than $2.4 billion in a fraud that destroyed the world's largest independent commodities broker.
The sentence marks the latest chapter in the decline and fall of Phillip Bennett, 59, who built Refco into a global commodities trading empire only to see it unravel in 2005 after the company disclosed an accounting deception.
U.S. District Judge Naomi Buchwald ordered Bennett to be kept under house arrest in his New Jersey home until he surrenders to a federal facility on September 4. After serving his sentence, Bennett is to be deported to his native United Kingdom.
"You tried to make Refco successful, but your success was in many ways a sham," Buchwald said.
Bennett pleaded guilty in February to 20 counts of fraud, conspiracy, money laundering and lying to auditors and others. His plea came just a month before he was set to go to trial, after two-and-a-half years of litigating his case.
Bennett, who at Refco's peak was a billionaire, but will forfeit all his assets as part of his sentence, was penitent on Thursday.
"During these 33 months (since Refco went bankrupt), I've come to realize that, despite the best of intentions, I made an unacceptable and appalling error in judgment," he said.
Prosecutors said Bennett conducted his fraud over eight years. In the late 1990s, a series of Refco loans to customers went bad. Bennett engineered fraudulent transactions to take the bad debt off the company's balance sheet at the end of reporting periods, so investors and others would not know about them. He engaged in other maneuvers designed to hide Refco's lack of cash flow as well, prosecutors said.
When $430 million of bad customer debt was revealed in October 2005, customers lost faith in the brokerage and it filed for bankruptcy.
IN LINE
Bennett's sentence is in line with other recent high profile corporate fraud sentences.
Former WorldCom CEO Bernard Ebbers is serving a 25-year prison term for orchestrating a massive accounting fraud.
Last week, a judge shaved some time off the sentences of Adelphia founder John Rigas and his son, Timothy, after an appeals court threw out one count of their convictions. John Rigas, who is 83, was resentenced to 12 years in prison, down from 15 years, while his son's prison time was reduced to 17 years from 20 years.
In another case, Bayou hedge fund executives Samuel Israel and Daniel Marino were each sentenced to 20 years in prison this year after admitting to defrauding investors. Marino is serving his sentence, while Israel, who is accused of staging his own death in June to avoid prison, surrendered to authorities on Wednesday after a weeks-long manhunt. A judge on Thursday ordered Israel to jail immediately, pending another hearing.
Corporate criminals today typically face tougher punishment than a generation ago. In 1990, Michael Milken served just 22 months in prison after pleading guilty to securities fraud.
The maximum possible sentence Bennett could have received under U.S. law was 315 years prison.
The Refco case is not over. Yet to be sentenced are ex-CFO Robert Trosten, who also has pleaded guilty, and former President Tone Grant, who was found guilty in April of five criminal counts. An outside lawyer for the company, Joseph Collins, is set to go on trial next year.
The sentence marks the latest chapter in the decline and fall of Phillip Bennett, 59, who built Refco into a global commodities trading empire only to see it unravel in 2005 after the company disclosed an accounting deception.
U.S. District Judge Naomi Buchwald ordered Bennett to be kept under house arrest in his New Jersey home until he surrenders to a federal facility on September 4. After serving his sentence, Bennett is to be deported to his native United Kingdom.
"You tried to make Refco successful, but your success was in many ways a sham," Buchwald said.
Bennett pleaded guilty in February to 20 counts of fraud, conspiracy, money laundering and lying to auditors and others. His plea came just a month before he was set to go to trial, after two-and-a-half years of litigating his case.
Bennett, who at Refco's peak was a billionaire, but will forfeit all his assets as part of his sentence, was penitent on Thursday.
"During these 33 months (since Refco went bankrupt), I've come to realize that, despite the best of intentions, I made an unacceptable and appalling error in judgment," he said.
Prosecutors said Bennett conducted his fraud over eight years. In the late 1990s, a series of Refco loans to customers went bad. Bennett engineered fraudulent transactions to take the bad debt off the company's balance sheet at the end of reporting periods, so investors and others would not know about them. He engaged in other maneuvers designed to hide Refco's lack of cash flow as well, prosecutors said.
When $430 million of bad customer debt was revealed in October 2005, customers lost faith in the brokerage and it filed for bankruptcy.
IN LINE
Bennett's sentence is in line with other recent high profile corporate fraud sentences.
Former WorldCom CEO Bernard Ebbers is serving a 25-year prison term for orchestrating a massive accounting fraud.
Last week, a judge shaved some time off the sentences of Adelphia founder John Rigas and his son, Timothy, after an appeals court threw out one count of their convictions. John Rigas, who is 83, was resentenced to 12 years in prison, down from 15 years, while his son's prison time was reduced to 17 years from 20 years.
In another case, Bayou hedge fund executives Samuel Israel and Daniel Marino were each sentenced to 20 years in prison this year after admitting to defrauding investors. Marino is serving his sentence, while Israel, who is accused of staging his own death in June to avoid prison, surrendered to authorities on Wednesday after a weeks-long manhunt. A judge on Thursday ordered Israel to jail immediately, pending another hearing.
Corporate criminals today typically face tougher punishment than a generation ago. In 1990, Michael Milken served just 22 months in prison after pleading guilty to securities fraud.
The maximum possible sentence Bennett could have received under U.S. law was 315 years prison.
The Refco case is not over. Yet to be sentenced are ex-CFO Robert Trosten, who also has pleaded guilty, and former President Tone Grant, who was found guilty in April of five criminal counts. An outside lawyer for the company, Joseph Collins, is set to go on trial next year.
