A Chicago lawyer was accused Tuesday of violating federal securities laws by misleading investors who lost more than $1 billion in the financial downfall of the commodities brokerage powerhouse Refco Inc.
The Securities and Exchange Commission brought a civil complaint in U.S. District Court in Manhattan against Joseph P. Collins, 57, of Winnetka, Ill., a partner with Mayer Brown LLP. The SEC said Collins worked at the firm's Chicago and New York offices.
Collins was Refco's primary outside lawyer from 1994 to August 2004 and continued to do work for Refco until October 2005, the SEC said. He brought the company with him as a client in 1994 from his previous law firm.
The SEC said Collins dealt directly with the company's senior management, including its chief executive officer, Phillip R. Bennett. Bennett of Gladstone, N.J., and other former top executives have been charged criminally with conspiring to commit securities fraud. A trial was set for March.
Federal prosecutors say the executives tried to hide hundreds of millions of dollars of debt owed to Refco by a company controlled by Bennett.
Federal prosecutors in Manhattan said new criminal charges were being announced Tuesday in the Refco matter but the new indictment had not been unsealed by late morning and it was not known if it related to Collins.
A message left for Collins at his law firm was not immediately returned.
In its civil complaint, the SEC said Collins helped Refco hide financial information from investors that a corporation controlled by Bennett owed Refco hundreds of millions of dollars.
Prosecutors say the then-privately held Refco in the mid 1990s sustained hundreds of millions of dollars of losses through losing trades while the company was partially controlled by Bennett.
The plot unraveled in October 2005, just two months after Refco went public, when Refco announced it had discovered it was owed $430 million by a company controlled by Bennett. Refco's stock value plummeted and it was forced into bankruptcy proceedings a week later.
Refco was one of the world's biggest commodities brokerages, employing some 2,400 employees in 14 countries.
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