NEW YORK, Oct 18 (Reuters) - Accounting firm Grant Thornton LLP has reached a preliminary $25 million settlement of a lawsuit by shareholders and bondholders of defunct commodities broker Refco Inc, according to a court filing.
The settlement resolves claims that prices of Refco stock and notes were inflated as a result of false statements, non-disclosures and fraudulent conduct.
Refco filed for Chapter 11 bankruptcy protection in October 2005, a week after revealing that former Chief Executive Philip Bennett had hidden $430 million of debt. Bennett was sentenced to a 16-year prison term.
Grant Thornton had been an outside auditor for Refco and gave the company clean bills of health for the 2003, 2004 and 2005 fiscal years.
The settlement, which requires court approval, resolves all claims between the investors and the defendants, including former Refco officers.
Grant Thornton denied wrongdoing. In a statement, the company said it had a 'strong and compelling' defense, but settled to avoid the uncertainty and cost of litigation, and will defend against other claims relating to Refco.
The three Refco officers -- former general counsel Dennis Klejna, former chief executive William Sexton and former Refco Global Futures CEO Joseph Murphy -- settled for $300,000, Monday's filing shows. They separately agreed to forfeit $8.3 million to the U.S. government, it shows.
Investors had alleged that shortly after completing an initial public offering in August 2005, Refco admitted that its financial statements should no longer be relied upon.
According to the lawsuit, Grant Thornton and the Refco officers were responsible for 'materially false and misleading statements' in connection with its IPO, as well as $600 million of notes that helped finance a June 2004 leveraged buyout.
The case is in re Refco Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 05-08626.
(Reporting by Dena Aubin and Jonathan Stempel. Editing by Robert MacMillan) Keywords: GRANT REFCO/ (dena.aubin@thomsonreuters.com; +1-646-223-6325; Reuters Messaging: dena.aubin.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The settlement resolves claims that prices of Refco stock and notes were inflated as a result of false statements, non-disclosures and fraudulent conduct.
Refco filed for Chapter 11 bankruptcy protection in October 2005, a week after revealing that former Chief Executive Philip Bennett had hidden $430 million of debt. Bennett was sentenced to a 16-year prison term.
Grant Thornton had been an outside auditor for Refco and gave the company clean bills of health for the 2003, 2004 and 2005 fiscal years.
The settlement, which requires court approval, resolves all claims between the investors and the defendants, including former Refco officers.
Grant Thornton denied wrongdoing. In a statement, the company said it had a 'strong and compelling' defense, but settled to avoid the uncertainty and cost of litigation, and will defend against other claims relating to Refco.
The three Refco officers -- former general counsel Dennis Klejna, former chief executive William Sexton and former Refco Global Futures CEO Joseph Murphy -- settled for $300,000, Monday's filing shows. They separately agreed to forfeit $8.3 million to the U.S. government, it shows.
Investors had alleged that shortly after completing an initial public offering in August 2005, Refco admitted that its financial statements should no longer be relied upon.
According to the lawsuit, Grant Thornton and the Refco officers were responsible for 'materially false and misleading statements' in connection with its IPO, as well as $600 million of notes that helped finance a June 2004 leveraged buyout.
The case is in re Refco Inc Securities Litigation, U.S. District Court, Southern District of New York, No. 05-08626.
(Reporting by Dena Aubin and Jonathan Stempel. Editing by Robert MacMillan) Keywords: GRANT REFCO/ (dena.aubin@thomsonreuters.com; +1-646-223-6325; Reuters Messaging: dena.aubin.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.