Firms face Refco fraud action

Two accountancy firms face threats of legal action over their role in alleged
fraud at Refco.
Joshua Hochberg, the US examiner investigating the collapsed broker’s bankruptcy
case, has told Refco’s creditors they have strong claims for professional
negligence against Ernst & Young and Grant Thornton, alongside US law firm
Mayer, Brown, Rowe & Maw, according to

Refco filed for bankruptcy in October 2005, a week after it was revealed that
Phillip Bennett, its former chief executive, had disguised a $430m (£215m) debt
he owed to the company.
E&Y, which provided tax advice to Refco but resigned in 2003, said: ‘We
believe our tax work fully complied with professional standards.’ The firm added
it resigned after Refco’s former management refused to allow the firm to meet
with its outside auditors.
Grant Thornton, which served as Refco’s auditor, said: ‘Our audit work met
professional standards and statements by the examiner for the bankruptcy estate
do not reflect the context or the facts as we know them to be.’

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