The ability of U.S. companies and indeed the U.S. government to borrow the large sums that we currently require is based in whole or part in the confidence that the worldwide financial community has in the effectiveness and impartiality of U.S. courts to provide equal justice to all, regardless of nationality
COLCHESTER, Conn. (PRWEB) November 20, 2005
Scott+Scott, LLC (http://www.scott-scott.com), which represents major institutional and individual investors in a securities class action against 28 defendants that allegedly participated in the Refco, Inc. (“Refco”) (OTC: RFXCQ.PK) fraud debacle, filed a more comprehensive and updated complaint on Friday, November 12, 2005 (Case No. 1:05-cv-09611-UA, Weit v. Bennett et al.). The firm first filed a complaint relating to this matter on October 11, 2005, in the United States District Court for the Southern District of New York (Case No. 1:05-cv-08663-DC, FrontPoint Financial Services Fund, LP v. Refco, Inc. et al.). Refco itself is not a named party in the updated complaint.
In Scott+Scott’s updated complaint for the class action – a case that has major international implications – the firm and its clients allege that during the Class Period, certain of Refco’s officers and directors, including now indicted former CEO Phillip Bennett, as well as the Company’s IPO underwriters and independent auditor, violated provisions of United States securities laws by issuing a false and misleading Prospectus to investors as well as making false and misleading statements during the Class Period.
“Although it was the industry leader in its field, Refco appears to have lacked significant financial controls,” notes Scott+Scott partner Neil Rothstein. “It is almost as if Bennett felt he had a gigantic personal Paypal account with which he could do as he pleased, enabling him to zip money here and there around the world on a whim. It is all quite shocking.”
Because investors were deceived out of over $1 billion not just in the United States, but in other countries worldwide, there is significant interest on the part of foreign government officials, international financial regulators, and major foreign financial institutions in the conduct of the litigation.
“Financial institutions around the world were deceived in the fraud and are watching this case and the American judicial system very closely,” says David Scott, a name partner in the well-known securities litigation firm. “At a time when so much skepticism about the integrity and fairness of Corporate America has been expressed around the world, our firm views this case as an opportunity not just to maximize recovery for our clients, but to demonstrate to overseas skeptics that they can still get justice in the American courts.”
The credibility of American courts to foreign investors is not of merely academic interest: Over the past several decades, America has swung from a creditor in the community of nations to a major debtor nation. “The ability of U.S. companies and indeed the U.S. government to borrow the large sums that we currently require is based in whole or part in the confidence that the worldwide financial community has in the effectiveness and impartiality of U.S. courts to provide equal justice to all, regardless of nationality,” says Rothstein.
“The U.S. is currently $7.6 trillion in debt and accelerating at about $9,000 per second,” says Rothstein. Of this debt $4 trillion is owed to the world and foreign investors, not to mention the $9 trillion foreigners own in U.S. financial assets. “In all actuality the U.S. is the world's largest debtor nation,” says Rothstein. “And the reason that other governments and foreign lending institutions are willing to lend to us stems from the fact that they know that our country is a government of law and courts will be diligent in enforcing their legal rights. New laws take time to settle in. With our President’s enactment of the Sarbanes-Oxley Act of 2002, we will eventually begin to see investor confidence grow as the teeth of the law take hold,” adds Rothstein.
Restraining order on $111 million will boost client payback:
As part of its strategy to maximize recovery for its clients, on October 31, David Scott sought and won from the federal court a temporary restraining order prohibiting Bennett from accessing or moving over $111 million in funds that he obtained by selling Refco stock in the firm’s August 2005 Initial Public Offering. The court granted the temporary restraining order freezing these funds in the Oct. 31 hearing, and arguments for a more “permanent” restraining order will be argued by Scott before the court in December.
"Including this $111 million as assets that can potentially be recovered by investors could boost recovery in this litigation by 10% or more," says Rothstein, whose firm has recovered hundreds of millions of assets for clients in its past class action litigation.
Experts say paper trail is often elusive in corporate fraud:
“But even with full document discovery,” says Rothstein, “highly sophisticated corporate officials accused of engineering financial fraud sometimes escape unscathed – because they plan their schemes in advance to take place with no significant paper trail.”
Harvey Kelly, now with AlixPartners, worked for Pricewaterhouse-Coopers when the firm was hired to investigate the fraud at HealthSouth and redo the company’s financial statements, a contract purported to be worth $91 million. According to an article by the Associated Press, Kelly said “it wasn't unusual for someone involved in a fraud to keep his name off documents…” Robert Dangermond, managing director of AlixPartners, LLC, a Refco advisor, has now assumed the position of Refco CEO.
Scott + Scott, LLC:
Scott + Scott, LLC has significant experience in prosecuting investor class actions. It has been lead counsel and is currently lead counsel in such high-profile and technically complicated cases as the General Motors Employee Benefits Case, Halliburton, Royal Dutch/Shell Petroleum ERISA Litigation, Mattel, ImClone and many more. The firm dedicates itself to client communication and satisfaction -- regardless of the size of the individual's financial loss -- and currently is litigating major securities, antitrust and employee retirement plan actions throughout the United States. The firm represents pension funds, charities, foundations, individuals and other entities worldwide.
If you wish to discuss this action or have questions concerning your rights, you may contact the firm for more information. Scott + Scott will provide class members with case materials, answer all questions regarding participation and assist with other services the firm provides. There is no cost or fee to class members. Contact Scott + Scott partner Neil Rothstein (800/332-2259, ext. 22 or cell 619/251-0887). Institutional Investors may also contact the firm at InstitutionalInvestors@scott-scott.com. During morning EST hours, you can also contact the firm at 800/404-7770 or 619/860-537-3818.
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