Firm’s Refco Work Questioned
Posted Jul 12, 2007 08:15 pm CDT
A bankruptcy examiner says Mayer, Brown, Rowe & Maw could face legal claims for drafting documents that helped a commodities trading firm move bad debts off the books.
Refco Inc. collapsed in 2005 after disclosures it used so-called “round-trip loans” to hide debts temporarily before audits or reports. Examiner Joshua Hochberg cited circumstantial evidence that the Chicago-based law firm knew or should have known the transactions were fraudulent, the Wall Street Journal reports (sub. req.).
Hochberg said possible claims against the firm include negligence, aiding and abetting fraud, and breach of fiduciary duty, according to the Wall Street Journal’s Law Blog.
Mayer Brown released a statement saying it disagreed with those conclusions. It said the examiner found no direct evidence that the firm knew the transactions were used to manipulate Refco financial statements, and his suggestion that firm lawyers knew of fraud is “an unwarranted assertion.”