Now in Legal Rebels:
Posted Aug 23, 2007 09:45 pm CDT
A court-appointed trustee for creditors of Refco Inc. is now seeking $2 billion from defendants, including Mayer Brown Rowe & Maw, in a lawsuit over a 2005 initial public offering of the commodities firm.
The suit, filed Tuesday in Illinois state court in Chicago, and the trustee, Marc S. Kirschner, contend that the 1,500-lawyer Chicago-based law firm, along with two accounting firms and several of the company’s investment banks, played a role in creating an illusion that the commodities broker was in far better shape financially than it in fact was, according to the Associated Press and the Wall Street Journal (sub. req.). That illusion allegedly permitted Refco insiders to profit—and the professional firms to receive fat fees—at the expense of the company’s creditors and investors.
“The Refco insiders’ looting of Refco was not a simple, straightforward theft,” the suit says. “With the active assistance of the company’s auditors and legal and financial advisers, the Refco insiders and their cohorts devised an elaborate scheme through which they maintained the illusion that Refco was a highly successful, financially secure broker-dealer.”
Mayer Brown said in a written statement that it was “disappointed” to be named as a defendant and described the suit as “premised upon the bankruptcy examiner’s report which acknowledged that ‘several significant factual and legal defenses are potentially available to all parties against whom claims may be asserted’,” reports Legal Week. “We intend to assert all available defenses and defend ourselves with vigor,” the statement continues.
Another defendant, accountant Grant Thornton, said in a written statement reported by AP that “Refco perpetrated a fraud which both benefited themselves and ultimately brought about their own downfall,” but criticized the suit as an attempt to “seek both scapegoats and deep pockets.”
Other defendants reportedly could not be reached or declined comment because they had not seen the suit.
Mayer Brown has previously been sued concerning its work for Refco, but Tuesday’s suit is reportedly the biggest such action to date. There has been a morass of litigation over Refco, involving multiple plaintiffs and defendants; a partial scorecard was provided earlier this month by the Wall Street Journal Law Blog.