Squandered Futures

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In recent years Bennett had improved Refco's record, but his handling of Refco's IPO may have been reckless in more ways than one. Not only did Bennett fail to disclose $430 million--more than double last year's net income--that would never be collected (believed to be the result of hedge-fund clients who didn't pay up after bad trades), but he also went ahead with the IPO even though his top lieutenant, Santo Maggio, was under investigation by the SEC in connection with a stock-manipulation scheme that had driven software firm Sedona into the ground. Refco disclosed the investigation when it went public, saying the case would be resolved. But it never was, raising questions as to whether the IPO should have proceeded with Maggio on board. As for Bennett's debt maneuverings, says futures broker James Mound: "You wonder why someone so wealthy, in such a powerful position, would do something so immoral." Prosecutors aim to find out, but Refco customers weren't waiting. They scrambled last week to take their business elsewhere in an exodus that may bring down the house of Refco.