Two international law and accountancy firms have been named as potential targets for litigation over their roles in the 2005 collapse of futures broker Refco.
Lawyers Mayer, Brown, Rowe & Maw and Weil, Gotshal & Manges, were identified alongside accountants Ernst & Young and Grant Thornton in an independent report into Refco’s bankruptcy published last night.
The report said Mayer, Brown and the two accountants could possibly be sued for professional negligence while Weil, Gotshal & Manges could be sued for failing to use appropriate care while acting for Refco.
Grant Thornton was Refco’s auditor and Ernst & Young tax adviser.
Refco filed for bankruptcy in October 2005, a week after it emerged that Philip Bennett, its former chief executive had hidden hundreds of millions of dollars in debt.
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According to US press reports, Mayer, Brown advised Refco on a series of counterfeit loans designed to hide its debt. The report said there was significant evidence that the law firm, based in Chicago with large offices in New York and London, “knew or should have known” that the transactions were fraudulent.
Mayer, Brown rejected the report and said it would show it had “acted properly and adhered to the highest ethical standards.”
Weil, Gotshal said its work was carried out “thoroughly, professionally and conscientiously”.
Ernst & Young and Grant Thornton also issued statements defending the work they did for Refco.