Ex-Refco Lawyer Gets Year for Aiding $2.4 Billion Fraud

Joseph Collins, Refco Inc.’s former outside lawyer, was sentenced to a year and a day in prison for helping ex-Chief Executive Officer Phillip Bennett and other company officials defraud investors of $2.4 billion.

U.S. District Judge Loretta Preska in Manhattan today also imposed two years of supervised release on Collins, who was convicted at a retrial last year after his 2009 fraud conviction was reversed. In passing sentence, Preska cited the defendant’s history of charitable works.

“There’s no doubt that, but for this matter, Mr. Collins is a certifiable saint,” she said “In this case, a lengthy prison sentence is not necessary.” She also allowed Collins to remain free pending appeal.

Once the biggest independent U.S. futures trader, Refco collapsed in 2005 two months after raising $670 million in an initial public offering. Refco Inc., as it was known after the IPO, filed one of the biggest bankruptcies in U.S. history after disclosing that it had transferred more than $1 billion in losses to a firm owned by Bennett.

Collins was found guilty in November of one count of conspiracy and two counts each of securities fraud, wire fraud and filing false statements with the U.S. Securities and Exchange Commission. He was acquitted of bank fraud and two wire-fraud charges.

No Knowledge

Formerly of the Chicago law firm Mayer Brown LLP, Collins claimed he had no knowledge of the fraud, which he said was set in motion and concealed by Bennett and senior executives Robert Trosten and Santo Maggio. All three men pleaded guilty. Trosten and Maggio agreed to cooperate in the case against Collins. Maggio died last year.

Bennett is serving a 16-year prison sentence while his former partner, Tone Grant, is serving 10 years. Preska said that in her view the other men were “Refco insiders” while Collins hadn’t been directly involved in orchestrating the scheme or profited from it in any way.

Prosecutors claimed Collins drafted legal documents that allowed Bennett to deceive investors and helped him transfer losses to the Bennett-owned firm. Mayer Brown wasn’t accused of wrongdoing.

Alleged victims of the scheme included Boston-based Thomas H. Lee Partners, which paid $507 million for a 57 percent stake in Refco in 2004.

The retrial was granted by a U.S. appeals court after it found that the judge in the first trial improperly instructed a deliberating juror outside the presence of Collins’s lawyers.

The case is U.S. v. Collins, 07-cr-01170, U.S. District Court, Southern District of New York (Manhattan).

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