Bloomberg News

Ex-Refco Lawyer Guilty of Aiding $2.4 Billion Fraud

November 17, 2012

Joseph Collins, Refco Inc.’s former outside lawyer whose 2009 fraud conviction was reversed in January, was again found guilty by a jury in federal court in Manhattan.

Jurors convicted Collins on seven out of 10 criminal charges against him after a four-week retrial. Prosecutors claimed Collins helped Refco Chief Executive Officer Phillip Bennett and other executives defraud investors of $2.4 billion.

“Even though we found him guilty, he was lucky to have us,” Andrea Brennan, Juror No. 9, said after the verdict was delivered yesterday afternoon, on the fifth day of deliberations. “We really agonized over this. People didn’t sleep.”

Jurors found Collins guilty of one count of conspiracy and two counts each of securities fraud, wire fraud and filing false statements with the Securities and Exchange Commission. He was acquitted of bank fraud and two wire-fraud charges. Brennan said that at no time during deliberations did any of the jury members argue Collins was innocent of all the charges.

U.S. District Judge Loretta Preska set Collins’s sentencing for March 20. He faces as long as five years in prison on the conspiracy charge and as long as 20 years on each of the other charges.

Improper Instructions

The new trial had been granted by a U.S. appeals court, which ruled that the judge in the first trial improperly instructed a deliberating juror outside the presence of Collins’s lawyers.

Prosecutors at the second trial accused Collins of helping New York-based Refco’s management hide transactions that concealed losses.

“Over and over and over again, Collins ignored his duties as an officer of the court by actively participating in the crimes of his client -- telling blatant lies, falsifying important documents and concealing others,” Manhattan U.S. Attorney Preet Bharara said in a statement yesterday. “In addition to the staggering losses and financial disarray caused by his actions, Collins gave the legal profession a black eye.”

Collins, formerly with the Chicago law firm Mayer Brown LLP, 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 this year.

Refco Collapse

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.

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.

Bennett is serving a 16-year sentence. His ex-partner, Tone Grant, is serving 10 years following a conviction at a trial.

In the first trial, Collins was convicted of five counts, including two counts of wire fraud, two counts of securities fraud and one count of conspiracy. Jurors were unable to reach a verdict on nine other charges. Before his conviction was reversed, Collins was sentenced to seven years in prison.

The case is U.S. v. Collins, 07-cr-1170, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in New York at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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