NEW YORK, Oct 17 (Reuters) - Financial services companies beware: The fast meltdown of futures and commodities broker Refco Inc. (RFX.N: Quote, Profile, Research) may cause investors to think twice before making bets on similar types of ventures.
The crisis at Refco in the past week has happened even as new U.S. financial reporting rules and increased auditor oversight -- the result of a wave of scandals at companies such as Enron and WorldCom in 2001-2002 -- were supposed to have better protected shareholders from such debacles.
There have also been plenty of hard looks at the behavior of executives throughout corporate America in recent years, as witnessed by the high-profile criminal trials of one-time highflyers like WorldCom's Bernard Ebbers and Dennis Kozlowski of Tyco International Ltd. (TYC.N: Quote, Profile, Research)
Still, New York-based Refco's former chief, 57-year-old Briton Phillip Bennett, managed to escape heavy scrutiny while building up Refco and even during its initial public offering of shares.
He was charged with securities fraud last week over allegations he hid about $430 million in company debt. Bennett's lawyer has said there is "no justification" for his client's arrest.
This one has lot's of people sick to their stomach and more are going to be checking in to the local clinic before this one is over. Everyone will be pointing fingers and wondering why SOX didn't save the day. The truth of the matter is Mr. Bennett is a true master at "Social Engineering" and was able to use his power to do the same thing that others in a position like his have done in the past. The finance industry is built on trust and this will be another lesson on why due diligence on a 24 x 7 basis is a harsh neccesity.