Return to search

TH Lee joins the plaintiff pool

Thomas H. Lee Partners has filed a lawsuit against the former Refco management. The complaint could help shift the public’s perception of the firm from Refco insider to a victim of the futures broker’s deceit.

Thomas H. Lee Partners has reportedly joined the throngs of groups suing to recoup money from the Refco collapse. The Boston firm named former Refco chief executive Phillip Bennet, ex-CEO and president Santo Maggio and former Refco president Tone Grant in the complaint, and accuses the three with defrauding the firm by failing to disclose bad debts to the firm and its advisors.

The suit puts Thomas H. Lee’s loss on the Refco investment at $245 million (€210 million). According to the Wall Street Journal, TH Lee invested $453 million of equity into the futures broker, while due diligence for the transaction cost the firm around $10 million.

The lawsuit, which was filed in a Manhattan federal court, could help to shift the perception of Thomas H. Lee’s role in the Refco affair from insider to victim. The firm was recently named in a separate lawsuit, filed by French businessman Gerard Sillam, which grouped the private equity firm alongside Phillip Bennett in the complaint.

Bennett, meanwhile, was recently charged on federal fraud allegations claiming he masked $720 million in bad debt.

This latest news follows the conclusion of the Refco auction in which Man Group agreed to acquire Refco LLC with a $282 million bid. As part of the deal, Refco LLC will be liquidated through Chapter 7 bankruptcy. Separately, Refco’s foreign currency exchange business will go to Forex Capital Markets, which reportedly agreed to pay over $110 million for the assets.

Refco’s bankruptcy has been valued as the 14th largest in the US, with creditors reportedly seeking around $16.8 billion.

Thomas H. Lee first agreed to acquire the company in June 2004, in a $2.25 billion deal. Refco went public earlier this year, pricing its stock in the offering at $22 a share, which roughly tripled the value of TH Lee’s stake. The investment hit the skids last month when the hidden debts were uncovered. TH Lee was, however, able to take a dividend out during the IPO, recouping a chunk of its original investment.