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How Bennett Pulled off his $500 Million Refco Scam (Thursday, October 20, 2005)

The New York Post explains:

Refco Inc.'s former boss Phillip R. Bennett duped some of the world's most sophisticated financial corporations by hiding almost $500 million in a huge line of credit the bankrupt commodities broker gave to hedge fund Liberty Corner Advisors.
New Jersey-based Liberty Corner had a $5 billion line of credit with Refco that it used to trade fairly low-risk government securities through Refco's prime brokerage unit, Refco Capital Markets, according to people close to the company.

Every quarter, Bennett would transfer the debt onto Liberty's books.

Because of its huge credit line and low-risk trading strategy, the $500 million or so didn't raise any red flags with Refco's outside auditors and other big financial institutions responsible for selling Refco's shares to public investors, according to sources close to the bankrupt firm.

"Liberty's debt would go from $3.5 billion to $3.9 billion every quarter but that's not something that would normally cause alarm," said one source familiar with the company.

Here's an interesting question: What did Liberty Corner execs know and when did they know it?
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Link: http://stocknewsdirect.com/2005/10/how-bennett-pulled-off-his-500-million.html