Refco Agrees to Settlement In Shareholder Class Action
August 2010 - If you purchased or otherwise acquired Refco Group Ltd., LLC/Refco Finance Inc. 9% Senior Subordinated Notes due 2012 (CUSIP Nos. 75866HAA5 and/or 75866HAC1) and/or common stock of Refco (CUSIP No. 75866G109) during the period July 1, 2004 through and including October 17, 2005, you might be a member of the settlement class in this action making you eligible for relief in connection with a partial settlement of the action.
On July 30, 2010, the Court preliminarily approved a partial settlement of this class action (the “Settlement”) between the Court-appointed Lead Plaintiffs RH Capital Associates LLC and Pacific Investment Management Company LLC (“Lead Plaintiffs”) and Defendants Ronald L. O’Kelley, Leo R. Breitman and Nathan Gantcher (collectively, the “Audit Committee Defendants”); Thomas H. Lee Equity Fund V, L.P., Thomas H. Lee Parallel Fund V, L.P., and Thomas H. Lee Equity (Cayman) Fund V, L.P. (the “THL Funds”); Thomas H. Lee Partners, L.P. (“THLP”), THL Equity Advisors V, LLC, Thomas H. Lee Investors Limited Partnership and The 1997 Thomas H. Lee Nominee Trust (collectively, the “THL Entities”); and Thomas H. Lee, David V. Harkins, Scott L. Jaeckel and Scott A. Schoen (collectively, the “Individual THL Defendants” and together with the THL Entities and the THL Funds, the “THL Defendants”).
The Settlement provides that Settling Defendants will cause $130,000,000 to be paid to the Settlement Class in cash and also provides for the possible payment of an additional payment of up to $10,000,000 as described in the Stipulation and Agreement of Settlement entered into by and between Lead Plaintiffs and the Settling Defendants, dated March 29, 2010 and amended on May 3, 2010 (the “Stipulation”)
December 2007 - A Second Amended Consolidated Class Action Complaint (the “Complaint”) was filed in the Action on December 3, 2007, a little more than two months after completing an Initial Public Offering, Refco admitted that its financial statements “should no longer be relied upon” given a previously undisclosed receivable owed to the Company by an entity owned by its Chief Executive Officer, Phillip Bennett (“Bennett”). The Complaint further alleges that while this admission only partially revealed the true extent of the problems at the Company, it set into motion a chain of events and subsequent disclosures that led to Refco’s bankruptcy filing.
The Complaint alleges that the THL Defendants who invested in Refco in June 2004 in a leveraged buyout (the “LBO”) and the Audit Committee Defendants are responsible for the materially false and misleading statements made by the Company in connection with bonds issued by Refco as part of the LBO and subsequently in Refco’s August 2005 Initial Public Offering and that these false and misleading statements caused the price of Refco securities to be artificially inflated, causing investors who purchased such securities during the Class Period to suffer damages.