Grant Thornton LLP will face a class-action lawsuit for allegedly failing to detect the accounting scandal at commodities and futures broker Refco Inc.
A class-action lawsuit filed in a New York federal district court blames Refco auditor Grant Thornton for issuing misleading statements about the company's financial results in support of Refco's $583 million initial public offering in August. Refco, as well as its two top officers and underwriters, were also named in the suit.
Last week, Refco announced that former chief executive Phillip Bennett had transferred about $430 million in debts to an entity he controlled in an apparent attempt to bolster financial results. The company said that its financial statements since 2002 shouldn't be relied upon, and that the debt transactions had been hidden at the end of quarterly and annual reporting periods by transfers to a third-party customer -- those debts are most likely uncollectable and stretch back to 1998.The Securities and Exchange Commission has reportedly launched an inquiry into Refco. M ajor investors in the company include General Motors' retirement funds and New York State's pension system.
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