Refco and the IPO Motive

Under Dittmer's stewardship, Refco grew from a small commodities brokerage into an international powerhouse. Shelly Jacobs, a former Refco broker, says Dittmer was the "glue that held the whole place together.''

But Dittmer, who took over Refco from his stepfather, Ray E. Friedman, was also a controversial figure. It was during Dittmer's tenure that the brokerage paid an $8 million fine to settle charges that it had helped manipulate customer accounts. The fine assessed by the Commodity Futures Trading Commission in May 1999 was hefty at the time.

Dittmer's departure was seen by many on Wall Street as part of an effort by Refco to clean up a renegade image. A number of other management changes were effected around this time. In setting with the CFTC, Joseph Murphy, who had just joined Refco as its new president, said, "Refco has begun the process of putting any issues with federal regulators or futures exchanges behind us.''

Refco executives were less vocal about the terms under which Dittmer left the company. A trade publication, Securities Week, reported in December 1999 that Dittmer's separation agreement included a provision that afforded him a lucrative post-departure payout in the event Refco ever went public or was bought.

In its IPO registration statement, Refco reported that within the past year it made an $861.7 million payment to a "former shareholder'' for sale of an interest in the predecessor company. Refco has not identified the shareholder. The payout was reported Friday by the New York Post, though the newspaper said the recipient remains a mystery.

If Dittmer received the money, the payout would cast an interesting new light on Bennett's possible motivation for allegedly concealing the bad debts on Refco's books. At the very least it would help explain why Bennett was worried about the appearance of Refco's books at a time when the company was still seven years away from an IPO.