Rogers Discussed Selling Funds' Stake to Refco

Mercorella surfaced in the lawsuit filed this week by the Rogers funds against Refco. The lawsuit alleges that Mercorella was one of several Refco executives who assured Beeland that the funds' assets were being put into segregated accounts with Refco's regulated futures division.

When the alleged fraud at Refco was disclosed, Beeland learned that the assets in the Rogers funds were being held in accounts at Refco Capital Markets, the firm's unregulated prime brokerage business. Refco has been prohibiting customers from withdrawing any funds from its Refco Capital Markets group.

Mercorella and other Refco executives, according to the lawsuit, told Beeland that the Rogers funds' money would be transferred as soon as possible to the futures business. But that apparently never happened, and after the filing it was too late.

Beeland contends that if the assets had been properly deposited in accounts with Refco's futures arm, they never would have become embroiled in the bankruptcy proceeding. That's because the futures business, which Refco is trying to sell, wasn't included in the bankruptcy filing.

The lawsuit lays out a paper trail in which Beeland officials kept asking for verification that the funds were deposited in the right accounts. Refco officials allegedly made repeated assurances to that effect. But in the end, it wasn't the case.