Former

Refco

(RFXCQ)

CEO Phillip Bennett can thank his former top deputy Santo Maggio for his quick arrest last October.

A tape recording made by former Refco President Maggio appears to have shifted federal prosecutors into high gear; they arrested Bennett on Oct. 12. He was picked up just two days after Refco revealed that its former CEO allegedly concocted a scheme to conceal hundreds of millions of dollars of bad debts rung up by customers of the now-bankrupt commodities brokerage.

The tape recording, made the evening of Oct. 10, consisted of a conversation between Maggio and Bennett, in which the former CEO talked about traveling to Vienna in two days, according to court filings and people familiar with the investigation. The tape, made with the knowledge of federal prosecutors, covered a phone call between the two men that took place several hours after Refco disclosed the debt-hiding scheme.

At Bennett's bail hearing on Oct. 12, prosecutors discussed the broad outlines of the taped conversation, but never disclosed who recorded it. They referred to the person only as one of Bennett's "colleagues.''

TheStreet.com

has learned that Maggio was secretly tape-recording his former boss. Prosecutors were concerned Bennett was a flight risk because he was traveling to Europe to go on a wine-tasting trip with the then-CEO of

Bank fuer Arbeit und Wirtschaft

, the Austrian lender that is emerging as a critical player in the Refco scandal.

An exhibit to a recent court filing in the criminal case against Bennett makes clear that the mysterious colleague was Maggio. The filing notes that last December prosecutors turned over a copy of the tape to Bennett's defense team. The filing refers to the piece of evidence as "Bennett/Maggio Taped Conversation on 10/10/05.''

People familiar with the investigation say Maggio's cooperation with federal authorities began a few days before the brokerage's Oct. 10 announcement about the Bennett scheme. Maggio's cooperation with the investigation has been no secret, but most believed it started after Bennett's arrest.

Sources say Maggio may have made contact with prosecutors as early as Oct. 7, when he and Bennett first learned that Refco's board was planning to suspend them over the alleged debt-hiding scheme. The board notified the executives of their decision after an internal investigation found Bennett had been concealing at least $430 million in uncollectible debts in a separate company under his control.

Scott Hershman and Paul Shechtman, the lawyers representing Maggio, did not return phone calls. Bennett's attorney, Gary Naftalis, declined to comment. Assistant U.S. Attorney David Esseks did not return a phone call.

Esseks, at the bail hearing, said authorities were concerned that Bennett's trip to Europe might be an attempt to escape prosecution. He told the judge the tape "is what prompted us to move as quickly as we did.''

Naftalis, meanwhile, did his best to try to downplay the trip, calling it a prearranged wine-tasting excursion with officials from Bawag, as Austria's fourth-largest lender is commonly known. Bennett's attorney, however, didn't disclose that one of the officials was Bawag's then-CEO Johann Zwettler.

On the day Refco disclosed the scandal that led to its ruin, Bawag, a one-time minority investor in Refco, came through with a last-minute, $410 million loan that enabled Bennett to pay off the $430 million in uncollectible debts he had been hiding. Zwettler was the bank official at Bawag who approved the unusual loan.

Zwettler ultimately was forced to resign from the bank because of controversy over the loan, which had been secured by shares Bennett owned in Refco. Those shares became worthless when Refco filed for bankruptcy a week after Bennett's arrest.

But in the six months since Refco imploded in scandal, more questions have emerged about Bawag's involvement with Refco.

Documents filed in the Bennett criminal case and the Refco bankruptcy indicate that prosecutors are paying a lot of attention to Bennett's and Refco's relationship with Bawag. One thing prosecutors are focusing on is "tax issues'' involving Bawag and Refco Group Holdings Inc., the separate entity that authorities allege Bennett used to conceal up to $720 million in bad customer debts.

Last month, Bawag stunned European investors when it disclosed that it, too, had been hiding enormous trading losses, just like Refco. Bawag said it had shifted about $1.2 billion in losses to six obscure, Anguilla-based companies and several brokerage accounts at Refco. The bank says it eventually wrote off all its bad debts by the end of 2005.

Meanwhile,

TheStreet.com

recently reported that Bawag's one-time ownership interest in Refco may have been far greater than the 10% equity stake that it always had claimed.

Documents obtained by

TheStreet.com

, and conversations with people familiar with Refco indicate that Bennett and Bawag engineered a 2003 deal that gave the Austrian bank the economic rights to share in the proceeds from any eventual buyout and IPO of Refco. The deal, which involved a company called DF Capital, purportedly entitled Bawag to a greater payout than the estimated $190 million it stood to receive in the $1.9 billion buyout of the brokerage by Thomas H. Lee Partners in 2004.

A person familiar with Refco said Bawag's effective equity interest in Refco was at least 20% with the DF Capital arrangement. If that's true, it means Bawag walked away with at least $380 million from its 1999 investment in Refco.

Bawag officials have not responded to repeated inquiries about the DF Capital arrangement.