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Refco Former CFO Indicted

Robert Trosten is charged with aiding the big fraud.

Federal prosecutors announced the indictment of



former CFO on Tuesday, a little more than a year after the New York commodities brokerage collapsed in an accounting scandal and Refco's then CEO was charged with master-minding the scheme.

Prosecutors charged Robert Trosten with helping former Refco CEO Phillip Bennett hide hundreds of millions of dollars in bad debts from the broker's auditors and investors. The charges against Trosten were part of an amended indictment filed against Bennett, which adds several additional new charges against Refco's former chief executive.

The filing of the new indictment adds few new details to the Refco scandal, which quickly unfolded last October--just two months after Refco went public in a $583 million IPO backed by Boston buyout firm Thomas H. Lee Partners.

TH Lee Partners engineered the $1.9 billion leveraged buyout of Refco in August 2004. Prosecutors allege that Bennett, who was originally indicted a year ago, along with Trosten, defrauded TH Lee Partners about the true financial health of the brokerage.

Trosten is scheduled to be arraigned in Manhattan federal court on Wednesday. His attorney, Robert Morvillo, says Trosten "denies that he intentionally engaged in any fraud and looks forward to establishing his innocence at trial.''

Prosecutors allege that Trosten received a $48 million payout in conjunction with LBO.

David Frankel, one of the attorney's representing Bennett, declined to comment.

Bennett, who pleaded innocent to initial indictment, is free on bail awaiting a March trial on the securities fraud charges.

For months now, federal prosecutors have told the judge overseeing the case that they intended to file a superseding indictment. The indictment, however, had been expected to be filed sometime next month.

Legal sources speculate that additional parties may still be indicted in the Refco scandal, or enter guilty pleas. There's also speculation that Trosten was indicted after talks about a possible plead deal broke down. Morvillo declined to comment.

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In the newest indictment there's no mention of Santo Maggio, Refco's former president, who has been cooperating with federal authorities ever since the scandal broke. The attorneys for Maggio could not be reached for comment.

Earlier this year, federal authorities negotiated an agreement with Austria's Bank fur Arbeit und Wirtschaft, or Bawag, which once had a significant ownership stake in Refco and allegedly helped Bennett hide nearly $750 million in bad debts and receivables. As part of the deal with prosecutors, Bawag agreed to pay at least $675 million in restitution and turn over a mountain of documents to aid the investigation.

Bawag had a secret deal with Bennett and Refco that entitled it to a larger then publicly-acknowledge payout from the 2004 LBO. Authorities allege the Austrian bank got nearly $800 million of the proceeds from the LBO.

Refco's beleaguered shareholders, meanwhile, are suing TH Lee and the three Wall Street firms--

Bank of America

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Credit Suisse

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Goldman Sachs

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--that were the underwriters on the IPO.

Prosecutors, however, have portrayed TH Lee as a victim of Bennett and Trosten.