Updated from 3:52 p.m. EDT

Two months after its $585 million IPO blew out of the gates, Refco ( RFX), the big derivatives brokerage, finds itself embroiled in a painful accounting scandal involving its chief executive.

New York-based Refco said Monday that CEO Phil Bennett took a leave of absence after the company determined it was carrying a $430 million receivable from him without labeling it as a related-party transaction. A Bennett-controlled company ran up the debt by buying a package of hard-to-collect receivables owed to Refco by unrelated third parties.

The good news for Refco is that Bennett, an obviously wealthy man who pocketed more than $118 million in the firm's initial public offering, paid back the $430 million plus interest on Monday. The bad news is that the scandal mauled Refco's shares and left them trading below their $22 offering price for the first time since the Aug. 10 IPO.

The stock closed down $12.96, or 45%, to $15.60. As recently as Oct. 3, the stock was above $30 a share.

A regulatory source says the Securities and Exchange Commission, which is close to sanctioning the firm in a separate matter involving its role in a private stock placement, will probably look into the latest scandal.

One thing regulators could focus on is whether Bennett deliberately hid his role at the company that bought the Refco debt in order to ensure that the IPO went forward. If Bennett's interest in the entity or the poor quality of the underlying receivables were fully disclosed to investors, it's possible the IPO might have priced at a lower valuation.

Refco's IPO was led by Credit Suisse First Boston, Goldman Sachs and Bank of America. A spokeswoman for CSFB declined to comment.

Sources say the underwriters, who are charged with doing their own due diligence before bringing a deal public, only recently learned of the accounting problems.

In a press release, the company said it has retained "independent counsel and forensic auditors" to assist in its internal investigation. The company's normal auditor is Grant Thornton. Refco also said its financial statements going back five years should no longer be relied upon and the filing of its 10-Q for the most recent quarter will be delayed.

In another ominous development for the company, Standard & Poor's lowered its rating on some of Refco's corporate debt, a move that could raise the broker's borrowing costs and sap its trading muscle. S&P, the big ratings agency, said it also put Refco's debt on a "creditwatch" for possible future downgrades.

"The CreditWatch review will focus on the firm's accounting controls and governance as well as on it ability to maintain access to the credit markets,'' S&P said.

The selloff in Refco's stock, meanwhile, is a particularly harsh development for Thomas H. Lee Partners, the Boston-based buyout firm that has a 40% post-IPO equity stake in Refco. Before the IPO, Thomas H. Lee had a 49% stake in Refco, which it acquired in return for a $507 million investment in the brokerage in August 2004. In the IPO, the buyout firm raked in about $165 million.

Thomas H. Lee said Monday that Scott Schoen, its co-president, was named chairman of Refco's reconfigured board.

"Although the receivable in question has been repaid in full by Phillip Bennett, we are very disappointed by this development, both as board members and as investors," Thomas H. Lee said in a statement.

A Refco spokesman declined to comment.

The other big shareholder in Refco is Bennett, who owned 33% of the brokerage's stock after the IPO. Jack Weinberg, Bennett's lawyer, declined to comment.

Both Thomas H. Lee Partners and Bennett were the main beneficiaries of a special, post-IPO $82.2 million dividend paid out by Refco on Aug. 18. The brokerage paid the dividend to all shareholders of record before the stock offering was completed.

Refco paid the special dividend with the proceeds it received from a decision by the underwriters of the IPO to exercise an option to purchase an additional 3.75 million shares.

Bennett wasn't the only top Refco executive placed on a leave of absence Monday. At the request of the firm's board, Santo C. Maggio, the president and chief executive of Refco Securities and Refco Capital Markets, also agreed to go on leave.

Sources say the decision involving Maggio stems from his role in the private placement being investigated by the SEC. But in an interview with Reuters, Schoen, the Thomas H. Lee Partners co-president, said Maggio had "some level of knowledge'' of the entity involving Bennett.

Peter McCarthy has been appointed president of Refco Securities, the company said.

Before its August IPO, Refco warned that Maggio could face a stiff penalty from regulators related to a stock manipulation scheme involving a private stock placement. Refco had previously said Maggio was likely to accept a settlement that would prohibit him from serving in a supervisory role for one year, even though he would still be able to "work for us and Refco Securities in his current capacities."

The regulatory mess stems from a 2003 SEC enforcement action against Rhino Advisors, a defunct investment firm that regulators charged with manipulating shares of Sedona, a tiny Pennsylvania software company, following a $3 million private stock placement in 2001.

Regulators charged that Rhino illegally shorted the stock on behalf of one of its clients, which had purchased a $3 million convertible note from Sedona. The SEC probe of Refco is focusing on the role of two former Refco brokers who handled an account and short sales for Rhino's customer.

As for Refco, the firm says it has established a $5 million legal reserve to cover the cost of a potential settlement.

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