NEW YORK (Reuters) – Tone Grant, former president of Refco, once the largest independent commodities broker, was sentenced to 10 years in prison for his role in a $2.4 billion fraud that involved hiding huge trading losses from clients.
His sentence was handed down by U.S. District Judge Naomi Buchwald in Manhattan at a hearing on Thursday. No surrender date was immediately set.
Grant, 64, was the lone top executive at Refco to go to trial. Ex-chief executive Phillip Bennett pleaded guilty in February to 20 criminal counts a month before he was due to go to trial.
Bennett was sentenced last month to 16 years in prison. He is appealing that sentence.
Refco unraveled in 2005, shortly after it became a public company, after revealing that Bennett had hidden $430 million in bad customer debt. Refco stock plummeted and the company filed for bankruptcy.
Judge Buchwald said Grant played a pivotal role in the fraud, rejecting defense lawyers' arguments that Bennett was the main culprit. She said Grant issued “totally false” statements to the public and showed a clear willingness to lie.
Grant “made the choice over and over again to join with Bennett — not to extricate himself from the fraud,” the judge said.
Grant's lawyers, who are planning to appeal his conviction, had asked the judge to impose a lighter sentence of about 3-1/2 years in prison. Prosecutors had sought a prison term on par with the 16 years that Bennett received.
“Mr. Grant continues to maintain his innocence,” Roger Zuckerman, one of his attorneys, said after the sentencing. “We look forward to the appeal.”
Prosecutors say total losses in the fraud totaled $2.4 billion. After recoveries, the losses still exceed $1.5 billion, the judge said on Thursday.
Prosecutors contend that Grant and Bennett's motive in the fraud was to keep the firm afloat in the hopes of one day selling it for a big profit.
Grant was accused of helping to defraud participants in a $1.9 billion leveraged buyout of Refco by private equity fund Thomas H. Lee Partners in 2004, by covering up Refco's true financial health. Grant received $16 million in proceeds from that transaction, as well as the right to share in half of Bennett's profits from any future sale of his Refco stock holdings up to $275 million, prosecutors said.
A year later, the company went public in a $583 million initial public offering.
Grant was convicted in April by a federal jury of five criminal counts — conspiracy, securities fraud, wire fraud, bank fraud and money laundering.
His lawyers have argued that, even if the government's evidence were to be accepted, the evidence shows Grant only played a relatively minor role in comparison with Bennett.
Grant's lawyers also have tried to also draw personal distinctions between the two men.
Zuckerman told the judge that while Bennett spent lavishly on luxury cars, a fancy art collection, a Manhattan penthouse and a New Jersey mansion, Grant lives modestly in a one-bedroom condominium and drives a 10-year-old car.
Grant, trained as a lawyer, saw combat as a Marine in the Vietnam War. His lawyer described good works including Grant's role in community organizations and helping family members.
The judge said, however, that evidence at trial showed a different side of the man. She said she also wanted to send a message that participants in frauds will face consequences.
During the eight-year span of the scheme, “he always had the chance to walk away,” she said.
(Reporting by Martha Graybow; Editing by Andre Grenon and Gerald E. McCormick)