Refco creditors sue Thomas Lee

A trust representing creditors of Refco Inc. has sued the private equity firm that held a controlling stake in the commodities firm brought down in a 2005 scandal.

The lawsuit against buyout firm Thomas H. Lee Partners was filed in U.S. District Court in New York. The complaint alleges that Lee uncovered red flags about Refco before the investment firm’s 2004 purchase of a stake in the company, once one of the world’s largest commodities and derivatives firms. The suit says Lee failed to follow up because it wanted to complete an initial public offering of Refco stock.

Lee issued a statement denying the claims, saying the private equity firm “was one of the victims of a carefully concealed fraud.”

The disclosure nearly two years ago of an improper loan scheme at Refco pushed the company into bankruptcy proceedings and led to criminal charges against former Refco executives, including former chief Phillip R. Bennett.

Last month a bankruptcy examiner said Refco’s legal and audit advisors could face liability. Lee subsequently sued law firm Mayer, Brown, Rowe & Maw over the firm’s alleged role in a coverup at Refco, claiming that the law firm knew about the loan schemes and didn’t inform Lee before it completed its purchase of the Refco stake. Mayer Brown said last month that it would vigorously defend itself.