Ex-US Justice Dept. fraud chief to probe Refco

The U.S. Department of Justice appointed Joshua Hochberg, the former head of its fraud unit, to investigate claims of fraud and other misconduct that may have led to Refco’s bankruptcy filing.

Hochberg, a partner at McKenna Long & Aldridge LLP in Washington, D.C., is a while-collar crime specialist, and helped lead the Justice Department’s response to accounting scandals following the 2001 collapse of Enron Corp.

The U.S. Trustee disclosed the appointment of Hochberg in a Friday filing with the U.S. bankruptcy court in Manhattan.

On March 7, U.S. Bankruptcy Judge Robert Drain authorized the appointment of an independent examiner to investigate Refco, a futures and commodities broker.

Drain had earlier rejected the government’s bid to appoint a trustee to run Refco’s business.

The ruling disappointed creditors who said naming an examiner would increase Refco’s reorganization costs, leaving less money for them. Refco has said it owes $16.8 billion.

An examiner has fewer powers than a trustee. U.S. bankruptcy law allows an examiner to investigate a debtor’s alleged misconduct when it is in creditors’ interest, or when the debtor owes more than $5 million.

Refco filed for Chapter 11 protection from creditors on October 17, one week after saying former chief executive Phillip Bennett hid $430 million of bad debt. The revelation caused an exodus of customers.

Bennett has pleaded innocent to eight counts of conspiracy, fraud and other charges.

Drain on Friday gave final approval for Refco’s hiring of Goldin Associates LLC as its crisis manager. The firm is led by former New York City comptroller Harrison Goldin.