URBANE banker or crook, call Phillip Bennett what you want, but those who have met him are starting to realise they never knew the man beneath the sharp suits.

Until last weekend Bennett was chairman and chief executive of Refco, one of the world’s biggest futures brokers. Today he is chairman of nothing, under house arrest and the former dollar billionaire will be lucky if he is left with a billion dimes.

The British-born Cambridge graduate is at the centre of a scandal that could turn his firm to vapour. It floated two months ago for more than $2.8 billion (£1.6 billion), but thanks to Bennett its figures were a con.

Underneath it all, Refco is a sound business — trading futures is one of the financial market’s growth areas, expanding at about 25% a year.

Unfortunately, Bennett seems to have cooked the books, and therefore its value was grossly inflated. It appears he let the good trades go through to profits and in effect hid the bad ones — totalling $430m — in a cupboard.

Refco has always had a reputation as a sharp trader — it gave low-grade clients aggressive margins, and had a chequered regulatory history and poor compliance. At the same time some clever people joined the firm and left pretty swiftly.

But in a rising market, investors are prepared to overlook such matters and they dived in, comforted by the fact that Bennett was not selling shares.

It has been a painful lesson, but the collateral damage Refco’s collapse will cause is of equal concern. Grant Thornton, the accountant, is yet again in the thick of it. This time it is the American, rather than the Italian office. Refco’s advisers, Goldman Sachs and Credit Suisse First Boston, face long legal battles, and the fragile trust between financial advisers and investors will be stretched even further.

The fall-out is not limited there. New York and London have been waiting for just such a train wreck, and this will highlight the ridiculously thin margins some banks are prepared to lend at. The head of the Austrian bank that agreed to take Refco shares to enable Bennett to pay off the debt should stick to yodelling.

Refco is a parable for our times. Its business involves broking layers of financial derivatives. But the man in the street would be amazed by the speed with which it collapsed and how a firm based on hundreds of millions of dollars of goodwill is worth nothing if a key member of staff plays foul.

Exchange of views

CLARA FURSE, chief executive of the London Stock Exchange, is not a woman who is easily ruffled. She has already seen off the takeover advances of her German peer Deutsche Börse, and the putative attempt by Euronext, its continental rival, to merge with the LSE also looks to be running into a strong headwind.

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