Monday, October 10, 2005

Refco RFX and receivables -- implications for Dell and others

Wow! Still couldn't believe it, someone actually has the guts to do it. REFCO's shares RFX was slashed 33% for not disclosing a $430mm receivables that was not an arm-length transaction. The receivables was in fact owed by an entity that is controlled by its CEO, Phillip Bennett. The loan thus far has been repaid in full and with accrued interest but the corporate governance has been shreded to pieces.

So what does that leave us? As I was blogging about Dell's hidden receivables, I just could not believe a real case involving this part of the balance sheet actually occurred. I am not saying Dell is actually having these types of loans to its executies but the mere appearance of conflicts of interest is enought to crater investor confidence. Only if DELL would fully disclose its receivalbes operation would serve to calm the investors -- but I guess we wouldn't see those until stock hit $10 or investors start to demand real answers from the board.

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