TH Lee, underwriters named in suit

French businessman Gerard Sillam has named Thomas H. Lee Partners and the underwriters of Refco’s IPO in a recent lawsuit.

With the conclusion of the Refco auction, Thomas H. Lee Partners will likely face a backlash from the collapse. The firm was recently named along with 39 other defendants in a lawsuit levied by French businessman Gerard Sillam.

The lawsuit, according to reports, alleges that TH Lee misled investors in its IPO documents, and names the firm and partners Thomas Lee and Scott Schoen in the claims. Others fingered by Sillam’s suit include former Refco head Phillip Bennett, accounting firm Grant Thornton, and IPO underwriters Credit Suisse First Boston, Goldman Sachs, and Bank of America.

According to the Wall Street Journal, Sillam’s ties to Refco stem from work he did for the company in 1999, when he claims to have helped Refco establish its European securities arm. He is seeking roughly $800 million that he said he is owed and another $600 million for punitive damages.

The news closely follows the conclusion of the Refco auction in which Man Group agreed to acquire Refco LLC with a $282 million bid. As part of the deal, Refco LLC will be liquidated through Chapter 7 bankruptcy, and Man Group will assume the unit’s customer accounts, thus shielding it from the company’s legal liabilities.

Separately, Refco’s foreign currency exchange business will go to Forex Capital Markets, which reportedly agreed to pay over $110 million for the assets.

Refco, a publicly held portfolio company of Thomas H. Lee Partners, collapsed last month after its head Phillip Bennett disclosed that he had masked $430 million of debt. Soon after, the company filed for bankruptcy protection. Greenhill & Co. was hired as Refco’s sole advisor, and ran the auction for the company’s assets.

TH Lee first acquired Refco last summer, then floated the business in an IPO that, on paper, roughly tripled the value of its investment. TH Lee was able to take out a dividend that allowed it to recoup nearly all of its original capital.

The company’s former chief, Bennett, has been charged with securities fraud.