Slamming Mayer, Brown, Rowe with a lawsuit, Tommy Lee is alleging the law firm assisted Refco in a fraud cover-up. Out for blood, the buyout firm (which owned a stake in Refco before it imploded) wants $245 million for its troubles.

Buyout firm Thomas H. Lee Partners LP, whose purchase of a stake in commodities firm Refco Inc. ended badly, yesterday sued law firm Mayer, Brown, Rowe & Maw LLP over the firm's alleged role in a coverup at Refco.

In 2004, Lee acquired a controlling stake in Refco, once one of the world's dominant commodities and derivatives-trading firms. Yet the next year, Refco said an internal review had uncovered an improper loan scheme, a finding that led to the discovery of multiple sham loan transactions to hide customer losses. The disclosure led to Refco's seeking bankruptcy protection.

Lee's lawsuit, and a bankruptcy examiner's report published this month, allege that Chicago-based Mayer Brown handled 17 loan transactions that helped Refco shift bad loans off its books. Lee's main claim: Mayer Brown knew about the bogus transactions and didn't inform Lee when the buyout firm was conducting due diligence before its 2004 purchase.

Mayer Brown "repeatedly misled the THL funds in connection with the 2004 purchase by both hiding and denying the existence of a series of virtually identical sham related-party transactions," Lee's lawsuit claims.

(Continue reading this story on Wall Street Journal)

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