Peter F. James had been working at Refco less than two months when he noticed something this summer that teams of accountants had apparently missed for years.

Mr. James, a recently hired employee in the controller's office, wondered why a larger-than-normal interest payment had been made to Refco on an outstanding loan made by the company. In August he started to ask questions, eventually taking his concerns to the chief financial officer, Gerald M. Sherer. The answers would lead to the departure of the chief executive and the rapid unraveling of the company that prompted its filing for bankruptcy protection last week.

"He's the hero in discovering this," a person close to the investigation said of Mr. James. "He just kept pushing." Mr. James declined to comment for this article.

Mr. James had been hired by Mr. Sherer, who himself came to Refco only in January, to help bolster the firm's financial operations. Mr. Sherer had alerted the board to problems with Refco's internal controls - the practices or systems for keeping records and preventing abuse or fraud. That weakness was disclosed in Refco's regulatory filings before its initial public offering in August.

Now, questions are mounting over why others - among them, the company's auditor and the underwriters that took Refco public in August - never discovered what Mr. James did.

The collapse of Refco has been a black eye particularly for Thomas H. Lee Partners, the private equity firm that bought a majority stake in Refco in August 2004.

Before Oct. 10, when Refco disclosed that its chief executive had hidden $430 million in debt for years, the Refco investment seemed like another quick, bold and successful bet by the Lee firm, perhaps best known for buying Snapple for $135 million in 1992 and selling it two years later to Quaker Oats for $1.7 billion. When Refco went public this summer, its shares surged 25 percent on the first day of trading.

Now Refco's collapse has come at an awkward time for Lee. The firm, based in Boston and one of the oldest in the buyout business, has been making a transition from the leadership of its founder, Thomas H. Lee, to three handpicked successors: Scott A. Schoen, Scott M. Sperling and Anthony J. DiNovi.

At the same time, it has begun trying to woo some of the nation's largest pension funds, among other investors, to take part in a new $7.5 billion buyout fund it plans to raise early next year. The fund would be the sixth such pool raised in Lee's 31-year history, and the first raised exclusively under the leadership of the three co-presidents.

Mr. Lee, 61, an amiable billionaire who has been gradually scaling back his role at the firm in recent years, will not be involved in raising the new pool and will have no role in investing the money, a person briefed on the firm's plans said. Even assuming that its Refco investment will be wiped out, Lee investors are still looking at hefty profits on the last investment fund, with returns of more than 30 percent before taking fees into account, a person briefed on the performance said.

Among the latest Lee fund successes have been deals involving Warner Music, TransWestern Publishing and National Waterworks, in which it earned three times its money or more.

That enviable track record should have made it easy for Lee to raise the new fund, at a time when competitors like the Blackstone Group and Warburg Pincus are raising even larger pools of capital. But the process may be delayed, investors and competitors said, as the partners struggle to explain how the Refco debacle happened on their watch.

"Either Tom Lee and partners are victims of fraud or they dropped the ball in terms of due diligence," said William Atwood, executive director of the Illinois State Board of Investment, which has put $35 million into the latest Lee fund. "Today, we don't know which it is. This is not a good time to come to market with a new fund."

Officials at the firm declined to comment, citing regulatory restrictions on speaking about fund-raising.

The oversize interest payment that Mr. James noticed had its roots in a bad receivable - money due to Refco - from clients adversely affected by the Asian financial crisis of the late 1990's, according to a person briefed on the investigation.

Perhaps out of concern about the effect of the uncollectible obligations on Refco's profitability, at some point the debtors' obligation was transferred to Refco Group Holdings Inc., a company that was partly and later wholly controlled by Refco's chief executive at the time, Phillip R. Bennett.

At the start of every quarter, Refco Capital Markets would extend loans to several hedge funds, including Liberty Corner Capital Strategies. The hedge funds would pay interest on those loans, which was recorded in Refco's financial documents and whose existence was confirmed, every quarter that it was checked, by Refco's auditor.

The next two steps were not apparent to the auditor a few days into the quarter: a loan from the hedge funds to RGHI, Mr. Bennett's company, and effectively a second loan, from Refco to RGHI. Mr. Bennett's company used the loan to repay the hedge funds, plus interest. Before the end of the quarter, the hedge funds would repay the obligation to Refco. The effect of the transaction was to convert, for bookkeeping purposes, an obligation by RGHI to Refco into an obligation by the hedge funds to Refco every time an auditor might look. But during the quarter, RGHI held the obligation to Refco.

The complexity of the transaction, the fact that it was carefully timed and that legitimate-seeming aspects of it could be verified made it hard to spot, a person briefed on the investigation said. "This isn't a needle in a haystack," this person said. "It's a needle in a pile of needles."

And Kevin Marino, a lawyer for Liberty Corner, said: "When you believe these are both subsidiaries of Refco, your only concern is the risk. The risk that Refco Group Holdings Inc. goes bankrupt is why you indemnify. The risk that the parent goes out of business is why there is risk."

For now, there is little that Mr. Lee and his partners can tell investors about Refco, which is the subject of federal investigations and numerous shareholder lawsuits. The partners are in the difficult position of having to say nothing even as they try to pitch the new fund.

Lee's investors include some of the nation's largest pension funds, including the California Public Employees' Retirement System, which committed $200 million. (A spokesman for Calpers declined to comment.)

A day after Refco disclosed the hidden $430 million, senior Lee executives met with Hamilton Lane Advisors, whose clients have had money with Lee since the early 1990's. At the meeting were two of Lee's three co-presidents, Mr. Sperling and Mr. DiNovi.

"They seemed very much in control," said Erik R. Hirsch, chief investment officer at Hamilton Lane. "They said they had a game plan in place."

At the time of the meeting on Oct. 11, Lee's investors were still showing a profit on their remaining Refco stake. But within days, Mr. Bennett was indicted on a securities fraud charge, and Refco soon filed for bankruptcy protection.

"We are still waiting to hear what happened," said Mario L. Giannini, chief executive of Hamilton Lane. Yet he noted, "This is a group with a history of strong performance."

The Lee partners are likely to face tough questions at their annual meeting with investors in Boston next month. One question the investors may have is Lee's ability to invest in complex financial companies, given its losses in Refco and the $440 million it lost on Conseco, an insurance holding company that filed for bankruptcy protection.

Mr. Giannini said he thought there was no pattern in the Conseco and Refco blowups, but that the coincidence did raise "an interesting question" about what sort of risks are involved in the buyouts of financial services companies.

Lee did have several earlier successes with financial companies like HomeSide Lending, a mortgage company, and Experian. It has also made tens of millions of dollars on Axis Capital and Endurance Specialty Holdings, two insurance companies formed after the terrorist attacks of September 2001.

But Lee's pursuit of Refco came after many on Wall Street had already chosen to pass up making a bid for the firm.

In 2003, Pershing, a unit of Credit Suisse First Boston that offered clearing services for equities, was sold to Bank of New York for $2.5 billion, an indication that greater value was being placed on such services. Lee had taken a preliminary look at Pershing. That year same year, Mr. Bennett approached investment bankers about selling Refco. The bankers canvassed Wall Street, trying unsuccessfully to find an industry buyer.

A senior Wall Street executive who attended a meeting where Refco was pitched said that the biggest concern was that it cleared transactions for many small customers in the United States and overseas whose practices might pose a risk to Wall Street firms.

Other buyout firms, including Blackstone and Kohlberg Kravis Roberts & Company, also looked at Refco. But Lee saw an opportunity. In December 2003, bankers, Refco executives and executives from Lee spent a day getting to know the company, a person who attended the meetings said.

Negotiations continued through the first half of 2004. Lee brought in advisers, including the accounting firm KPMG, to examine Refco's financial data, among other due diligence efforts. In August 2004, Lee invested $453 million in equity and raised $1.4 billion in bank debt and bonds to finance a buyout of the company.

A spokesman for Lee said the firm stood by its due diligence efforts, which took place over a seven-month period. "The firm has conducted in-depth due diligence before making each of its over 90 investments since 1974," the spokesman said, "and Refco was no exception."

Lee spent $10 million hiring an army of advisers including KPMG and others, who "conducted an exhaustive due diligence investigation, including speaking with numerous third parties who had done business with Refco and Bennett."