Subject: [NEXTEL-1] MERRILL LYNCH: SEC Files Securities Charges Over Role in Enron Collapse

From: "marcel_rf1" <[email-masked]>
Date: Thu, 27 Mar 2003 16:38:19 -0000

MERRILL LYNCH: SEC Files Securities Charges Over Role in Enron 
Collapse
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Merrill Lynch & Co., Inc. and four of its former executives face 
charges
filed by the United States Securities and Exchange Commission (SEC), 
over
its role in helping Enron Corporation artificially inflate its 
profits, in
the United States District Court in Houston, Texas, Reuters reports. 
The
complaint states, "Merrill Lynch and its former executives aided and 
abetted
Enron Corp.'s earnings manipulation by engaging in two fraudulent 
year-end
transactions in 1999."

The investigation centers on a deal between Enron and Merrill Lynch 
over
power-generating barges in Nigeria and a series of trades between 
Enron and
Merrill's energy trading division. Enron allegedly used the 
transactions to
pad its 1999 fourth-quarter income by $60 million and its full-year 
1999
earnings per share to $1.17 from $1.09, the SEC stated. Merrill also
allegedly bought an interest in the Nigerian barges from Enron at the 
end of
1999 with the understanding that Enron would arrange for its sale 
within six
months at a specified rate of return.

"In substance, this transaction was, at best, a bridge loan because 
the
risks and rewards of ownership did not pass to Merrill Lynch," the
commission said, according to Reuters. The other transaction involved
energy trades that Merrill believed "were essentially a wash" and 
that it
"knew had the purpose and effect of inflating Enron's income by
approximately $50 million," the SEC said.

Merrill announced last month that it had agreed to pay $80 million to 
settle
the case, a move that it said "concludes the SEC's investigation into
Enron-related matters with respect to the company."

SEC Enforcement Division Director Stephen Cutler said the $80 million 
was
one of the five largest penalties ever imposed in a civil securities
enforcement action. "Even if you don't have direct responsibility for 
a
company's financial statements, you cannot turn a blind eye when you 
have
reason to know that what you are doing will help make those 
statements false
and misleading," Mr. Cutler said in a
statement.

In a statement, the SEC said the four former Merrill executives named 
in the
complaint -- Robert Furst, Schuyler Tilney, Daniel Bayly and Thomas 
Davis --
"are contesting the matter."

Ira Sorkin, Mr. Furst's attorney, told Reuters, "We do not believe he 
did
anything improper or anything that violated federal securities laws, 
and we
intend to defend the action."

Mr. Tilney's attorney, Robert Trout, told Reuters, "Schuyler Tilney 
did not
engage in any wrongdoing. He is a person of great integrity and would 
never
participate in a fraudulent scheme."

Thomas Fitzpatrick, attorney for Mr. Davis, said his client "gave 
final
approval to the Nigerian barge transaction after it had been 
thoroughly
vetted by legal counsel . He did not aid Enron in fraudulently 
accounting
for the transaction and he did not even know how Enron booked the
transaction."

Bayly's attorney could not immediately be reached, Reuters states. 
Merrill
neither admitted nor denied wrongdoing. The firm said last month it 
would
also consent to an injunction barring it from violating federal 
securities
laws under the deal.

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