bankers were charged in an indictment Wednesday with helping
manufacture a profit in late 1999 through the phony sale of energy equipment.
Daniel Bayly, 56, the former head of Merrill's global investment banking division; James A. Brown, 51, the head of its strategic asset lease and finance group; and Robert S. Furst, 42, Merrill's Enron account manager, were named in the indictment, which charged each with conspiracy to commit wire fraud and falsify books.
The three are charged with engineering a deal with former Enron Chief Financial Officer Andrew Fastow in which Enron pretended to sell barges to Merrill and used the proceeds to spruce up its income statement in late 1999. The deals were bogus because Merrill allegedly had Enron's assurance it would buy back the barges and even include an agreed-upon profit for Merrill when it did.
That happened on June 29, 2000, when Fastow's infamous LJM2 partnership -- at Enron's direction -- purchased Merrill's interest in the barges for $7.5 million, the indictment alleges.
"The arrangement allowed Enron to enhance fraudulently the year-end 1999 financial position that it presented to the public and used to pay its executives unwarranted bonuses," prosecutors noted in a press release.
Fastow was allegedly assisted in the transaction by Daniel Boyle, Enron's vice president of global finance. Both were charged with numerous crimes in a May 2003 indictment and Fastow's trial is scheduled for April 2004.
Brown was also hit with a perjury charge for allegedly telling a grand jury under oath he wasn't aware of the deal with Merrill and an obstruction charge for allegedly trying to impede the government's probe.
If convicted on the conspiracy count, all three defendants face a maximum sentence of five years in prison. Brown also faces a maximum sentence of five years in prison on the perjury count, and 10 years maximum on the obstruction of justice charge.
The indictment was returned by a federal grand jury in Houston and unsealed Wednesday by officials with the U.S. attorney general's office and the FBI.
The Justice Department, meanwhile, said Merrill entered a separate agreement in which it "accepted responsibility for the conduct of its employees" in the Enron debacle. It will "cooperate fully" in the government's probe of the energy trader, which went bankrupt in late 2001.