Merrill Lynch


defended itself Tuesday against allegations it helped facilitate deceptions by


, telling a congressional panel that its dealings with the now-bankrupt energy trader were done at "arm's length" and without intimate familiarity with the company's accounting practices.

In testimony prepared for the Senate Governmental Affairs Committee's permanent subcommittee on investigations, Merrill executives say their dealings were "appropriate and proper based on what we knew at the time."

"At no time did we engage in transactions that we thought were improper," Merrill Lynch said in the statement, adding that the investment banking fees it received from the Houston company weren't sufficiently large to create any undue pressure on the investment house.

Central to the panel's inquiry is a $7 million investment by Merrill in a set of Nigerian barges that allowed Enron to book about $12 million in sales. Committee investigators believe the investment should've been accounted for as a loan.

Merrill responded that the transaction was part of an effort to build a relationship with Enron, and said it thought a third party was likely to buy out its interest in the barges. It said the investment wasn't a loan.

"Merrill Lynch owned the shares, was at risk until it was able to resell those shares and, though it hoped and expected to be able to resell those shares at a profit, had no guarantee that would happen," Merrill said.

The third party didn't materialize and the interest was eventually bought by a partnership set up by Enron's chief financial officer that Merrill had helped find investors for, invested in and lent money to.

Merrill argued that it wasn't inappropriate for the investment bank to rely on Enron's accounting because it had been carried out by auditors and reviewed by the company's board and audit committee.

"We ... felt justified at the time in believing Enron's financial representations," Merrill Lynch said, adding it "does not know -- even today -- whether Enron's accounting treatment for this transaction was correct."