Four former Merrill Lynch & Co executives, including an ex-chief of investment banking, were charged with civil fraud by the Securities and Exchange Commission for allegedly helping Enron Corp manipulate its earnings in 1999.
The former executives are Daniel Bayly, 55, a former chairman of investment banking; Thomas Davis, 49, a former vice chairman of private equity and research; Schuyler Tilney, 47, a former energy investment-banking head; and Robert Furst, 41, a former managing director. The SEC said they are contesting the charges.
Merrill Lynch concluded its settlement over the same Enron charges today, agreeing to pay US$80 million without admitting or denying the allegations. The world's biggest securities firm first announced those settlement terms in February.
"This action is a message to all who would help a reporting company commit fraud," SEC Chairman William Donaldson said. "We will bring the full weight of our enforcement arsenal against you.''
JP Morgan Chase & Co and Citigroup Inc also have been the focus of government investigations into loans and other financing they arranged for Enron. Donaldson and SEC Enforcement Director Stephen M. Cutler declined to comment on either bank today.
The Merrill complaint, filed in US District Court in Houston, accuses the firm and the former executives of helping the bankrupt energy trader overstate revenue by creating two fraudulent transactions at the end of 1999. Enron used the transactions to add about US$60 million to its fourth quarter 1999 income and raise its 1999 earnings per share from US$1.09 to US$1.17, the SEC alleged.
"For aiding Enron, Merrill Lynch earned millions of dollars in fees and believed Enron would continue to award it lucrative business in the future," the complaint said.
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