Ex-Merrill Lynch executives charged in probe
By Marcy Gordon
Associated Press
WASHINGTON — The Securities and Exchange Commission yesterday charged four former senior Merrill Lynch executives with helping Enron inflate profit and mislead investors with two financing deals. The SEC also approved a settlement in which the brokerage company will pay $80 million to resolve the case.
The SEC and the nation's biggest brokerage firm last month reached a tentative agreement regarding the 1999 transactions, which now has been approved by the SEC commissioners. The firm neither admits nor denies wrongdoing in the settlement, which it says ends the SEC's investigation into its dealings with Enron.
"This action is a message to all who would help a ... company commit fraud: We will bring the full weight of our enforcement arsenal against you," said SEC Chairman William H. Donaldson. "Our commitment to protect investors demands nothing less."
SEC officials said all of the $80 million that Merrill is paying eventually will go to compensate investors who were hurt by the fraud. They said the $80 million, comprised of civil fines, restitution payments and interest, represented one of the largest amounts ever paid in a civil securities law case.
In a civil lawsuit filed in federal court in Houston, the SEC alleged that the four former Merrill executives "aided and abetted Enron Corp.'s earnings manipulation" by working with Enron executives to set up the transactions. The four men are disputing the SEC's allegations.
The SEC named Thomas W. Davis, 49, a former Merrill vice chairman; Schuyler Tilney, 47, an investment-banking managing director who directly oversaw corporate finance matters related to Enron; Robert Furst, 41, a managing director in the investment banking division; and Daniel Bayly, 55, the global head of the division who later became the firm's chairman of investment banking.
The former executives had previously denied wrongdoing. Davis and Tilney were fired by the firm in September; Furst resigned in 2001 and Bayly retired last fall. Davis, Tilney and Furst asserted their Fifth Amendment right and refused to testify before a Senate panel in July and to give testimony to the SEC in its investigation.
Davis "intends to vigorously defend the ... charge against him," said his attorney, Thomas Fitzpatrick. He said Davis gave final approval to one of the deals, in which Merrill bought three energy-producing Nigerian barges from Enron, only after it had been checked out by Merrill's lawyers and firm executives. "He did not aid Enron in fraudulently accounting for the transaction and he did not even know how Enron booked the transaction," Fitzpatrick said.
Bayly's lawyers, Lanny Breuer and Andrew Lawler, made the same point concerning his role in the barge transaction. "Dan Bayly is a man of great integrity whose limited actions in this matter were undertaken in complete good faith. He did nothing wrong," Breuer said.
Tilney's lawyer, Robert Trout, said his client "did not engage in any wrongdoing."
"He is a person of great integrity and would never participate in a fraud scheme," Trout said. "We intend to contest these allegations."
Said Furst attorney Daniel Horwitz: "Robert Furst is a person of integrity and did not engage in wrongful conduct. We plan to fight these allegations vigorously."
Merrill agreed to refrain from future violations of federal securities laws, and said that it agreed to the settlement "to resolve the inquiry and put the matter behind it."
By reaching a settlement, Merrill avoids the release of SEC findings that could be used against the brokerage in the court cases.
