The Securities and Exchange Commission (SEC) last week charged Enron Corp.’s former outside auditor, Merrill Lynch & Co., and four of its ex-senior executives with helping to carry out securities fraud at the Houston energy company.

The SEC complaint, filed in U.S. District Court in Houston, alleges that Merrill Lynch and its former executives “aided and abetted” Enron’s earnings manipulation by engaging in two fraudulent year-end transactions in 1999. The transactions lead to the overstatement of Enron’s reported financial results during the period, according to the agency.

Specifically, the fraud added approximately $60 million to Enron’s fourth quarter income in 1999, boosting it to $259 million, and pumped up full-year 1999 earnings per share to $1.17 from $1.09, the SEC said.

The SEC accepted Merrill Lynch’s offer to settle the charges against the company. Without admitting or denying the allegations, Merrill Lynch agreed to pay $80 million in “disgorgement, penalties and interest.” It also agreed to be “permanently enjoined from violating the anti-fraud, reporting, books and records, and internal controls provisions of the federal securities laws in the future.”

The Commission said it accepted the settlement offer due to “certain affirmative conduct” on the part of Merrill Lynch. The company fired two of the ex-executives when they refused to cooperate with the SEC, and it alerted agency staff about a trade transaction “when it believed the staff was unaware of its existence,” the agency noted.

The SEC said it plans to have the funds placed into a court account for “ultimate distribution to victims of the fraud.”

The four former Merrill Lynch executives named in the complaint were Robert S. Furst, Schuyler M. Tiney, Daniel H. Bayly and Thomas W. Davis. They are contesting the charges, the SEC noted. In addition to its own Division of Enforcement, the SEC said it was assisted by the staff of the Federal Energy Regulatory Commission, the Justice Department’s Enron Task Force and the Federal Bureau of Investigation.

“This action is a message to all who would help a reporting company commit fraud: we will bring the full weight of our enforcement arsenal against you,” said SEC Chairman William H. Donaldson.

©Copyright 2003 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.