Merrill Lynch & Co. (MER) reached an agreement in principle with the Securities and Exchange Commission to resolve the SEC’s investigation into two transactions it made with Enron Corp. (ENRNQ) in 1999.
In a prepared statement Thursday, the brokerage firm said that under the settlement it would pay a total of $80 million in disgorgement, penalties and interest.
Merrill Lynch will record this payment in its 2002 fourth-quarter financial results; the company already reported the year-end unaudited results on Jan. 22, so it will include the payment in its 2002 10-K report, due to be filed in March.
Without admitting or denying any wrongdoing, Merrill Lynch would consent to an injunction enjoining the company from violations of federal securities laws. The agreement with the SEC is subject to the drafting of settlement papers and commission authorization.
Merrill Lynch said the settlement would conclude the SEC’s investigation into the company’s Enron-related matters. The SEC began its investigation of Merrill Lynch in August.
One item that has received scrutiny from congressional investigators was the 1999 sale of a Nigerian barge operation by Enron to Merrill Lynch. Lawmakers suggested that the deal may have been designed to artificially inflate Enron’s profits. Merrill Lynch denied any wrongdoing in the matter.
In a Congressional hearing in July, it was disclosed that Merrill agreed to a questionable deal with Enron in late 1999 even after a senior Merrill banker warned top executives that the sale appeared to be an improper ploy to boost profits.
In September, Merrill Lynch fired Thomas W. Davis, one of two corporate vice chairmen, for his refusal to testify in an investigation by the Justice Department and SEC. The firm also fired investment banker Schuyler Tilney, who headed Merrill’s Houston-based energy group and worked closely with Enron, also for refusing to testify about his role involving Merrill’s work for Enron. Messrs. Davis and Tilney were among nearly 100 Merrill executives who invested a total of more than $16 million of their own money in a partnership Merrill sold for Enron, The Wall Street Journal reported in September.
At the time, Merrill Lynch said it didn’t find any wrongdoing by any of its employees in their dealings with Enron.