Two Merrill Lynch investment bankers have told US congressional investigators that they would not have agreed to buy three Nigerian barges from Enron without an assurance that the energy giant would quickly buy the ships back.
The statements bolstered allegations, currently being investigated by the Justice Department, that Merrill intentionally mislabelled the deal as an equity investment instead of a short-term loan in order to help Enron mislead investors by counting the complex transaction as income instead of debt.
The two Merrill bankers - Mr Schuyler Tilney and Mr Robert Furst - yesterday invoked their Fifth Amendment rights against self-incrimination and declined to testify at a Senate hearing, citing the Justice Department inquiry.
But Senator Carl Levin, chairman of the hearing, said both Mr Tilney and Mr Furst had previously confirmed the agreement with Enron.
Merrill bought the three barges in December 1999 as a favour to Enron, which was desperate to include $12 million (€12.17 million) in revenue from the deal in its year-end financials.
Merrill contributed $7 million to the sale, but congressional investigators said the cash should have been counted as a loan, since Enron had allegedly guaranteed a $250,000 fee plus a 15 per cent return on investment in six months.
Documents made public by the subcommittee yesterday showed senior Merrill executives raised warnings about the deal, arguing the transaction was an improper attempt by Enron to inflate earnings.
- (Financial Times Service)
