HOUSTON, April 21 -- Two former Merrill Lynch & Co. executives convicted in Enron's bogus sale of power barges to the brokerage were sentenced Thursday to prison terms far shorter than the punishment sought by the government.
James A. Brown, former head of the brokerage's asset lease group, was sentenced to three years and 10 months in prison and a year's probation. Daniel H. Bayly, former head of investment banking for Merrill Lynch, was sentenced to 2 1/2 years' incarceration and six months' probation. Each was ordered to pay $840,000 in fines and restitution. Both men live in Darien, Conn.
Federal probation officers had recommended up to 15 years for Bayly and up to 33 for Brown. Their case illustrated Wall Street participation in Enron crimes through the brokerage's choice to take part in a sham deal to make a client happy.
U.S. District Judge Ewing Werlein, who sentenced the men, criticized the pursuit of sentences longer than the maximum 10-year sentence that awaits former Enron finance chief Andrew S. Fastow, who ran bogus schemes that rotted Enron.
"The defendant is correct to observe that this would be a harsh and irrational result," Werlein said of the recommended term for Brown.
Both men made statements before their separate sentencings.
"Since I was indicted, I have been branded a liar and a criminal; I could no longer make a living in my chosen profession," Brown said.
"This whole experience has been devastating to me," Bayly said.
Fastow had faced 98 counts including fraud, conspiracy, insider trading and money laundering. Last year, he pleaded guilty to two counts of conspiracy for hiding Enron debt and inflating profits while pocketing millions for himself.
Werlein said the term awaiting Fastow and the five years former Enron treasurer Ben F. Glisan Jr. is serving "established some benchmarks" for the defendants in the barge case. The judge said the Merrill defendants faced "unjustified disparate sentences" in comparison.
Bayly and Brown were convicted of one count of conspiracy and two counts of fraud. Brown also was convicted of perjury and obstruction for lying to a grand jury about whether he knew Enron had promised to resell or buy back the barges within six months of the late 1999 deal, which meant the purported sale was really a loan. Fastow confirmed that promise. The judge said the barge deal was "rather small and relatively benign in the constellation of the Enron frauds."
"Our position is there is no benign fraud when it comes to playing God with the reported earnings of publicly traded companies," prosecutor Matt Friedrich said.
"That a person who served as a leader in the investment banking world goes to prison at all serves a deterrent effect," Werlein said.