Four former Merrill Lynch and Co. executives and two former mid-level Enron Corp. executives conspired to push through a sham sale of barges in 1999 because they didn't think they'd get caught, a prosecutor said Wednesday.
In closing arguments in the first criminal trial to emerge from Enron's 2001 collapse, prosecutor Kathryn Ruemmler told jurors Wednesday that they have seen "how one of the most powerful investment banks in the world helped Enron cook its books."
Closing arguments in the fraud and conspiracy trial were expected to conclude today.
The defendants are accused of helping push through Enron's year-end 1999 sale of interest in the barges so the energy company could book a $12 million pretax profit the company needed to meet earnings targets.
The government says the deal was a loan because Enron promised to resell or buy back the barges at a premium within six months, meaning that Merrill Lynch wouldn't risk losing its investment.
Prosecutors say Merrill Lynch participated in the hope of getting investment banking business from the energy company, which then was a Wall Street favorite.
The Merrill Lynch defendants contend that Enron was never obligated to resell or buy back the barges. Former Enron finance executive Daniel O. Boyle testified that he realized the deal had a buyback promise and former in-house Enron accountant Sheila Kahanek testified she always opposed any buyback guarantees.
Richard Schaeffer, who represents Merrill Lynch defendant Daniel Bayly, former head of investment banking for the brokerage, said his client was briefly involved in late December 1999 and thought the small transaction could help strengthen Merrill Lynch's relationship with Enron.
Ruemmler said final deal documents at Merrill Lynch and Enron deliberately omitted mention of a buyout guarantee, masking the loan as a sale.
"It doesn't matter what's in the document. What matters is what the parties agreed to," she said.
Ruemmler reminded jurors that former Merrill Lynch credit analyst Tina Trinkle testified during the trial that she listened in on a Merrill Lynch conference call three days before Christmas 1999 during which Bayly and other Merrill Lynch defendants Robert S. Furst and James A. Brown and others discussed the deal.
Trinkle said Furst, Brown or Furst's immediate boss, Schuyler Tilney -- she said she didn't know which -- said a written buyout guarantee would preclude Enron from treating the deal as a sale and book earnings. When Furst and Tilney said they had "strongest verbal assurances" of a buyout within six months, Trinkle said Bayly said Enron had better "understand that we expect to be taken out by June 30."