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CRACKING DOWN ON CORPORATE FRAUD:
New Indictments in Enron Case

09/17/03

Enron corporate fraud graphicOn September 17, three former executives at Merrill Lynch & Co. were charged with conspiracy to commit wire fraud and falsify books and records. One was further charged with perjury and obstructing a federal investigation into the Enron Corporation's multibillion dollar collapse.

The Scheme

The indictment alleges that three Merrill Lynch executives agreed in late 1999 to be party to a phony sale from Enron -- letting Enron "park" some of its assets with Merrill Lynch so Enron could fraudulently enhance its year-end financial position to the public and use that position to justify unwarranted bonuses for its executives.

How "park"? Enron had tried in 1999 to sell its interest in electricity-generating power barges moored off the coast of Nigeria; when it failed, it arranged for Merrill Lynch to serve as a temporary buyer and recorded that amount as earnings...promising in return by oral agreement that Merrill Lynch would receive a 22% rate of return on its investment and a set profit within six months. This non-risk agreement effectively disqualified the transaction as a legal "sale."

The Investigation

FBI Assistant Director of the Criminal Investigative Division Grant Ashley stressed the critical efforts of the FBI-Department of Justice Enron Task Force, assisted by the SEC, IRS, and other agencies, in bringing to justice corporate executives who engage in deliberate fraud to conceal a "company's poor performance and to enhance their personal prestige and wealth." Since the task force was formed in January 2002, 24 individuals have, to date, been charged, more than $67 million restrained or seized, and an $80 million civil settlement achieved by the SEC, bringing the total recovery to more than $147 million.

We need your help.

Mr. Ashley specifically thanked the public for using the FBI's Corporate Fraud Telephone Hotline to report alleged fraud. Some 1,300 calls have been received on it in the past seven months alone.

However, the work is ongoing. Today the FBI is conducting 126 active investigations of Corporate Fraud, and at least 15 of these involve losses to public investors that exceed $1 billion each. If you have any information that might assist the FBI in investigating corporate fraud, please call the tollfree Corporate Hotline at 888-622-0117.