Merrill banker refuses to testify in Enron probe

Reuters via CBS MARKETWATCH ^ | 7/26/2002 | Brian Kelleher

[aculeus]

NEW YORK, July 26 (Reuters) - Merrill Lynch & Co. Inc. (MER) put one of its investment bankers on leave on Friday after he said he would not testify to Congress in a probe of Enron Corp.'s (ENRNQ) collapse and allegations that Merrill worked side-by-side with the bankrupt energy trader.

The world's largest brokerage placed Schuyler Tilney on administrative leave after his attorney told him not to testify to the Senate Permanent Subcommittee on Investigations at a hearing scheduled for Tuesday.

Tilney had been subpoenaed by the subcommittee, which held a hearing last Tuesday on Enron's links to two other Wall Street giants: Citigroup (C) and J.P. Morgan Chase (JPM) .

"Without the support and assistance of major financial institutions, Enron could not have engaged in the extent of the deceptions that it did," said subcommittee Chairman Carl Levin, a Michigan Democrat, in a statement.

Merrill said that, based on what it knows, its employees acted properly in deals with Enron, the fallen Texas company whose Dec. 2 bankruptcy kicked off a continuing series of corporate scandals that have undermined investor trust.

"However, it (Merrill) is placing the employee on administrative leave because the company's policy is to cooperate fully with governmental and regulatory inquiries," New York-based Merrill said in a statement.

Tilney, 46, decided not to testify after he learned the Department of Justice was probing a deal that the Senate is reviewing. The Department of Justice has told Merrill it is not a target of the investigation, a company spokesman said.

Merrill said its dealings with Enron were limited. It said they included a $7 million investment in a company set up to operate energy generation barges. It said it also was private placement agent for an Enron-linked partnership known as LJM2.

"Merrill Lynch strongly believes its dealings with Enron and LJM2 were appropriate and proper based on what we knew at the time," the bank said in a statement, adding it is fully cooperating with the subcommittee.

Tilney, head of Merrill's energy and power group, was involved in the energy generation barges venture. His wife, Elizabeth, was an Enron executive and a close associate of ex-CEO Ken Lay, sources familiar with the matter said.

Tilney's attorney, Robert Trout, wasn't immediately available for comment.

Robert Furst, a former Merrill managing director, has also said he will not testify, Merrill said.

Both Furst and Tilney were listed as witnesses to appear on Tuesday in a statement issued by the subcommittee. Also listed was Kelly Martin, a Merrill senior vice president.

Subpoenas were issued to both Tilney and Furst within the past 24 hours, said a subcommittee spokeswoman.

Tilney's attorney accepted his subpoena, but Furst's did not accept his, said the spokeswoman, adding the subcommittee had not yet determined how it would respond to Tilney's and Furst's refusals to testify.

According to a massive class-action lawsuit filed in April by Enron investors against former Enron executives and other defendants, including Merrill, the investment bank:

--played a key role in creating and funding the LJM2 partnership central to many of Enron's questionable ventures;

--allowed some of its top executives, including Tilney, to invest personally in the LJM2 venture;

--knew LJM2 was designed to keep debt off Enron's balance sheet to help inflate its profits and boost its stock price;

--reaped enormous profits from banking and advisory fees from its extensive work for Enron;

--helped Enron create the troubled Azurix water venture;

--was lead underwriter in several Enron public offerings.

The lawsuit alleged that Merrill "provided investment banking services to Enron, helped structure and finance one or more of Enron's illicit partnerships or SPEs (special purpose entities), while its securities analysts were issuing extremely positive reports on Enron."

The lawsuit said Tilney's marriage "provided Tilney with unique access to information about serious problems" at Enron.

Merrill last month placed broker Peter Bacanovic and his assistant, Douglas Faneuil, on administrative leave pending further investigation into an undisclosed transaction.

Bacanovic was Martha Stewart's broker, and regulators are still investigating whether she had inside information before she sold shares of ImClone Systems Inc. (IMCL) Stewart, who has denied wrongdoing, is friends with former ImClone CEO Sam Waksal, indicted last month on insider trading charges.

Stewart is chief executive of Martha Stewart Living Omnimedia Inc. (MSO) , a media firm.

[alrea]

Citigroup (C) and J.P. Morgan Chase (JPM) bumps

[APBaer]

"The Department of Justice has told Merrill it is not a target of the investigation, a company spokesman said."


Parsing that: not a "target", i.e. have not YET been sent a "target letter"- of course that could change--

How about whether he or Merrill are "subjects" of the investigation"?

[eureka!]

"Citigroup (C) and J.P. Morgan Chase (JPM) bumps"

Funny how the presstitutes at Reuters do not identify these "financial institutions"...

[backhoe]

For background info, check the bump list:

Enron_List:

Enron_List: for Enron_List articles. 

Other Bump Lists at: Free Republic Bump List Register

[Mike Darancette]

Is he related to TILNEY, ELIZABETH ARENDALL who works for Enron? If so, no wonder he doesn't want to talk.

[ken5050]

Sounds like these guys know that whoever gets the deal fro the prosecutor first, wins.....whatever thet've done, and it probably stinks..if they can give up enough on the folks above them, they'll get a walk....it's also interesting that ML didn't fire them outright..which is what they would have done if the compant's hands were clean...watch, on Sunday, Martha Stewart will announce that she's eloped with her stockbroker, Peter whateverhisnameis....and they're both claiming spousal privilege....

[arete]

"Without the support and assistance of major financial institutions, Enron could not have engaged in the extent of the deceptions that it did,"

No matter how you dress it up or how much lipstick you put on it, this is fraud.

Richard W.

[Jimmy Valentine]

Sounds like old Schuyler Tinley has been "coloring outside the lines"

There is going to be some serious stuff come down on J.P. Morgan and Citibanc.

[Miss Marple]

Here's another interesting development.

[independentmind]

...watch, on Sunday, Martha Stewart will announce that she's eloped with her stockbroker, Peter whateverhisnameis....and they're both claiming spousal privilege

LOL. A unique solution!