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Three former Merrill Lynch executives were charged with conspiracy Wednesday for allegedly helping Enron Corp. inflate earnings with a loan disguised as a sale of Nigerian barges. Daniel Bayly, Robert Furst and James Brown became the first Wall Street bankers to be hit with criminal charges in the scandal that brought down the energy company. They pleaded innocent during a federal court appearance Wednesday and were freed on $100,000 bond each. The Justice Department also unveiled an agreement with Merrill Lynch in which the firm acknowledged the executives may have broken the law. The firm agreed to cooperate with the investigation and take steps to prevent dubious deals. The three men were charged with conspiracy to commit fraud and falsifying books and records. Brown also was charged with obstruction and lying to a grand jury investigating the scandal. “We’re going to defend these charges in court,” Furst’s attorney, Ira Lee Sorkin, said after the court appearance. “There is nothing Rob Furst did in any way that was not abetted and approved by senior officials at Merrill Lynch.” Bayly’s lawyers, Richard Schaeffer and Andrew Lawler, released a statement saying their client has been “wrongly and unfairly indicted.” Brown’s lawyer, Lawrence Zweifach, declined comment. Prosecutors allege that in 1999, Enron, with Merrill’s knowledge, booked a short-term $7 million investment from the brokerage as a $12 million profit from the sale of Nigerian barges. The profit was used to make Enron appear to have met earnings targets. Then-Enron treasurer Jeff McMahon approached Merrill with the sham deal, prosecutors said. The barge transaction is among the many schemes former Enron finance chief Andrew Fastow, named in the indictment Wednesday as a co-conspirator, is alleged to have masterminded. Fastow is awaiting trial in April on charges of fraud, money laundering and insider trading. Bayly, former global head and chairman of investment banking, retired from Merrill last year. Furst, former managing director in investment banking, quit in 2001. Brown, former senior finance chief, retired earlier this year. Merrill Lynch paid the Securities and Exchange Commission $80 million in March to settle allegations related to the barge deal. The firm will also be scrutinized by an independent auditor and an outside monitor appointed by prosecutors. Merrill Lynch spokesman Mark Herr said the company had no comment on the indictments, but said the new internal policies “will help ensure that these kinds of transactions do not occur in the future.” “We have cooperated fully with this investigation and will continue to do so,” Herr said. Federal prosecutors said they hope other banks and brokerages follow Merrill’s example. A tentative trial date of Nov. 10 was set. Bayly, Furst and Brown could get up to five years in prison on the conspiracy charge. Brown also faces maximum sentences of five years on the perjury count and 10 years on the obstruction charge. Copyright 2003 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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