Daniel H. Bayly, et al.

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21361 / January 6, 2010

Accounting and Auditing Enforcement Release No. 3094 / January 6, 2010

Securities and Exchange Commission v. Daniel H. Bayly, et al., Civil Action No. H-03-0946 (S.D. Tex.)

SEC SETTLES WITH FORMER MERRILL LYNCH EXECUTIVE FOR AIDING AND ABETTING ENRON FRAUD

The Securities and Exchange Commission ("Commission") announced today that, on December 31, 2009, the U.S. District Court in Houston entered a final judgment in the Commission's civil action against Daniel H. Bayly ("Bayly"), former global head of investment banking at Merrill Lynch & Co., Inc. ("Merrill Lynch").

On March 17, 2003, the Commission charged Bayly and three other former executives of Merrill Lynch with aiding and abetting Enron Corp.'s earnings manipulation. That action remains stayed against Bayly's co-defendants pending resolution of a parallel criminal prosecution. On March 17, 2003, the Commission also sued and simultaneously settled all of its Enron aiding-and-abetting charges against Merrill Lynch, which was enjoined from violating the federal securities laws and paid $80 million in financial sanctions for distribution to injured investors through the Commission's Enron Fair Fund.

Without admitting or denying the allegations in the Commission's complaint, Bayly has now been permanently enjoined from violating the antifraud provisions, as well as from aiding and abetting violations of the periodic reporting, books-and-records, and internal controls provisions; barred from serving as an officer or director of a public company for five years; and ordered to pay $300,001 in disgorgement and civil money penalties for deposit into the Commission's Enron Fair Fund.

As alleged in the Commission's complaint, Bayly substantially assisted Enron's sham sale of an interest in certain Nigerian barges during late 1999. Although the interest in these barges purportedly passed to a special purpose entity in which Merrill Lynch invested equity capital, Bayly had received an oral commitment from Enron's then-Chief Financial Officer, Andrew Fastow, that Merrill Lynch would be repaid within six months at a specified rate of return. In substance, this side agreement transformed what was supposed to be an equity investment into a bridge loan with a fixed interest rate. The complaint alleged that Bayly helped enable this sham "sale" on Enron's interest in the Nigerian barges so as to maintain favorable relations with Enron. By participating in the arrangement ¢€" which allowed Enron fraudulently to record $28 million in revenue and $12 million in pre-tax income ¢€" Bayly aided and abetted Enron's violations of the federal securities laws.

For more information, see Litigation Release No. 18038 (March 17, 2003).