Parker & Waichman, LLP announces that it has been retained by additional plaintiffs and that they will soon file a new round of claims against Merrill Lynch on behalf of current and former Enron Corporation shareholders.
These plaintiffs purchased shares of Enron as a result of misleading research and advice from Merrill Lynch analysts and brokers. To date, Parker & Waichman and associated counsel have been retained by hundreds of individuals financially injured by the inappropriate advice of Merrill Lynch. Current and former Enron shareholders are encouraged to visit www.enronstockfraud.com for more information.
The claims will charge that Merrill Lynch inappropriately advised clients to purchase shares of Enron by not disclosing a conflict of interest between its research and investment banking divisions. In 1998, Merrill Lynch, concerned about being excluded from a large Enron stock offering, replaced John Olson, Merrill Lynch’s top energy analyst who was not positive with respect to Enron’s stock, with Donato Eassey, who was bullish on Enron. Merrill Lynch was specifically rewarded for the analyst switch with tens of millions of dollars in Enron investment banking business.
Last week, David W. Delainey the former chief executive of Enron North America and Enron Energy Services plead guilty to insider trading and admitted to engaging in fraudulent transactions to boost Enron’s financial results.
One such fraudulent transaction that Mr. Delainey was allegedly involved with was the bogus sale of three energy barges to Merrill Lynch. Last month prosecutors charged former Enron accountant Sheila Kahanek and a former Merrill Lynch vice president William Fuhs for their involvement in this scheme which helped pad Enron’s earnings by making a loan to look like a profitable sale.
In what prosecutors have termed an “asset parking” scheme, Merrill Lynch agreed on the last days of the fourth quarter of 1999 to pay Enron $28 million for three Nigerian energy barges. The deal let Enron record $12 million in earnings and $28 million in cash flow, and meet quarterly targets it would have otherwise missed. However, Enron allegedly promised to buy the barges back from Merrill Lynch at a guaranteed 22 percent return. This promise to purchase the barges back, made the Nigerian deal a loan, and made recording it as a sale on Enron’s books illegal.
Earlier this year, the SEC filed a civil lawsuit alleging that the Nigerian barge deal was a “sham transaction” that helped Enron “manufacture earnings”. The SEC alleged that the four former Merrill executives “aided and abetted Enron Corp.’s earnings manipulation” by working with Enron executives to set up fraudulent transactions. Additionally, the lawsuit alleged that Merrill Lynch helped set-up and fund LJM, LP and LJM2, LP, two companies controlled by former Enron CFO Andrew Fastow, which Enron used to generate artificial profits and conceal its true debt by moving billions of dollars of debt off its balance sheet and onto the balance sheets of LJM2s. Although Merrill Lynch allegedly knew that Enron was deceiving investors by hiding debt, Merrill Lynch never disclosed this information to the public, and material maintained a false and misleading “Buy” recommendation on Enron’s stock at all times.
These complaints will charge that Enron and Merrill Lynch violated section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under, by issuing a series of materially false and misleading statements. Additionally these complaints will charge Merrill Lynch with violations of Section 15(c) of the Securities Exchange Act of 1934, as well as various state statutes, for issuing fraudulent research reports and for violating NYSE Rules 401, 472 and 476(a)(6), and NASD Rules 2110 and 2210, for issuing research reports that were not based on principles of fair dealing and good faith, did not provide a sound basis for evaluating facts, contained exaggerated or unwarranted claims about the covered companies, and/or contained opinions for which there were no reasonable bases.