Ex-Executives Say Sham Deal Helped Enron

HOUSTON, Aug. 7 — Desperate to meet a year-end profit target, the Enron Corporation struck a sham energy deal with Merrill Lynch that let Enron book a $60 million profit in the final days of December 1999, according to former Enron executives involved in the transaction.

The executives said that the energy deal, a complex set of gas and power trades, was intended to inflate Enron's profits and drive up its stock price. Enron and Merrill Lynch, they said, agreed that the deal would be canceled after Enron booked the profits; it later was.

By allowing the company to meet its internal profit targets, the power deal unleashed the payment of millions of dollars in bonuses and restricted stock to high-ranking executives, including Kenneth L. Lay, then the chief executive, and Jeffrey K. Skilling, then Enron's president, former executives said.

"This was absolutely a sham transaction, and it was an 11th hour deal," said one former Enron executive who was briefed on the deal. "We did this deal to get 1999 earnings." This account was confirmed by five other former executives who either worked on the deal or were briefed on it. All the executives insisted on anonymity, concerned either about losing their current jobs or being drawn into the litigation over Enron's collapse.

Merrill Lynch officials said there was nothing improper about the power deal and no prearrangement to cancel it, and one former Enron executive involved in the deal agreed.

"The trades we conducted with Enron were legitimate transactions involving real risk," Merrill said in a statement today. "At no time did Merrill Lynch knowingly assist Enron in misstating revenues."