A former Merrill Lynch & Co. executive involved in a bogus Enron sale was sentenced Thursday to 2 1/2 years in prison by a judge who criticized the government's pursuit of a term longer than the one former Enron finance chief Andrew Fastow received.
U.S. District Judge Ewing Werlein also sentenced Daniel Bayly, former head of investment banking for Merrill Lynch, to six months probation and ordered him to pay $840,000 in fines and restitution. He will report to a prison selected by the Federal Bureau of Prisons on July 6.
"This whole experience has been devastating to me," Bayly told the judge before he was sentenced.
Later Thursday, James A. Brown, former head of the brokerage's asset lease group, was scheduled to be sentenced.
Federal probation officers had recommended up to 15 years for Bayly and up to 33 years for Brown for their roles in Enron's bogus sale of a power barge to Merrill Lynch. Their case illustrated Wall Street participation in Enron crimes through the brokerage's choice to take part in a sham deal to make a lucrative client happy.
Fastow, who ran bogus schemes that rotted Enron, had faced 98 counts including fraud, conspiracy, insider trading and money laundering. Last year he pleaded guilty to two counts of conspiracy for hiding Enron debt and inflating profits while pocketing millions for himself.
A decade is the maximum sentence for two conspiracy counts, though Fastow can shave a year and a half from that with good time credit.
Werlein said the term awaiting Fastow and the five years former Enron treasurer Ben Glisan Jr. is serving "established some benchmarks" for the defendants in the barge case. The judge said the Merrill defendants faced "unjustified disparate sentences" in comparison.
Fastow likely won't go to prison until after prosecutors no longer need his cooperation, which will include testimony in next year's conspiracy and fraud trial of Enron founder Kenneth Lay and former CEO Jeffrey Skilling.
Glisan, who worked for Fastow, had faced 24 similar counts until he pleaded guilty in September 2003 to conspiracy and went straight to prison for the maximum of five years. He later began cooperating with prosecutors and testified in the barge case.
Bayly and Brown were convicted of one count of conspiracy and two counts of fraud. Brown also was convicted of perjury and obstruction for lying to a grand jury about whether he knew Enron had promised to resell or buy back the barges within six months of the late 1999 deal, which meant the purported sale was really a loan. Fastow confirmed that promise.
The judge said the barge deal was "rather small and relatively benign in the constellation of the Enron frauds."
"Our position is there is no benign fraud when it comes to playing God with the reported earnings of publicly traded companies," prosecutor Matt Friedrich said.
"That a person who served as a leader in the investment banking world goes to prison at all serves a deterrent effect," Werlein said.
Werlein rejected the government's contention that investors suffered a $43.8 million loss by overpaying that amount for Enron shares after the barge deal helped the company make its earnings targets, undercutting the main factor supporting double-digit sentences.
The judge also rejected prosecutors' notions that Merrill defendants were leaders or organizers, which also can pump up a prison term.
"The court finds that the organizers and leaders were the executives at Enron," he said, who were "willing to recruit into their criminal activity any investment bank or a 'Friend of Enron,' quote unquote."
Three others convicted in the barge case _ former Merrill executives Robert Furst and William Fuhs and former midlevel Enron finance executive Dan Boyle _ will be sentenced May 12. A sixth defendant, former in-house Enron accountant Sheila Kahanek, was acquitted.