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Former Merrill exec pleads guilty to $43 million theft
Saturday, December 20, 2003
By LARRY NEUMEISTER
The Associated Press
Merrill Lynch's former chief energy trader admitted stealing $43 million from the firm Friday in a plea deal under which he also accused superiors of directing him to make the company's energy business seem more profitable than it was.
Daniel L. Gordon, 27, of Old Lyme, Conn., pleaded guilty to wire fraud, money laundering and conspiracy in U.S. District Court in Manhattan. Gordon promised to testify against others, if necessary, as part of a continuing probe.
"The decision was made by my superiors to make the business look more profitable by altering certain (parts) of the data," Gordon said.
Sentencing was set for April 30. Gordon was released on $500,000 bail. Although the charges carry potential sentences totaling 55 years, prosecutors indicated they would seek leniency if Gordon cooperates fully.
"I deeply regret my actions that led to the filing of these charges," Gordon said in a statement released by his lawyers. "I apologize to all those who have been hurt by my actions. My plea today is the beginning of a long process of making amends to those I have harmed."
Merrill Lynch spokesman Mark Herr said the company was cooperating fully with the government and had not heard Gordon make allegations before that other Merrill Lynch employees had assisted him in inflating the value of the company's energy business.
"We cannot comment on it other than to say he has stolen from our firm in the past and lied to people about it," Herr said.
As to the theft of $43 million, Herr said: "Merrill Lynch was victimized by Mr. Gordon's deception when he made this fraudulent transaction in August 2000. We have put a number of procedures in place to prevent this type of fraud in the future."
Gordon joined Merrill Lynch in 1998 to start the company's Manhattan-based energy trading division, Global Energy Markets. In 2000, he became the division's president.
Prosecutors said in court papers that Gordon became aware in the summer of 2000 that Merrill Lynch management wanted to find insurance as a hedge against $500 million in energy obligations it had agreed to with another company.
The government alleges that Gordon fooled Merrill Lynch into paying a one-time $43 million premium insurance payment that it thought would guarantee it could buy energy it might need, when it actually was depositing the money into accounts he controlled.
Using a Canadian company in the business of establishing offshore entities, Gordon arranged for a non-U.S. citizen to pose as the head of a shell company, Falcon Energy Holdings incorporated in Anguilla, British Virgin Islands, prosecutors said.
The government said Gordon lied to Merrill Lynch, telling the company Falcon was an international energy firm with investments in power plants and oil fields and was affiliated with a French energy conglomerate that would provide the insurance Merrill Lynch sought.
Through other companies and accounts created by Gordon, he laundered the money he had stolen from Merrill Lynch, prosecutors alleged.
In court papers, prosecutors said Gordon in September 2000 teamed with co-conspirators who were Merrill Lynch managing directors to make the company's energy-trading division seem more profitable by falsifying its financial information.
The most valuable commodity I know of is information