Merrill Lynch and Company, in an agreement with prosecutors that let it avoid criminal charges over its role in the Enron debacle, has promised not to engage in business deals - even ones that appear legal - that it believes might be used to mislead investors about a company's financial condition, a media report said on Thursday.
The Wall Street firm also agreed to allow the government to monitor portions of its business for the next 18 months, the New York Times reported.
The settlement involved deals late in 1999 that let Enron increase its reported profits when its business was falling short of Wall Street's expectations.
Merrill acknowledged that the government had obtained evidence that some of its employees might have committed crimes in the transactions, and it accepted responsibility for those employees' actions. Three former senior executives were charged on Wednesday in connection with their roles in one deal, the paper said.
Prosecutors - whose decision last year to prosecute Enron's accountants, Arthur Andersen, contributed to that firm's collapse - said that they hoped the Merrill settlement would be seen by other companies as a model for appropriate behavior in the financial world.
The paper quoted legal experts as saying the deal could serve as a strong deterrent to abuses in Wall Street's marketing of the complex deals known as structured finance, which critics say can obscure companies' true financial conditions, even if they arguably meet accounting rules.
The Merrill settlement - under what is known as a deferred-prosecution agreement - is a result of negotiations that began this summer with a meeting of federal prosecutors and E Stanley O'Neal, the firm's chairman and chief executive.
Information provided by prosecutors helped convince O'Neal that Merrill's culture had become too reckless and its procedures too lax, a Merrill official and other people close to the firm were quoted as saying.
Within days, they said, he began moving to change that, ousting a number of the firm's senior officers.
A spokesman for Merrill Lynch declined to comment on the case's role in O'Neal's personnel moves. At the time, O'Neal was involved in a broad effort to consolidate his power in the firm and to enhance profits by cutting costs, the paper said.
Like many of its Wall Street peers, the Times said Merrill has had its reputation battered by scandals over the last two years - not only the Enron affair, but abuses involving stock analysts and the distribution of shares in hot new companies.
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