Merrill in hot seat at Enron inquiry

CONGRESSIONAL investigators will today unveil details of investment bank Merrill Lynch's alleged role in helping Enron inflate its profits.

Yesterday, America's two largest banks admitted setting up offshore entities through which Enron channelled controversial deals.

According to testimony expected at a Senate hearing today, Merrill allegedly engaged in a sweetheart deal with Enron in 1999 when it invested $28m (£18m) in three Nigerian electricity projects with the guarantee of a resale at a higher price within six months.

Investigators claim that was designed by Enron to boost its 1999 profits.

'It appears that Merrill Lynch, like other financial institutions, knowingly participated in deals that were used to make Enron's position appear more robust than it was,' said Senator Susan Collins, a top Republican on the Senate Permanent Subcommittee on Investigations, which has been probing the collapse of the energy giant for nine months.

Merrill joins JP Morgan Chase and Citigroup in the Congressional hot seat. Late yesterday, the latter two banks confirmed they set up offshore entities, Delta Energy and Mahonia, which Congressional investigators believe were used to mask Enron loans as energy trades.

In affidavits demanded by the Senate committee and released last night, Citigroup chief executive Sanford Weill said his bank established Delta in the Cayman Islands as an independent entity in 1993 but that Citigroup had no control over the offshore firm.

JP Morgan Chase chief executive William Harrison said Mahonia, in the Jersey Islands, was 'legally independent' even though it was incorporated at the bank's request in 1992.

The Senate committee is also expected to probe whether Merrill's research analysts were under pressure to be enthusiastic about Enron shares.