Merrill man probed over £27m theft

A FORMER chief energy trader at Merrill Lynch is being investigated for allegedly embezzling $43m (£26.9m) from the firm in what is believed to be the largest-ever employee theft from a financial institution.

Reports today said a letter by a US Justice Department prosecutor claims that Daniel Gordon sent the cash to a Caribbean-based shell company three years ago and disguised it as an energy trade.

Merrill Lynch has not disclosed the loss in its public filings and said it was unaware of the alleged theft until last October. It is 'co-operating fully' with investigators.

The case will stir memories of the collapse of disgraced energy giant Enron and is likely to ignite yet more criticism about the strength of internal controls at Merrill.

This year, it has paid $80m in charges resulting from its role in the Enron scandal and $200m to settle accusations it allowed conflicts of interest among its analysts.

Gordon, now chairman of legal-documents storage firm Daticon, is alleged to have directed Merrill to send the $43m to Falcon Energy Holdings, a shell company in Anguilla in August 2000, a Bloomberg report said.

According to the public filings, a Canadian firm helped set up the offshore company but froze the account after $32.5m was wired out soon after it was opened.

Merrill sold the energy trading unit to Allegheny Energy in January 2001 and Gordon became chief energy trader, but was fired that September.