“Merrill Lynch & Company said yesterday that it had dismissed two senior executives, one of whom had been in the running to be its next chief executive, because they refused to cooperate with a federal investigation into the financing of Enron,” writes Patrick McGeehan in today’s New York Times.

“Thomas W. Davis, a vice chairman, and Schuyler Tilney, an investment banker in Houston, were dismissed for refusing to provide information to investigators from the Justice Department and the Securities and Exchange Commission, Merrill said. The firm said it did not have any evidence that either man had done anything wrong other than violating the firm’s requirement that its employees cooperate with regulators and prosecutors.”

“The federal investigators are looking into some unusual transactions in 1999 that involved Merrill and helped Enron to book quick profits. Merrill acquired a Nigerian barge from Enron in late 1999, and the two companies completed a complex energy trade in the final days of the year.”

“Investigators from the F.B.I. and the S.E.C. recently interviewed several former Enron employees in Houston about the power deal, which helped the company book a $60 million profit at the end of 1999.”

“Merrill also helped create a limited partnership called LJM2 that allowed Enron to keep some debt off its balance sheet. Mr. Davis and Mr. Tilney were among 96 Merrill employees who invested about $16 million of their own money in LJM2. Investigators say they think the partnership, which a Merrill private equity sales team had helped raise about $265 million for, may have helped mask Enron’s true financial condition and precipitated its downfall.”

“Merrill had placed Mr. Tilney, 46, on paid leave in July after he refused to testify before a Congressional panel investigating Merrill’s dealings with Enron. Mr. Tilney, a friend of Andrew S. Fastow, Enron’s former chief financial officer, was a crucial Merrill contact with Enron in recent years. Lawyers for each man said yesterday that their clients had done nothing wrong.”

” ‘We’re seeing a more sustained pattern on Wall Street where top brass is moving to distance themselves from employees who are unwilling to usher in change quickly,’ said Henry McVey, an analyst with Morgan Stanley.”