Former Merrill Lynch exec suspected of taking $43M

http://story.news.yahoo.com/news?tm...e=3&u=/usatoday/20030812/bs_usatoday/11569899

By Elliot Blair Smith, USA TODAY

A former Merrill Lynch energy trader is suspected of embezzling about $43 million from the Wall Street investment bank through massive self-dealings, according to parallel criminal investigations by U.S. and Canadian authorities.


Daniel Gordon, who became president of Merrill Lynch's Global Energy Markets Group in 1999, when he was 23, engaged in a series of shams to siphon off the investment bank's funds through off-shore companies he controlled, Assistant U.S. Attorney Jane Levine alleged in a November letter to Canadian prosecutors.


In the biggest alleged scam, Levine said, Gordon negotiated a $43 million electricity hedge contract for Merrill Lynch through a company he controlled in the British Virgin Islands. Even before the hedge took effect, Levine says, that company paid $550,000 to terminate the contract, allowing Gordon to pocket $42.4 million.


U.S. prosecutors have not yet filed charges against Gordon and declined to comment on the letter, the contents of which first were reported by the Edmonton Journal, a Canadian newspaper.


But Alberta Ministry of Justice spokesman Jason Chance confirmed "there is an ongoing investigation" into Gordon, his Alberta tax lawyer, Michael Ritter, and Ritter's offshore banking company, Newport Pacific Financial Group. The Royal Canadian Mounted Police suspect Ritter of financing a lavish lifestyle including private planes and a posh apartment with laundered money.


Ritter's attorney, Hersh Wolch, said his client has done nothing wrong. He argued that Newport Pacific was contracted by Merrill Lynch and alerted the investment bank when it became suspicious of how Gordon repatriated $30 million from Switzerland. "Money moved too fast," he said.


Gordon was fired in September, 18 months after Merrill Lynch sold the energy trading business to Allegheny Energy. He could not be reached for comment through his family-owned business, Daticon, a document-management service in Norwich, Conn. U.S. prosecutors believe Gordon acquired Daticon with embezzled funds. Prosecutors say that while Gordon was employed by Allegheny, he also engaged in oil trades with another company he owned, Eastern Energy Group. That conflict led to his termination, Levine says.


Levine says Gordon also negotiated a multimillion-dollar lease for Allegheny on land he owned and then negotiated a $2.5 million lease termination fee for himself.


Allegheny is suing Merrill Lynch over its $605 million acquisition of the energy trading business in March 2001. Allegheny alleges it was cheated by "false and misleading representations" that touch on virtually every aspect of the trading operation's business, from energy trades with Enron to Gordon's alleged self-dealings. Merrill Lynch is counter-suing, alleging it has not been fully paid.


Earlier this year, Merrill Lynch agreed to pay $80 million to settle allegations by the federal government that it helped Enron disguise its financial condition before it filed for bankruptcy-court protection. Merrill spokesman William Halldin said Monday that if the government's allegations against Gordon are true, "Then Merrill Lynch was victimized by this individual." He said the investment bank has "taken steps to strengthen our controls."

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How the hell did this "kid" get to be president of such a large organization at 23?