Any would-be facilitator of a public company's fraudulent revenue recognition practices who has not already been deterred by the string of SEC cases discussed in posts such as this should consider the verdict handed down yesterday in the Enron "barge" case. As discussed in detail in this article in the New York Times, a federal jury in Houston found that five defendants, including four former executives of Merrill Lynch, conspired to help Enron report bogus profits. The case "centered on a single transaction involving what the government argued was a bogus sale of an interest in barges by Enron to Merrill." Specifically, according to the article,

The barge transaction took place in late December 1999, when Enron was struggling to meet Wall Street's profit projections. When no buyer emerged, Merrill agreed to invest $7 million in an entity that made the purchase, in exchange for what the government said was a secret oral commitment from Enron to repurchase the barges in six months. Such a deal would guarantee Merrill against loss, meaning that Enron still retained the risk of ownership and could not report the money from the deal as revenue.

The former Merrill executives include the former head of global investment banking at Merrill and the former head of the firm's project and lease finance group. They now face sentences of up to five years in jail on the conspiracy charge.