Two former Merrill Lynch executives were sentenced to prison for helping Enron manipulate earnings, making them the first bankers jailed...

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Two former Merrill Lynch executives were sentenced to prison for helping Enron manipulate earnings, making them the first bankers jailed in the scandal surrounding the energy trader’s collapse.

Daniel Bayly, 57, who was head of investment banking, got 30 months, plus six months of supervised release after he gets out.

James Brown, 52, who led the strategic asset lease and finance group, got 46 months and a year of supervision. They were fined $295,000.

The two men were convicted of conspiracy and wire fraud for their roles in a sham deal that disguised a $7 million loan to Enron as a sale of three Nigerian energy barges to Merrill.

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Bayly got the minimum prescribed by federal sentencing guidelines, after the judge received more than 40 letters praising him for his integrity and asking for leniency. Brown got a steeper sentence because he was convicted of lying to a grand jury and obstructing the Enron investigation. The jury at his trial also determined that he played a leadership role. Under the guidelines, he could have received up to 57 months in prison.

U.S. District Judge Ewing Werlein in Houston called the letters from Bayly’s friends, family, and associates, “the most extraordinary compilation about a person that I’ve ever received.” He said the defendant was referred to in some of them as “Boy Scout Bayly” and “By-the-book Bayly.”

The government had asked the judge to impose the statutory maximum of 15 years, citing Bayly’s position at Merrill and the amount of money lost.

In imposing fines of $295,000 each on Bayly and Brown, Werlein said the figure represents one-fifth of the $1.475 million he determined investors had lost. Werlein overruled the jury’s calculation that damages amounted to $13.7 million. The government’s estimate was $43.8 million.

In all, five defendants were convicted in the November trial, including a former Enron official and two other former Merrill executives.

James Brown led asset lease and finance group.

Earlier yesterday, Assistant U.S. Attorney Kathryn Ruemmler asked Werlein to give Bayly a stiff sentence, saying he has shown “not one iota of acceptance of responsibility.”

His lawyers asked for probation and community service instead of prison, arguing that the former executive’s role in the crime had amounted to a single hour’s involvement in an otherwise unblemished 30-year career.

“In a life of 57 years, Mr. Bayly never did anything wrong,” defense lawyer Tom Hagemann told the judge. “He was a faithful husband, worked hard,” and devoted himself to Merrill Lynch.

“At the most, there was a day-and-a-half of aberrant behavior,” Hagemann said. “We beg you for mercy.”

Another defense lawyer, Larry Robbins, indicated Bayly would appeal his conviction.

The defense contended that Bayly’s only involvement with Enron and the Nigerian barge deal was “one brief conference call with Andrew Fastow.”

Fastow, Enron’s former finance chief, has pleaded guilty to two counts of fraud and conspiracy and agreed to serve a 10-year prison sentence and forfeit $29 million in illegal profits. In exchange, the government dropped 96 other charges against him.

Fastow, 42, didn’t testify in the barge trial. He’s expected to testify at the fraud trial of former Enron Chairman Kenneth Lay and former Chief Executive Jeffrey Skilling in January.

Lay, 63, faces a separate trial on bank-fraud charges. A federal judge in Houston yesterday said he’d start the bank-fraud trial as soon as jury deliberations begin in the broader fraud and conspiracy case. Prosecutors wanted to start the bank-fraud case as early as next month. A separate jury will hear evidence in that trial.

“The illegal parking of the Nigerian barges was part and parcel of an overarching criminal conspiracy to manipulate Enron’s reported earnings,” Andrew Weissmann, director of the Enron Task Force, said in court documents last month. “When that conspiracy — of which this fraud was a part — came to light in the fall of 2001, Enron came crashing down.”

Prosecutors said Merrill executives helped Enron “cook its books” when the investment bank paid $7 million in December 1999 for a stake in three energy-generating barges moored off the Nigerian coast.

Enron secretly promised to buy back Merrill’s investment, with interest, six months after the sale, prosecutors claimed. The promise made the deal a loan under accounting rules and made Enron’s subsequent booking of a profit fraudulent, they said.