Nigerian Barge Deal

The Nigerian barge deal was a 1999 agreement between Enron and Merrill Lynch that ended up being a fraudulent transaction to assist Enron to book fake profits. In the deal, Enron transferred an interest in energy-producing barges located off the coast of Nigeria to Merrill Lynch. The sale was a sham because of a side deal Enron made to repurchase the barges from Merrill Lynch shortly after the sale. The transaction enabled Enron to record $12 million in pretax profits.

The leaders of Enron Corp., a high-flying energy firm in the late 1990s, took its corporate crime show to Lagos, Nigeria — itself not exactly known as a place of business probity — in 1999. Enron announced that it planned to build gas-fired power plants there, but in the meantime, while they were to be constructed, Enron would supply power from mini-facilities installed on three barges. Enron never came close to fulfilling its contract to supply power to the country. Instead, it engaged in an "asset-parking arrangement, whereby on Dec. 29, 1999, Merrill Lynch bought an interest in certain Nigerian barges from Enron with an express understanding that Enron would arrange for the sale of this interest by Merrill Lynch within six months at a specified rate of return," according to the complaint brought by the Securities and Exchange Commission (SEC).

One former Enron executive and four former Merrill Lynch executives were found guilty and received prison sentences for conspiracy to commit wire fraud and falsify books and records. One former Enron accountant was acquitted. It was the first of many Enron trials and a relatively small one, but it was thought to be an important indicator of how future trials might be handled for this rogue company. Eventually, Enron collapsed into bankruptcy by playing fraudulent accounting games from this small deal and other much larger cases, with far-reaching ramifications for the accounting industry and government regulation of some of Wall Street's complex products and tricks.