Daniel Gordon, under investigation for the embezzlement of $43 million from Merrill Lynch & Co. in 2000, will be criminally charged with money laundering, according to a letter written by a U.S. Justice Department official on April 22.

``There is no doubt that Gordon will be charged with money laundering,'' wrote Mary Ellen Warlow, director of the office of international affairs of the criminal division of the Justice Department in Washington, in a letter to the Swiss Justice Department. Gordon, 27, the former head of Merrill's energy- trading unit, allegedly disguised the theft as an energy trade, according to the U.S. Justice Department.

The letter, obtained by Bloomberg News, also cites an ``ongoing investigation'' into the January 2001 sale by Merrill Lynch, the world's largest securities firm by capital, of its energy-trading unit to Allegheny Energy Inc., for $605 million. The letter said no more about that probe. Justice Department spokeswoman Casey Stavropoulos declined to comment, citing agency policy.

``It makes one very curious what the investigation of the sale is about and what it may show,'' said Alan Bromberg, professor of securities law at Southern Methodist University. He said the complexity of the case explains why the Justice Department is taking time to investigate before filing charges.

In a Jan. 3 request for assistance from the U.S. Justice Department to Swiss authorities, Warlow wrote that if Gordon was charged with money laundering, he could face up to 20 years in prison.

`Significant Criminal Charge'

Peter Djinis, a senior prosecutor in the criminal division of the Justice Department from 1986 to 1990, said that when a U.S. prosecutor writes a letter as Warlow did, criminal charges are likely to follow.

``The Justice Department is not about to make a frivolous statement to its counterpart in Switzerland concerning its intention to file a very significant criminal charge,'' said Djinis, who was executive assistant director for the U.S. Treasury's Financial Crimes Enforcement Network until last year.

``The Justice Department is not about to cry wolf, because that could jeopardize its ability to get Swiss cooperation in the future,'' Djinis said.

William Halldin, spokesman for Merrill Lynch, based in New York, and Cynthia Shoop, spokeswoman for Allegheny, based in Hagerstown, Maryland, declined to comment.

Gordon was reached on his mobile phone twice in August, hanging up each time after the caller identified himself as a reporter. He's declined to comment since he was first reached on Aug. 20.

Merrill Wired Money

Merrill Lynch wired $43 million in August 2000 to a Swiss account at Gordon's request, according to Justice Department documents. The money went to Falcon Energy Holdings SA, a Caribbean-incorporated shell company Gordon set up the same month, according to the Justice Department.

Gordon arranged to wire about $33 million of the money back to U.S. accounts he controlled, Justice Department documents show.

Gordon was hired by Allegheny to run its energy-trading unit in 2001, after the purchase from Merrill. Allegheny fired Gordon in September 2002 for unspecified violations of its conflict-of- interest rules, Shoop said.

Gordon's lawyer, Alan Levine at Kronish Lieb Weiner & Hellman LLP in New York, declined to comment.

The Jan. 3 letter from the Justice Department asked Swiss criminal authorities to freeze the bank account that held what remained of the $43 million.

Account Frozen

``The prosecutor further requests that any funds remaining in the accounts be frozen to prevent their removal or dissipation and as a preliminary step to forfeiture under United States law,'' the Justice Department wrote in the letter, a copy of which was obtained by Bloomberg.

Swiss officials located $2 million linked to the embezzled $43 million and froze the account, said Giorgio Bumio, an attorney with the Swiss Federal Office of Justice in Bern.

The April 22 letter asked Swiss criminal officials to extend the freeze. ``The money in the restrained account is traceable to money laundering, in addition to fraud,'' Warlow wrote.

The freeze was lifted in June or July when no victim came forward to claim the money, Bumio said.

``It was not so clear who the victim was in this case,'' Bumio said in a telephone interview. ``It's up to the authorities in the U.S. to inform the victims.''

Victim Not Named

The U.S. Justice Department was unable to identify the victim, Warlow wrote in the April 22 letter, citing continuing litigation between Merrill Lynch and Allegheny over the sale.

``While in most fraud cases, we are able to identify the victims and advise them to immediately file a civil action in Switzerland, in this case we haven't been able to do that,'' Warlow wrote.

It's not uncommon for fraud victims to remain silent in large, cross-border financial crimes, said Jonathan Winer, former U.S. deputy assistant secretary of state for international law enforcement, without commenting specifically on the Gordon case.

``While you sometimes find lily white victims, not every victim is without a sin,'' Winer said.

``A good reason not to claim the money might be the investigation revealed something dubious, or worse,'' Bromberg said.

Merrill Lynch sued Allegheny in September 2002, alleging $115 million of the purchase price remained unpaid. Allegheny then sued Merrill, alleging the firm made fraudulent representations about the energy unit's revenue and Gordon's qualifications. The suits have been consolidated in federal court in New York.

Merrill Lynch is a passive, minority investor in Bloomberg LP, the parent of Bloomberg News.