He also encouraged Merrill employees to be "proactive" with their customers.

Nearly 100 Merrill employees, including Mr. Tilney, personally invested in the deal, contributing a total of $16.6 million.

Mr. Miller, a 19-year Merrill employee, has specialized in municipal finance since joining the firm.

A Merrill employee said the two had mishandled a retail customer's account.

"This one is really kicking people in the gut," said one Merrill employee who sells stock to big investors.

Merrill employees had to have a salary of at least $300,000 and have attained the title of Vice President or higher to be eligible.

The six-month wage freeze will affect about 80 percent of all Merrill employees.

That deal surprised many analysts and Merrill employees because it came as trading Nasdaq stocks appeared to be becoming less lucrative.

Some 6,000 Merrill employees moved back into 4 World Financial Center from the middle of October to the end of 2001.

In his testimony, Mr. Cessna cited two other Merrill employees.