/ 29 November 2007

Natwest Three plead guilty to $7,3m fraud

A trio of British bankers dubbed the ”Natwest Three” face 37 months in prison after pleading guilty to stealing $7,3-million in a highly sophisticated transatlantic fraud tied to the collapse of the energy trading behemoth Enron. Less than 18 months after their extradition to America prompted a political storm and allegations of injustice, David Bermingham, Gary Mulgrew and Giles Darby abandoned their protestations of innocence at a hearing in Houston’s federal courthouse.

Dressed in dark suits, the men stood before the judge, Ewing Werlein, for the duration of a 45-minute hearing. They faced close questioning from the bench about their sobriety, mental fitness, free will and understanding of the charges.

Turning to each in turn, Werlein asked: ”How do you plead to the charge set forth in the indictment — guilty or not guilty?”

In a clear voice, Bermingham replied: ”Guilty, sir.” His two former Natwest colleagues echoed: ”Guilty, your honour.”

The men, who worked for Natwest’s investment banking arm, concocted a deal in 2000 with two senior Enron executives who have since been jailed. They recommended that Natwest sell its stake in an Enron-related venture in the Cayman Islands for a knockdown price, and shared a secret profit on the side of $20-million with their Enron counterparts.

Under a deal struck with the US government, the bankers owned up to only one of seven charges of wire fraud. Both sides have provisionally agreed to a penalty of 37 months in jail, although the judge has the leeway to alter this. They must also repay their ill-gotten gains of $7,3-million to Natwest’s owner, Royal Bank of Scotland.

Speaking outside the court, defence counsel Dan Cogdell said the men would apply for a prisoner exchange programme in the hope of spending their sentences in a British jail. Explaining their decision to plead guilty, Cogdell said: ”They realised it was the right thing to do — to get this done, to get it behind them and to move on with their lives.”

Since they arrived in America in July last year, the three men, all 45, have been electronically tagged, restricted from working, banned from associating with each other and subjected to a curfew.

”You can imagine how difficult it’s been,” said Cogdell. ”They’ve had plenty of time to reflect on what they’ve done.” The case has prompted a debate about the fairness of Britain’s extradition arrangements with the US. The men were sent there under a broadly worded treaty, signed in 2003, which was prompted by an increased threat of terrorism. Tory and Liberal Democrat front-benchers opposed their extradition, alongside business figures such as the CBI boss Richard Lambert, the Glaxo SmithKline chairperson Christopher Gent, the retail entrepreneur Philip Green and the chairperson of the London Stock Exchange, Chris Gibson-Smith.

Critics say Britain requires only basic information from foreign law enforcement agencies to send its citizens abroad. In contrast, the US demands evidence of ”probably cause” and suspects are screened by a grand jury. Eoin O’Shea, an extradition expert at Simmons & Simmons in London, said: ”It’s a far less rigorous test in England now for extradition than it used to be. British defendants are at much greater risk than they once were.”

Supporters of the men argued that they should have been tried in Britain. But the electronic nature of international business has made the jurisdiction of fraud a contentious basis. O’Shea said: ”We’re in a much more globalised world and crime is one of the most globalised of industries.”

Bermingham, Mulgrew and Darby remain on bail pending a formal sentencing hearing in February. The judge rejected a request to allow them to travel beyond Houston and its surrounding counties, saying: ”They’ve had generous enough terms of release — I’m going to continue with them. Some of us live our entire lives within this territory.” – Guardian Unlimited Â