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Three NatWest bankers who fought extradition from Britain to answer a multimillion-dollar fraud charge face 37 months in jail after dramatically pleading guilty last night.
Gary Mulgrew, David Bermingham and Giles Darby had fiercely maintained their innocence since September 2002 against charges of defrauding the NatWest-owned bank where they had worked out of $7.3 million through a suspect deal. They are believed to have agreed to pay this sum as restitution to the Royal Bank of Scotland.
The trio had each been charged with seven counts of wire fraud – illegally gaining money through international banking systems – that left them facing a maximum prison sentence of 35 years each.
All three men were extradited from Britain to Houston, Texas, on July 13 last year under a controversial treaty after a high-profile campaign.
In a hearing before District Judge Ewing Werlein in the Southern District of Texas Court in Houston last night, they agreed to a plea bargain in which they admitted their guilt for the first time, but pleaded guilty to only one of the seven counts of wire fraud against them.
Prosecutors said that the three bankers had advised Greenwich NatWest, the subsidiary of NatWest where they worked, to sell off its stake in an Enron business in 2000 at well below its market value. The men admitted that they had quit the bank and bought a $250,000 stake in the Enron unit, which they sold on at a higher price to make a total of $7.3 million.
All three men pleaded guilty to being involved in an e-mail sent from London to Houston on March 17, 2000. The e-mail contained the final sale documents for the company Swap Sub, which is at the centre of the allegations.
The remaining six counts of wire fraud are expected to be dismissed when the three bankers are sentenced formally in Houston on February 22.
The eleventh-hour change of plea may have something to do with the length of time that the men have been apart from their families.
Standing next to the three defendants outside the court, Reid Figel, Mulgrew’s lawyer, said: “By changing their plea today, Gary, Giles and David have fully accepted the responsibility for the significant lapse of judgment that led to the signing of these charges and which has caused them to be separated from their family and friends in the UK for more than 17 months.”
Mr Figel went on: “We look forward to working with the UK and the US governments to promptly transfer Gary, Giles and David back home to serve their sentence.”
Earlier in court, Dan Cogdell, defending Bermingham, urged the judge to consider bringing forward the defendants’ sentencing date. “They can’t get out until they get in,” he said.
The terms of the plea deal have not yet been accepted by the US court.
The extent to which the agreement watered down the original charges will raise questions over the length and expense that the US Justice Department has gone to during the five years that it has spent pursuing the case. In particular, critics will want to know why the US Government pursued this case so doggedly on the basis of a new extradition treaty that was already highly controversial.
It will also reignite the debate as to why Tony Blair, the Prime Minister at the time, defended their extradition.
The trio became a cause célèbre in 2004 as the most prominent target of a new extradition treaty between Britain and the US, which allowed America to extradite criminal suspects from the UK without prima facie evidence. The treaty was signed by David Blunkett in 2003 and came into effect in 2004. The treaty – and the ruling in September 2004 that the NatWest Three’s extradition should go ahead – was greeted by protests from British politicians, business people and human rights campaigners.
The NatWest Three were accused of persuading Greenwich NatWest, the investment bank that is now owned by Royal Bank of Scotland, of selling a stake in a Cayman Islands investment company at a fraction of its real market value to a small company controlled by Andrew Fastow, the former chief financial officer of Enron.
The stake was then sold to Enron for its true value and Mr Fastow shared the profits with the trio, who made about $2.4 million each.
The cast of characters
Gary Mulgrew, 45, was a bouncer at a Scottish nightclub before entering the world of finance. He was immortalised as Braveheart in the novel The Pursuit of Happiness, a thinly veiled account of the world of banking written by a former colleague at Greenwich NatWest, where Mr Mulgrew ran the structured finance division and where the alleged fraudulent transaction took place
Giles Darby, 45, was born in India, where his father was a diplomat, and joined NatWest at 17. He has five children from two marriages and inspired the character of the Energiser Bunny in The Pursuit of Happiness. He is best friends with Mr Mulgrew
David Bermingham, 45, has three young children by his wife, Emma, whom he met when he had left the Army for the City. He was living in a mock castle in Oxfordshire before his extradition to the US. He is characterised in The Pursuit of Happiness as Charlie Bristols, a man who wades through the small print
Bank charges
December 2001 Collapse of Enron, the US energy giant
June 2002 US prosecutors issue arrest warrants for David Bermingham,
Gary Mulgrew and Giles Darby over a suspected £11 million fraud involving an
Enron subsidiary
September 2004 Judge rules the three can be extradited to US
February 2006 The High Court upholds the extradition
July 13, 2006 The three are extradited
January 7, 2008 Trial to start unless charges are dropped or a
plea-bargain agreed
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Read the prosecution evidence ,its damning ,the US system sends out a deterrant message to all fraudsters who plan on enriching themselves at the expense of the unknowing.They did it , the only reason they are now plea bargaining is that they found out that the FSA had supplied the SEC with the evidence.
Mulgrew is particularly greedy , hiding assets valuing his hedonism before his children. The use of the terrorism act to extradite them was red herring which they tried to use a a diversionary tactic
Vlad the Impaler, Moscow, Russia
Plea bargaining is state-sponsored blackmail - agree to be punished or the state will use all its resources to punish you more severely.
It also means that we will never know if they were guilty. We have only had confirmed that the state can easily oppress the individual providing they take us on a few at a time.
Hands up all those people who would risk their own freedom on getting a fair trial in Texas in connection with Enron, or in the USA generally when an innocent verdict would blow apart this biased extradition treaty?
Ian, Stafford,
I've always agreed with the extradition imbalance - I keep hoping a British citizen will extradited over the al Yamamah bribes. Citizen Thatcher.M.(Mrs).
eric campbell, harrogate, uk
All that fuss.then lo and behold they were guilty all along - well done the Yanks.
Would that our authorities were as sharp and diligante as those in the US.
What do we have in place to defend us.The Serious Fraud Office and the Financial Services Authority, all the old boys still in the same incompetent waltz around each other.
robert everittt, wolverhampton,
I think I was actually one of the very few people in this country last year, who actually supported the extradition of the NatWest aka Enron Three.
I was bemused with their very high profile and slick media campaign, as well as the jingoism of a great many in this country.
The guilty plea of these criminals shows why they protested so loudly against extradition.
This whole matter: the savvy media campaign and manipulation, as well as the blatant jingoism reminds me very much of the current McCann issue.
Let us hope the truth might also eventually come out in this very sad and sorry saga.
Rupert Nathan, London, UK
Well done to the US Justice System
If they were innocent they would plead not guilty.
Why is it that 3 employees sent to get the best deal for selling a compnay owned by their own firm come to a allegedly secret illegal deal to sell the company with them as secret directors and make millions in a few months.
Now I think that just because British Justice system is useless at convicting White Collar Criminals doesn't mean we shouldn't all cheer the US system.
Next time some allegedly greedy bankers are sent to do some business in US they will behave themselves.
If you plead guilty then you are guilty and must take the punishment. I mean they got away with millions no wonder my bank shares keep falling in price.
Phil , Edniburgh, UK
I feel very sorry for these 2 men. They have pled guilty not because they are necessarily actually guilty but because it will perhaps give them the best outcome in terms of years in jail.I also feel sorry for their families. America should stick to prosecuting its own citixens and stop trying to interfere with UK citizens.
Simon, London, UK
How any more ' not guilty ' bankers are there in the City? I assume the expensive PR company that they hired , all the ' city grandees ' who came to their defence plus all the gullible journalists who slavishly wrote what they were told will now come clean and apologise for trying to mislead us.
Adrian, London , Gt Britain
So the NatWest Three were crooks after all - who'd've thunk it?
Eric Murray, Auckland,
Well done the US for taking white collar crime seriously. Remember the UK pension raids with no convictions eg Maxwell.
KK, West Mids,
Had our FSA had any teeth they would have been prosecuted in the UK and the situation would never have arisen. About time the FSA started taking white collar crime seriously.
Iain, Northampton,
The NW three are now proven criminals regarding the recent case.
If Stephen of London's comments are true then Royal bank Of Canada should check it's records & so should the regulators.
I agree that there is not equality between the UK & US relationship, or the extradition support by the US, yes the USmilitary are proven to be gung ho shoot first think later types & our governement pathetic at defending our troops under any circumstances.
But the point is here that the US caught three crooks redhanded that the UK financial world & regulators missed.
MT London What was once Great Britain
MT, London, Once was once Great Britain
So sick of attitudes like those displayed by MS, who by their colloquialisms is clearly originally from the US (if I'm wrong, I apologise in advance, but I don't think I am).
It's not about the crime, it's about the double standards employed by the US, whose government NEVER accord ours mutual respect and cooperation - what's more serious, white collar crime or killing someone through military incompetence?
To quote a fictitious CIA agent from a TV program "that special relationship everyone's always going on about only applies while you guys are doing what we want you to do for us".
Never a truer word spoken.
Alex, London,
sorry to say your caption accompanying the NatWest Three is erroneous. Giles Darby features left, David Bermingham front centre and Gary Mulgrew right.
alison darby, chaumontel, france
The person who comes out very badly from all this is Shami Chakrabarti, Director of Liberty, who must rue the day she allowed herself to be cynically manipulated by three articulate fraudsters â in the interests of political point scoring about an extradition treaty.
Let's face it, is there really a difference between three criminals that heist over 3 million pounds and train robbers? Answer: Messrs Biggs et al were not constantly referred to as David, Giles and Gary (how deceptively cosy is that?).
Unlike the unfortunate Ms Chakrabarti, I am not manipulated to feel sorry for individuals who deliberately set out to defraud the depositors and shareholders, and profit to the collective tune of over USD 7 million. In my book, 3 years seems over lenient â and they should pay interest (let's say at the same 11 per cent coupon currently being paid by Citicorp). Judges, and directors and depositors of the RBS Group please note.
Robin Worrall, Copenhagen, Denmark
I'm curious why what these men isn't a crime in the UK.
And why did Natwest not pursue them when things came to light? Why are their shareholders not furious? Is a £7 million not worth worrying about? And why such sympathy in the press when it looks like they are guilty? The list of questions goes on and on. I think the Americans are the only ones who come out of this looking good.
Shaun, London, London
I wonder if they'll be sent to Terre Haute?
Paul Wray, Bradford,
Whatever the rights and wrongs of this case are, it is certainly a wake-up call to anyone trying to do business with the USA. After this episode, anyone who does must have rocks in the head.
Nicholas Lee, Windsor, UK
Having worked with these self confessed crooks I am sorry that they will only serve 37 months. They deserve 35 years. When they go in their former colleagues will raise a loud cheer as they did when they were extradited in chains. Why doen't anyone enquire about the $250m that their next employers, Royal Bank of Canada paid ABN for a dodgy swap they sold and why has no-one pressed RBS for an explanation as to why they did not prosecute them in the UK? Is it because some senior persons might have known more than they wanted to reveal in court. NatWest was a huge lender to Enron thru the Houston office. The media has done a shoddy job of investigative reporting on this case. Dig deeper-you will be surprised by what you find.
Stephen, London ,
The issue here is..a.
The issue here is....b
The issue here is...c
Oh you're all so liberal. These men stuck their hands in their employers till and walked away with $7m. If Enron hadn't gone bust, they'd be living the life of riley.
Even now after having fessed up and are about to give it back, people are still mollycoddling them. Oh you poor victims !
Their greatest achievement was to persuade the gullible that they, in some way, are heroes.
Simon, dawlish,
Plead guilty, move some money around, transferred to UK, time off for good behaviour and go home. Maintain innocence, Hit the Brit, Mel Gibson justice, and the slimey Limey rots in jail.
This isn't justice! It's blackmail, psychological torture.
Remember the money is being paid to the RBS and not to the US banks. The RBS wasn't howling for it before. The USA has passed laws that it believes have jurisdiction outside the USA. The extradition treaty, which is a one way street as they refuse to honour it, should never have passed into UK law.
Corin Keiler- Lloyd, Wolverhampton,
shame none of the requested US citizens suspected of supporting terrorism that the UK has requested (links to IRA etc) have not yet been extradited!
mole, london,
Looks like the anti-Capitalist crowd are out in force below. Lets see ANYONE facing decades in some hellhole US prison not take the least worst option to get out of it, regardless of guilt or innocence. These men should never have fallen under the provisions of this agreement, it was meant for terrorist suspects. Wrongdoing by British businessmen in Britain should be assessed and dealt with by the British authorities. If the British authorities wont or cant deal, then replace them and change the law.
Still its nice to know that so many people have such faith in the US legal system, that they are content to let the US police the world economy.
Kev Wilson, Hounslow,
Completely agree with the sentiments above.
Where was the FSA, and why did it have to fall to the US to prosecute these criminals. Well done US.
I can't believe George from Glasgow that you deem guilt immaterial. Are you also against the hunting and extradition of war criminals?
Paul Jones, London, uk
What a lot of jealous load nonsens so far as comments......fact is that these people did NOT break any Uk law, a place where they were born, lived and worked and where the business transaction, carried out utilising the best legal advice possible, was conducted with a major UK bank.
Fact - the US gets convictions by tying up innocent people for years and costing them many hundred of thousands of dollars in attempting a defence against charges brought at the whim of the Justice system for PR or publicity reasons.
Fact - these men have only copped a plea to avoid spending yet more years and hundreds of thousand or millions of their money in fighting these charges, which, if by some chance were proved, could have resulted in their spending effecitvely the rest of their lives in jail.
Fact - this government should be ashamed of itself for caving into their wrongful extradition and imprisonment yet allowing, as said already, our service men to be shot with impugnity by US forces.
Tony, Biarritz, France
Following the dreadful anti American campaign waged in the press and TV in this country, can we now shope to see ee loads of newspaper articles and leading items on TV news agreeing that the Americans were right after all!
I don't think so. Hypocites - the media that is.... and still blindly anti American.
I'm not an American, by the way, just sick of the overt racism I see in the media today.
Stephen Edwards, Wokingham, Berkshire
I agree totally with MS above. What I am concerned about is the UK system of monitoring and follow-up in these cases. Why did it take the USA to extradite and prosecute? Where was the UK legal system? Why did it not act? Where is the FSA and its cohorts? Could it have done? If not, the legislation needs to be reviewed. Also, would the case of fraudsters have created so much media pyblicity if it had been dealt with in the UK? I doubt it.
Barqueleigh
Spain
Phillip Day, Lliber,
Presumably these crooks would never have been charged in the UK, which still sees some white-collar crime as a jolly jape carried out by clever chaps in the City. Fortunately in this case we have been helped by the US to see that justice is done. Perhaps our legal people need to learn some lessons about the definition of "crime".
Al, Weybridge, UK
I happen to agree with the extradition of these three crooks. At least under the American system justice was done.
Can the same process be undertaken for the senior management of QinetiQ? Their agreement that allowed them to compensate themselves to the detriment of the UK taxpayer was with Carlyle Group, an American company.
M Jeffs, Bucks, UK
The fact that they are guilty is immaterial in this case, the real issue here is why did Britain allow British citizens to be extradited to the US when their soldiers can kill our troops by 'friendly fire' with complete impunity. This is a one way street that should either become two way or be closed completely. STOP pandering to the US and start being proud to be British again - the politicians may want to be US 'poodles' but the rest of us do not.
George, Glasgow, UK
Oh, so they DID have the $7 million !
But they are still "innocent" really. O yes.
These guys basically got away with it. If they had invested $7 million when it first fell into their laps all those years ago, they would have tripled that money by now.
Moses, Hong Kong,
Regardless of this case , faced with 35 years or 30 months unless you are a hardened gambler or deluded that justice may prevail , what would you do ?
The issue here is not the specifics but the US can extradite people from the UK without prima facie evidence, which should be changed as soon as possible Or MS has the USA never made a mistake without proper evidence ?
Answers on a postard .
simon, london,
When the bait is freedom, even the innocent plead guilty under duress for the sake of freedom, tranquility and an end to State oppression. That's what I did.
Sebastian, London , UK
Enough already.
This is what GUILTY people do - they take a for sure lesser sentence than risk big penalties.
For those who still want to defend these crooks remember - they pleaded GUILTY!!!
Also, 30+ months isn't "oh, I pleaded guilty to avoid real jail time" - more than 3 years in jail on a plea bargain? The only people who take that plea are guilty. Period So please, save the fake, nationalistic dramatics......
MS, london,