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A Financial Services Authority investigation into the NatWest Three formed the central thrust in the case against the bankers, who changed their plea to guilty on Wednesday after maintaining their innocence for five years, it emerged yesterday.

It has come to light in documents seen by The Times that the source of evidence against them came from an investigation by the FSA, which sent its findings to America’s Securities and Exchange Commission in the summer of 2002. The SEC passed them on to the US Department of Justice.

Gary Mulgrew, David Bermingham and Giles Darby, who were extradited to Houston, Texas, to face seven charges of wire fraud, pleaded guilty on Wednesday to defrauding NatWest through a deal from which they collectively pocketed $7.3 million (£3.5 million). However, they admitted only one of the seven counts in a plea bargain that would reduce their potential prison sentences from 35 years to 37 months.

The report included interviews with the three as well as executives from other related parties such as NatWest and Royal Bank of Canada.

It was so detailed that it told the SEC who it should interview and what evidence was needed to secure a conviction. The report, which was referenced in documents used in an appeal against the NatWest Three’s extradition, concluded that “there appears to be evidence that the three individuals were subject to a major conflict of interest”.

It went on to recommend that the SEC interview Andrew Fastow, the former chief financial officer of Enron, and Michael Kopper, another former Enron executive, who were also involved in the suspect transaction. The NatWest Three persuaded Greenwich NatWest, the investment bank that is now owned by Royal Bank of Scotland and where they worked, to sell a stake in a Cayman Islands investment company at a fraction of its real market value to a company controlled by Mr Fastow. Mr Fastow then sold it on to Enron at its real value and shared the profits with the trio.

The one count to which the NatWest Three pleaded guilty centred around their admission that the transaction represented a conflict of interest. Furthermore, Mr Fastow gave the US prosecutors the only significant additional evidence that they secured on top of the FSA report. Mr Fastow implicated the trio as part of a plea bargain that reduced the sentence he received for his part in the Enron melt-down from 95 years to six.

One senior financial regulator based in London said: “This level of cooperation between the FSA and the SEC is very unusual. There’s a memorandum of understanding between the two, which is not legally binding. The FSA usually just cooperates in a formal, back-covering way.”

The case became a cause célèbre in Britain. Among those supporting it was Hugh Osmond, the chief executive of Pearl Assurance.

He said yesterday: “It doesn’t matter whether they are guilty. It is absolutely outrageous that they were extradited. Once in the US the odds were stacked against them. They probably chose to plea bargain to end the ordeal. It is a totally unfair piece of legislation that allowed them to be extradited and a bad reflection on the UK’s ability to protect its citizens.”

The FSA declined to comment.

‘It is possible that the $7.3 million received by the three individuals may have represented the proceeds of fraudulent activity’

‘We believe it is imperative this matter is brought to the attention of the SEC or appropriate body to fully investigate’

‘There appears to be evidence that the three individuals were subject to a major conflict of interest’

–– From the FSA's report to the SEC

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