Enron's crooked bosses created a series of small companies in the Cayman Islands to hide some of their company's debt. Known as special purpose vehicles (SPVs), the companies included Swap-SUB, a wholly owned subsidiary of another SVP called LJM Cayman. Both shells were owned by Andrew Fastow, Enron's head of finance.
Greenwich NatWest, the city investment arm of the NatWest bank, which was taken over by the Royal Bank of Scotland in 2000, owned shares in Swap-SUB, and during the takeover, Andrew Fastow phoned Gary Mulgrew and offered to buy GNW's shares in Swap-SUB for $1 million. These shares eventually ended up under the control of Southampton LP, another Cayman Islands SVP.
Credit Suisse owned the same number of shares in Swap-SUB as Greenwich NatWest, but they got $10 million for theirs when they sold them to Southampton LP.
The NatWest Three became great pals with the Enron guys and the Royal Bank of Canada head-hunted them for their Enron connections at a time when every bank in the world was eager to do business with Enron.
The day after David Bermingham left Greenwich NatWest, he bought parcels of shares for the NatWest Three (to the value of $250,000 per man) in a Cayman Islands SVP which owned part of Southampton LP. Soon afterwards, Southampton LP sold Swap-SUB to Enron and the NatWest Three made a total of $7.3 million out of the deal.
When Enron collapsed, the NatWest Three confessed to the British Financial Services Authority, their part in the Southampton LP deal. The US Dept. of Justice used their statements to force previously silent Enron executives to talk and make the best plea-bargain they could manage. The NatWest Three were indicted in 2002. David Bermingham has admitted that there is a 98% probability that he and his associates will start their own plea-bargaining process after they are extradited.
|The charges against the NatWest Three allege that that they deliberately sold Greenwich NatWest's shares in Swap-SUB for less than their true value, they bought shares in Swap-SUB and they made a big chunk of cash for themselves through a common or garden piece of insider trading.|
|The Extradition Treaty|
The NatWest Three faced extradition under a treaty signed in secret between Britain and the United States in the wake of the 2001/09/11 terrorist attacks on the US. The US Justice Dept. can requested extradition of suspects by presenting enough evidence to justify an arrest rather than the entire case against the accused.|
While Britain has ratified the treaty, the United States hasn't. This means that suspects can be fast-tracked to the US from Britain but not the other way from the United States to Britain.
The NatWest Three claimed that if the treaty is not reciprocal, then it is unfair and it should not apply to them. They wanted to be tried in Britain as they claimed that their alleged crimes were committed here. The NatWest Three 'lost badly' at every stage in their court battle to avoid extradition, and their attempt to make the Serious Fraud Office investigate their case was rejected by the European Court of Human Rights in June 2006.
|The Attorney General's Case|
|Lord Goldsmith says that the conspiracy took place in the United States, the complicity of Enron executives was an essential element in the fraud, the American case against Enron's executives is well advanced and it serves the overall interests of justice for the entire case, including the contribution of the NatWest Three, to be dealt with by one court, i.e. a court in the United States.|
|Why should they be tried anywhere but Britain?|
|The NatWest Three know that Britain's Serious Fraud Office has a lamentable record when it come to prosecuting major fraud cases. The SFO's cases tend to drag on for so long, often because the judge fails to get a grip on the court proceedings and rein in windy lawyers, that the case falls apart.|
British major fraud cases also have the additional safety net of an appeal to the House of Lords, where the accused are more than likely to get off on human rights grounds.
The NatWest Three have attracted a lot of support from the 'business community' as theirs is seen as a test case for the new extradition law. If they can be taken to the US to answer fraud charges, the same could happen to other British businessmen, who believe that they are safe from the Serious Fraud Office, which can't handle dodgy traders, but not from the Americans, who are good at prosecuting crooks.
Despite the alleged fast-tracking, it has taken four years to get the NatWest Three to the United States to face 'a well-documented case, which they should answer'.
It is argued, irrelevantly, that the extradition treaty was supposed to be used for evicting suspected terrorists, not allegedly dodgy bankers, and it is so one-sided because the IRA lobby has 'got at' US lawmakers in an attempt to prevent the return of Irish terrorists, and their supporters and fund-raisers, to Britain for trial.
The fact that the NatWest bank has not laid charges against the NatWest Three is being presented as something in their favour (in their PR), but the bank is being sued by Enron's creditors in the US and it is worried that anything revealed in a trial of the NatWest Three would be used against the bank in due course.
The NatWest Three are using the 'Lord Levy Defence', pointing out that they are just middle-class family men and much too respectable to be criminals despite making the statements which brought the whole Enron house of cards crashing down.
They are also using their PR machine to portray the American courts as little better than the ones which operated in Nazi Germany and Stalin's Russia, implying that they'll get an unfair trial and a lynching.
Despite all the dust kicked up by the usual suspects and NatWest Three's publicity agent, there is a strong feeling that the NatWest Three are getting no more than they deserve for a swindle which they have admitted.
Following their extradition to the United States, the NatWest Three have fallen into the hands of grasping American lawyers. They will be lucky to have anything left of their ill-gotten gains by the time their trial starts on September 11th, and they have had to tell their briefs to stop chatting to the meeja with the meter running. Some pessimists are estimating that they will take up to 2 years to organize their defence.
They face 7 fraud charges for stealing $7.3 million dollars and they face 7-9 years in gaol if convicted. [Not the 22 years they were yelling about when they were trying to avoid being extradited.]
The Enron guys involved in the alleged frauds have already offered guilty pleas in exchange for a deal on sentencing. Their sworn statements detail the parts played by the NatWest Three in the scam.