Gary Mulgrew’s Book Excerpted In Daily Mail

Gary Mulgrew, one of the NatWest Three, has written a book titled Gang of One about his experience with the American justice system. The UK Daily Mail has excerpted the book; it sounds utterly horrific.

On the other hand, Mulgrew sounds utterly charming. For example:

‘Look,’ I said, speaking more quietly. ‘I’m not from around here, and I ain’t trying to be disrespectful. But I’m not part of your battles, and I won’t be part of your Brotherhood. I’m a Scot, from Scotland. I’m British. I play football and eat chips.’ Embarrassingly, they were the only British credentials I could muster.

Check out the article and pre-order the book here.

Today In Enron History

June 27, 2002, the Enron Task Force announced they had charged Gary Mulgrew, David Bermingham and Giles Darby with wire fraud against their employer, Greenwich NatWest, in a series of deals involving an investment in a partnership formed by Enron CFO Andy Fastow.

The Southampton deal was odd for several reasons, the first being that when the NatWest Three realized there might be some irregularities involving Fastow, they reported themselves to British authorities. If they were truly guilty, it makes one wonder why they were so eager to speak to the very people who could punish them.

Secondly, the guts of the accusation against them (that they vastly under-reported the value of an asset, urging Greenwich NatWest to sell at far below market value) was refuted by the so-called victim itself. NatWest said the asset was fairly appraised.

Third, the extradition process that would ensue for the NatWest Three would become a nightmare. The three British citizens, who worked for a London bank, would find themselves at the mercy of the post-9/11 weirdness that surrounded America’s attitude toward all foreigners, not just those carrying suicide belts but quite proper and ordinary citizens like the NatWest defendants. The US claimed authority to pluck three British citizens and deposit them in US courts. The NatWest Three pleaded to be tried in British Courts, which was where the supposed crime occurred, and where – not incidentally – witnesses and evidence of their innocence remained. But the US eventually won that battle, and the defendants were hauled before a Texas court where they were forced to plead guilty to an absurd crime and sent to American prisons, some five thousand miles from their families.

UK Guardian Publishes Snarky Article About NatWest Three

The UK Guardian has published an article with a rather snarky tone about the NatWest Three, which I will now dissect like the frog in seventh grade biology class.

They became poster boys for City fraud when they confessed to stealing $7.3m in an Enron-related fraud. But the convicted British bankers once dubbed the “NatWest Three” are now recanting their guilty pleas, claiming that they were extracted under duress by a flawed American justice system.

I suppose I should be flattered that the British press seems to insinuate that the possibility of being forced by the American justice system into confessing to a crime one did not commit is beyond the realm of reality. However, I am ashamed to say that in the USA, most of the men and women in prison are in there because of plea deals.

Recently released from prison after serving half of their 37-month jail sentences for a scam dreamed up with corrupt Enron executives, two of the NatWest Three, David Bermingham and Gary Mulgrew, are far from remorseful.

God, I love the Brits.

They have launched a ferocious attack on their controversial extradition from Britain to the US in 2005 and subsequent imprisonment, claiming that they only admitted fraud in order to get home as quickly as possible after frustrating delays in their criminal trial.

I spoke to one of them who said even in prison that his situation was completely ridiculous and he was innocent. I found that refreshing because everyone else I’ve spoken to in prison does the whole “I am pretending to be remorseful until I get out of here” dance. And if they say anything that would violate their agreement (which almost universally say that they are not allowed to utter one word in contradiction to the plea) they will be punished for perjury. I love that the NatWest men are angry and vocal about their anger. They should be mad.

In a two-hour-long video on the website Ungagged.net, which is dedicated to exposing “prosecutorial abuses” in the Enron saga, Bermingham has compared the US system of plea bargaining to “Stalinist Russia”, while Mulgrew asserts his ordeal was akin to “torture”.

Wait. Why the scare quotes around “prosecutorial abuse”? And I agree with Bermingham and Mulgrew that the entire situation showed the very worst of our monolithic justice system.

“They ripped me away from my home country, away from my family and friends,” said Mulgrew. “Torture takes many forms. They delayed the trial, delayed the trial.”

Bermingham and Mulgrew, along with a colleague, Giles Darby, were at the centre of a furore over Britain’s extradition treaty with the US that sparked questions in parliament and a march by business executives on the Home Office .

The trio persuaded their employer, Greenwich NatWest, to offload a stake in an Enron-related investment venture in the Cayman Islands for a rock-bottom price of $1m. Unbeknown to NatWest, they held a stake in the purchaser, through a deal cooked up with Enron’s then finance director, Andrew Fastow, and the conspirators sold on the investment at a profit of $20m.

This is written as the Official Story and it simply isn’t true. It’s mocking the seriousness of the trouble these men have faced.

Pleading guilty in front of a Texas judge in February 2008, the British bankers delivered grovelling apologies. Bermingham said his conduct “fell well below the standards expected” while Mulgrew accepted that an offshore transaction in the Cayman Islands “lacked integrity”, adding: “I apologise unreservedly for my actions.”

It pains me to think of them – or any of the Enron executives – apologizing for something I know they did not do. Ken Rice’s “I am ashamed of my actions… I was not raised that way,” haunts me. All of the apologies are just painful and horrible because they’re being forced to accept the burden for something they simply did not do. I am sure it was painful for them to say those things. But it is also painful to hear them.

But the men now say that their confessions were drawn out of them by the pressure of extradition to the US and a two-year hiatus in Houston with little money and minimal family contact.

Gee… ya think? You think maybe these men might have a point?

Bermingham said he feared a mistrial if a jury failed to reach a majority verdict, further prolonging the trio’s stay: “On the one hand, we were going to be able to show without any shadow of a doubt that the government’s case was bullshit. On the other hand, we were three greedy foreign bankers who’d done a deal with Andy Fastow and made $7m bucks. And you’ve got yourself a mistrial.”

Bermingham need only examine the Broadband case for a picture of what a mistrial or hung jury looks like in the USA. Rex Shelby, now gone from Enron for eleven years, has been prosecuted for nine. He’s been tried, been acquitted and some counts were hung. To the Fifth Circuit innumerable times, to the Supreme Court twice. And he’s going to trial again. An even more extreme example is Kevin Howard, another Broadband defendant who was tried twice and was set to go for a third time when he finally said enough was enough. If there is any comfort at all that I can offer Bermingham, it is that he was correct; a retrial would have been hell. He is home in Britain now where he belongs. He did the right thing – even if it was horrible that he had to be put in the position of doing it.

He added: “The government made it clear to us that if we agreed to plead guilty, they would recommend that we got sent home under the prisoner transfer treaty so that we could spend a good proportion, if not a majority, of our sentences in the UK where would could be close to our wives and families. But if we went to trial and lost, they said they would ensure we spent all of our sentence here [in the US].”

As part of their sentence, the trio were obliged to pay back $7.3m to Royal Bank of Scotland, which now owns NatWest. An RBS spokesman said they had reached a settlement: “The dispute between the parties has been resolved pursuant to an agreement, the terms and conditions of which are confidential.”

The US department of justice declined to comment on the bankers’ remarks.

The trio are now trying to rebuild careers in Britain. The men’s solicitor, Mark Spragg, said there were ongoing contentious cases of British business executives being extradited to the US, including a former boss of the Morgan Crucible engineering group, Ian Norris, who was sent to the US for trial in May.

“There’s a real issue here that businessmen being sent to America are under immense pressure to plead guilty to something even if they don’t feel they are guilty, because it’s the quickest way to get out of the system,” said Spragg.

It’s not even about “feeling” guilty. It is about knowing, objectively and without reservation, that your actions did not violate any law and that you are being pursued not in the interest of justice but in the interest of becoming a trophy for an attorney who wants more than anything to advance in her or his career, and you are the way to do it.

By cynical about the media reports. Don’t be cynical about the men – like Bermingham and Mulgrew and Darby – who were too innocent to even fathom that would end up in Texas, in prison, and we would know them as the NatWest Three.

What We Know Now About Enron

The video of David Bermingham and Gary Mulgrew on Ungagged.net has unveiled a trove of details about their case, but what strikes me the most is how similar the case was to all the others. There was a coordinated strategy among the Enron Task Force with a singular goal to get Ken Lay and Jeff Skilling. As Gary Mulgrew says in the video, “we were just in their way.”

Some examples of what I mean by a strategy:

The allegations against Gary Mulgrew, David Bermingham and Giles Darby center around a personal transaction they did with Andy Fastow. They were accused of misleading their employer about the value of an asset. Bermingham states in the video, “the asset was worthless.” Even NatWest, the entity they were accused of defrauding, told the FSA that they were “content with the price.”

This reminds me of the Nigerian Barge deal, in which all the parties were content with the deal, and yet the government strived to criminalize it. Oddly, or perhaps not, both deals were worth $7 million.

In February 2002, the FSA (which is the British version of the American SEC) investigation concluded. None of the NatWest defendants heard anything more about the investigation until June when they discovered – by watching television – that they were the subjects of criminal complains. They had never spoken to anyone at the Department of Justice.

This is like the Broadband defendants. Rex Shelby answered his door one August evening to find two FBI agents standing there. As they came inside, he asked if he was being accused of something. They said no. Later, a friend stated that they had been at his place too, and they had said “Shelby’s fingerprints are all over this.” Shelby offered numerous times to speak to the prosecutors in order to explain the EBS technology and they flatly refused him. The DOJ in the EBS and NatWest cases had no interest whatsoever in speaking to the actual people they were accusing.

In the video, Gary Mulgrew’s describes a horrific strategy in which the DOJ simply manipulated his email, taking phrases from one document, pasting them into another document. He said in the video that while reading the doctored emails, he said to his brother, “I must have had a lobotomy. It seems to me, reading this, I did this. I stole this money.” His astonishment is clear. He says, “I didn’t think these people lied. I didn’t think these people manipulated. I didn’t think that they would cut and paste and do things. I grew up watching Law & Order, and I thought these were good guys… and instead what you get is this contorted load of rubbish.”

He also discusses an internal RBS report from early 2002 when the Financial Services Authority were investigating the transaction after the NatWest Three had come forward to them and self-reported. The DOJ deliberately restricted their document subpoena to pre-bankruptcy times, because they didn’t want to get hold of reports like that which would have completely undermined their case. They knew of its existence, though, because the FSA sent a huge pack of documents (which the NatWest defendants had given them) to the SEC, under a covering note which included a summary of the FSA’s conclusions, including the information that RBS had been asked to go back and look at everything again and had concluded that all procedures had been folllowed and that the price paid was fair.

This, sadly, is par for the course. Despite the fact that the entire world say “the Enron dataset”, numerous important emails were kept from the Broadband defendants until well after the first trial. Other documents, such as the new discovery in the James Brown case, are clearly exculpatory and were released only on March 10, 2010. The manipulation of email and documents is shameful, but when the DOJ has a case to make, nothing – not even civil rights – is sacred.

Mulgrew also said Caldwell gave a speech in which she said that all the people in Washington were urging an indictment. This sadly is almost word-for-word what John Kroger said. He was eager to be the first to get some “scalps on the board.” His book, Convictions, details the passion with which he was determined to convict Enron executives whether or not they were guilty.

One of the most troublesome things in the prosecutions was the way the government used anyone and everyone to get Ken Lay and Jeff Skilling.

The charging document alleged that the NatWest Three conspired with Andy Fastow and Michael Kopper. The Three were charged. Michael Kopper and Andy Fastow were not. The document was used to get Kopper and Fastow to talk since they had pled the Fifth. When Michael Kopper talked, Andy Fastow still refused. Then they indicted his wife.

The NatWest Three and the Nigerian Barge defendants were used to go after Andy Fastow. Andy Fastow, Ken Rice, Kevin Howard, and Kevin Hannon were used to go after Skilling and Lay, which is who they really wanted. The fact that thirty-six other people got trapped under the wheels did not matter one bit to the DOJ. Lea Fastow, for God’s sake, was a mother with two young kids. And John Kroger openly admits that not only would her “crime” usually not be punished, but she was being punished BECAUSE HER HUSBAND REFUSED TO TALK!

All the men they sent to prison under pernicious plea deals had children and wives and lives. David Bermingham had a three month old baby when he discovered he was subject to a criminal complaint in the USA.

And yet it didn’t matter.

None of the lives of these people mattered one bit to the DOJ. They were happy to separate a father from his infant son, or in the case of Ken Rice, his four children or in the case of Lea Fastow, her two young boys. It simply made no impact on them at all that they were deeply hurting innocent people. And these innocent people had no recourse.

I am so proud of both Gary Mulgrew and David Bermingham for speaking out. I think the big break-through in the way Enron is perceived by the majority will come when those who did plea deals start speaking out too, when they let it be known that they were manipulated and used by the DOJ for the stupid reason of putting Jeff Skilling and Dr. Lay behind bars.

So thank you, Gary and David, for being the first.

David Bermingham and Gary Mulgrew Discuss Their Case on Ungagged.net

Just released! Beth Steier has two hours of footage of David Bermingham and Gary Mulgrew talking about Enron. Both are lovely people – you can see their genuineness in the video. In the fourth installment, you can see it is still painful for Gary Mulgrew to admit that Andy Fastow was a thief. That struggle, that hesitancy to acknowledge the darkness in another human being, touches me. Both are compulsively watchable. Both are innocent; it is impossible to believe otherwise once you see the video. Check it out!

Today In Enron History

Today in 1999, Enron completed the final process of setting up LJM1. Fastow gave a presentation at a board meeting attended by Skilling, Dr. Lay, Rick Buy and David Duncan at Arthur Andersen. Fastow explained how he could hedge its Rhythms Net stock with a put option offered by LJM. It was, of course, later approved.

Also today, in 2002, three lovely men referred to here as the Natwest Three, were charged with one count of wire fraud.

Gary Mulgrew, Gilles Darby, and David John Birmingham were all employees of NatWest. They were accused of being involved in a series of financial transactions involving an investment in Enron. The pay off, the Task Force alleged, should have gone to NatWest and not to the men personally.

These three, like the Broadband Three, are great men who did nothing wrong. The legal case of the Natwest Three is fascinating to me because they were pursued under certain of the new terrorism laws that had been put into place after 9/11. They are three British subjects who worked for a British bank – IN BRITAIN – and ended up in a Texas courtroom.

Just another crazy incident in the Enron prosecutions, I guess.

NatWest Three: British Hotties

What is it about men from Britain? They are born with the ability to rock a suit. I’ve never seen any of these guys look anything less than spectacular.

They occasionally wears suits where the print is visible, like so:

Gary Mulgrew looks terrific in that overcoat. They all look terrific. David Bermingham is the Ken Rice of the Natwest Three. He just looks amazing in everything.

The Strange Silence In The Natwest Three Case

[Again, it was written over a year ago.]

During the ordinary course of my Enron googlings, I found this Guardian article about the NatWest Three, dated Monday, August 6, 2007. The NatWest Three – David Bermingham, Giles Darby and Gary Mulgrew – are all former NatWest bankers who have been accused of doing a dirty deal with Enron, and profiting from that deal. In 2006, they were extradited to the US to face trial for illegally profiting to the tune of $7.3M. As usual, no evidence exists to prove that the three did anything wrong at all. And as the Guardian story recounts, the NatWest Three had great difficulty in getting any witnesses to speak on their behalf because the prosecutors were using the exact same strategy against them as they were against Jeff Skilling and Ken Lay. They silenced witnesses with threats of arrest (or indictment). And exactly like in the case of Skilling and Lay, virtually no witnesses were willing to step up and face that kind of pressure to defend their friends and coworkers.

The only defendants who have had any luck in witnesses defying the prosecution are the Broadband executives. In that case, five former executives were fortunate enough to have witnesses come forward, despite being labeled unindicted co-conspirators, and despite repeated threats from prosecutors not to testify on behalf of the five Broadband defendants. Several other also risked themselves, their families and their very freedom to tell the truth about Enron Broadband Services.

But, oddly, that was the only Enron trial where such courage was commonplace.

Again, the obvious question presents itself: is this the best path to justice? Is this a valid way to determine if something untoward or illegal really occurred? Silencing witnesses doesn’t sound like the most noble way of acquiring a conviction. But where Enron is concerned, nothing about the DOJ is noble.

Today In Enron History

Today in 2002, the NatWest Three were charged with wire fraud in a transaction involving Enron. The three former employees of National Westminster Bank (Gary Mulgrew, Giles Darby and David Bermingham) were accused of secretly investing in an Enron special purpose entity, Southampton, and siphoning off $7.3 that belonged to National Westminster Bank. The criminal complaint, filed in Houston Texas, alleged that Mulgrew, Darby and Bermingham recommended that an interest in an Enron-related partnership held by Nat West should be sold for $1 million at a time when the defendants were scheming with Enron executives to purchase that interest for themselves for only $250,000, and then liquidating it only weeks later for over $7.3 million. The complaint alleges that the defendants: (i) knew the details of Nat West’s interest because they helped structure it; (ii) were aware that the investment had a minimal value of between $7 million and $9 million in February 2000; (iii) represented to Nat West that $1 million was a fair price; (iv) secretly negotiated their own purchase of Nat West’s interest while still employed at Nat West; (v) along with Enron executives, set up a series of offshore entities to carry out their scheme; and (vi) all the while, were employees of Nat West that had fiduciary duties to Nat West and were subject to its compliance policies.

This was, of course, nonsense.

The NatWest bankers became aware through news reports that the transaction – one of Fastow’s deals – was being investigated for fraud. They did the only conscionable thing to do, and alerted the UK authorities. The UK authorities contacted the SEC, and before even a single US investigator had talked with them, they were named in a criminal complaint.

(If you ever wonder if you should speak up when you believe yourself to have been an unwitting partner in something nefarious, that is your answer.)

Tom Kirkendall has a succinct summary of the transaction:

the case against the NatWest Three is fairly straightforward, at least as Enron-related criminal cases go. The Task Force alleges that the three defrauded their former employer by conspiring with Fastow and Kopper to underpay NatWest for its interest in an entity named Swap Sub, an affiliate of LJM1, the Fastow/Kopper-managed special purpose entity that was created in 1999 to hedge Enron’s valuable but highly volatile interest in a technology company called Rhythms.

Fastow arranged to have an entity called Southhampton that was owned by his family, Kopper and several other Fastow underlings at Enron (including Ben Glisan) buy NatWest’s interest in Swap Sub in March, 2000 for $1 million, which was substantially more than NatWest had that interest valued at the time. After NatWest sold out, Fastow sold a portion of the old NatWest interest in Swap Sub through Southhampton to the three bankers personally for $250,000. About a month and a half later, Fastow and Kopper arranged to have Enron and Swap Sub unwind the hedge on the Rhythms stock, which resulted in Enron purchasing a large chunk of Enron stock from Swap Sub. The NatWest Three’s net share of the Enron stock sales proceeds was $7.3 million.

In short, the Task Force alleges that the NatWest Three’s making $7.3 million on an investment of $250,000 a month and a half earlier violates the “too good to be true” rule. Presumably, Fastow and Kopper are prepared to testify that the NatWest Three knew that Fastow and Kopper had arranged with Enron to unwind the hedge on Rhythms stock with Swap Sub, knew that such unwinding would make Swap Sub worth much more than NatWest had it valued at the time, and that neither Fastow nor the NatWest Three disclosed the situation to NatWest before the bank sold its interest in Swap Sub to Southhampton for a measly $1 million.

For their part, Bermingham, Mulgrew and Darby contend that they knew nothing about Fastow and Kopper’s plan to unwind the Rhythms hedge with Enron, that the $1 million price that Southhampton paid for NatWest’s interest in Swap Sub was substantially more than it was worth at the time, that the $250,000 price they paid for an interest in Swap Sub was similarly reasonable given the risk of the investment, and that they were as pleasantly surprised as anyone on the big return on their investment when Enron and Swap Sub unwound the hedge a month and a half later (remember, all this took place before the bursting of the stock market bubble on tech stocks). Interestingly, despite the fact that all of the foregoing information has been well-known to NatWest for several years now, the bank did not pursue either a civil case or criminal prosecution of the NatWest Three in the UK.

By the way, colorful Houston-based criminal defense attorney Dan Cogdell, who successfully defended former Enron in-house accountant Sheila Kahanek in the Nigerian Barge case, is defending Bermingham. Cogdell’s involvement ratchets up the entertainment value of any case, so stay tuned.

Today the NatWest Three are serving their sentences in prison. Gary Mulgrew is projected to be released on 01-02-2011, Giles Darby on 01-09-2011, and David Bermingham on 01-11-2011. However, with a 15% reduction for good behavior, we can expect them out in the summer of 2010.

Calendar Of Release Dates For Enron Defendants

Michael Kopper, Managing Director Global Equity Markets Group, 01/01/2009

Kenneth D. Rice, CEO Enron Broadband Services, 02/03/2009

Kevin Hannon, COO Enron Broadband Services, 04/20/2009

Gary Mulgrew, Managing Director of Greenwich NatWest, 01/02/2011

Giles Darby, managing director and oil and gas specialist at Greenwich NatWest, 01/09/2011

David Bermingham, Finance Specialist at Greenwich NatWest, 01/11/2011

Andrew Fastow, CFO, Enron Corp., 02/17/2011

Richard Causey, CAO Enron Corp., 10/16/2011

Jeffrey K. Skilling, CEO Enron Corp., 02/21/2028

Gary Mulgrew of the NatWest Three Reports To Prison

Gary Mulgrew, one of the “NatWest 3,” the British former bankers who pleaded guilty in a U.S. court to a $20 million Enron Corp.-related fraud, became the first of the men to enter a federal prison.

Mulgrew, 46, entered the Federal Correctional Institution in Big Spring this afternoon, according to his lawyer, Reid Figel.

“He reported in accordance with the court order,” said Figel, a lawyer based in Washington, who declined to comment further. He said he went to the prison today with his client.

Last week, U.S. District Judge Ewing Werlein in Houston ordered co-defendant Giles Darby, 45, to surrender at the Allenwood federal prison in White Deer, Pa., on May 7, and David Bermingham, 45, to enter a federal prison facility in Lompoc, Calif., on May 9.

NatWest Three To Report To Prison

Bloomberg reports that Giles Darby, David Bermingham and Gary Mulgrew, three British former bankers who pleaded guilty in a “$20 million Enron Corp.-related fraud” – were each ordered to surrender to prison during the next three weeks.

Those quotation marks are mine. It is not true that it was “Enron related” fraud – if there was any fraud, then Enron was the victim of the fraud. The allegation is that the NatWest Three conspired with Andy Fastow to skim millions from a deal with Enron.

Background on the alleged fraud

The deal with Enron which is in question involves Swap Sub – the hedging structure that was originally in place to protect Enron against a decline in Rhythms Net stock. Enron had an option to force Swap Sub to buy Enron’s investment in Rhythms for a predetermined amount (I believe it was $41 per share) in the year 2004.

In March 2000, Enron terminated the hedging arrangement with Swap Sub. As the hedge was being unwound, Andy Fastow offered to buy NatWest’s share of the investment (NatWest, Credit Suisse and Andy Fastow’s LJM were the investors.) Fastow created Southampton in order to buy the interest. After the NatWest interest was bought out, Andy Fastow then sold the bankers a personal put option on NatWest’s interest. One of the bankers exercised his option and made a profit of about 7 million dollars, which he split with the others.

Tom Kirkendall has a lavish and expansive NatWest Three archive for more details if you want them. One particulaly good synopsis of the events in question can be found here.

If there was a crime in all this, it wasn’t evidenced from their eventual plea agreement: one count of wire fraud. They were then sentenced to 37 months in prison.

The men will serve their time in different federal prisons, according to orders signed yesterday by U.S. District Judge Ewing Werlein in Houston. Gary Mulgrew was ordered to surrender to the facility in Big Spring, Texas, on April 30*; Giles Darby to the Allenwood facility in White Deer, Pennsylvania, on May 7; and David Bermingham to the prison in Lompoc, California, on May 9.

This is just absurd.

*Mr. Mulgrew will be housed in the same prison as Michael Kopper, Andy Fastow’s assistant and one of the people with whom the NatWest Three did the original Swap Sub deal.