Posted on 08/06/2002 9:07:43 PM PDT by Libloather
NatWest Three could be key to Enron case
Tuesday August 6, 6:40 pm Eastern Time
FT.com
By Peter Spiegel in Washington
It was the winter of 2000. For three British employees of National Westminster bank, the future looked grim; their jobs might be on the line.
They worked for Greenwich NatWest, a structured finance division with offices in Connecticut and London. And, facing a hostile takeover and needing to raise cash, Natwest had put GNW up for sale to help it fend off unwelcome advances from two Scottish rivals.
In February, David Bermingham, Gary Mulgrew and Giles Darby flew to Houston for a meeting with Enron executives with a secret plan that, according to documents uncovered by federal prosecutors, was intended to set them up for life.
According to charges filed against them in a Houston federal court, the scheme they launched was nothing less than a highly complex bank robbery - a robbery from NatWest, their employer, completed over six months with the help of a handful of Enron officials.
In the overall scale of Enron's collapse, their alleged actions were small beer. The $7.3m they are alleged to have stolen is tiny compared with the debts that finally brought Enron down, and the partnerships used to facilitate the transaction are not central to the accounting fraud that, once uncovered, plunged the company into bankruptcy. Because of that - although charges were filed against the three and arrest warrants issued almost two months ago - the case has received scant attention. The three remain at large and no extradition proceedings have been started.
But these first charges brought by the justice department's Enron taskforce may soon prove more important, not because of the men who were charged in the scheme, but because of the men who were not: Andrew Fastow, Enron's former chief financial officer, and Michael Kopper, Mr Fastow's protégé.
Mr Fastow and Mr Kopper have long been at the centre of the justice department's investigation of wrongdoing at Enron, but making a case against either man has proved difficult.
But records collected by prosecutors allege that Mr Fastow and Mr Kopper helped facilitate the three NatWest bankers' scheme, making the case possibly the federal government's easiest opportunity to charge Mr Fastow and Mr Kopper with a crime.
For its part, the justice department is not commenting, other than to say it is hoping to see the NatWest bankers face the charges in court.
But the fact that the three have not yet been arrested and were charged in a criminal complaint rather than a formal grand jury indictment - giving prosecutors flexibility to threaten stiffer charges - has led legal experts to believe the bankers are being put under pressure to testify against Mr Fastow in return for lenient treatment.
According to e-mails and other documents cited by the Federal Bureau of Investigation, Mr Fastow's involvement in the scheme was seen as essential by the bankers from the beginning.
Before the February 2000 Houston meeting with Mr Fastow, the charges allege, the three discussed ways to enrich Mr Fastow in the plan. "We should be able to appeal to his greed," Mr Bermingham wrote in an e-mail to Mr Mulgrew.
In Houston, prosecutors allege, the three met Mr Fastow at a rendezvous so secret that the NatWest employee normally responsible for dealings with Enron was told by Mr Darby not to attend - but also not to worry, as they were "going to get rich".
According to the charges, they laid out several options that would enable the bankers to pocket more than $7m and net Mr Fastow $25m without their bosses at NatWest, limited partners in an Enron- related investment, finding out.
One option was rejected as being too risky. "Problem is that it is too obvious [to both Enron and LPs] what is happening [ie robbery of LPs], so probably not attractive," the bankers' presentation read, according to prosecutors. "Also no certainty of making money."
The charges claim that the bankers decided to tell their bosses at NatWest to sell an Enron-related investment for $1m, even though they knew the stake was worth much more.
A Fastow-led partnership named Southampton, in which the three NatWest bankers had a financial interest, would buy the shares and quickly sell them again at a true market price, enabling the bankers to pocket $7.3m. "Between approximately March 2000 and July 2000, Mulgrew, Darby and Bermingham executed a scheme to purchase and then profit hugely from the lion's share of what should have been NatWest's beneficial interest," said testimony from FBI special agent Deanne Simpson.
When the sale was completed, prosecutors said, Mr Fastow placed a call to Mr Mulgrew, saying the three had just made the $7.3m, which was sent by wire to a Cayman Islands bank account controlled by the Britons.
Rubin hasn't been charged - yet...
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