James Quinn, on The Telegraph, has two stories today (here and here) on the conviction of the three former bankers - David Bermingham, Giles Darby and Gary Mulgrew - working at Greenwich NatWest, the investment banking arm of NatWest, now, Royal Bank of Scotland (RBS), who face 37 months each in jail after pleading guilty to fraud. They pleaded guilty to one count of wire fraud in return for the rest of the charges being dropped....
"... In a somewhat complex deal, the three men essentially bought shares in an offshore vehicle from NatWest, albeit without its knowledge, and each benefited to the tune of more than $2m.
As part of their plea agreement, the men have agreed to jointly repay the $7.35m owed to RBS, with Messrs Bermingham and Darby making an initial $500,000 payment, while Mr Mulgrew will make a smaller $250,000 payment."
They are also hoping for a transfer to a UK jail, and "the three men were pardoned from spending their time ahead of trial in Federal detention centre by then Attorney General Alberto Gonzales, each was fitted with a bulky electronic tag, and ordered not to leave the southern districts of Texas."
Quinn provides a concise run-through of the "Statement of Fact" and an interesting analysis:
"But what is interesting in working through the court-approved 'Statement of Fact' is that while each man was guilty of breaking compliance rules within NatWest, and there were breaches of fiduciary duty aplenty, at no time did the three know that what they were doing would defraud NatWest.
In addition, and perhaps more importantly, at no time did any of the three defraud Enron, which was the driving force behind the DoJ's long-standing argument that the case should be heard on American soil in the first place."
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Asiavest Investigative Services considered Enron to be kids play in comparison to the daily frauds committed in the world of public companies. "Enron, in our opinion was not even close to the daily occurring criminal manipulation of public companies." {see here}
The Truthseeker website in the UK claims that John O'Neill (former FBI, and security chief at the WTCs on 9-11) had been investigating deals Enron had been making with the Taliban in Afghanistan; the National Enquirer {see also here, another blurb here}, claimed that Enron had at least 20 CIA staff on its payroll. {Note that the National Enquirer's complete photo archive and library collection were destroyed in the first anthrax attack.}
From the catbirdseat blog {not up on the 'net anymore} -- "Lawrence B. Lindsey, Bush's once top economic adviser, was an Enron consultant; Robert Zoellick, U.S. Trade Representative, served on Enron's advisory council; I. Lewis Libby, Cheney's Chief of Staff, was a major Enron stockholder; Thomas White, Secretary of the Army, was an Enron executive for over 10 years and held millions of dollars in stocks and options when appointed; Karl Rove, chief White House political adviser, owned between $100,000 and $250,000 worth of Enron stock when he met with Ken Lay in the White House to discuss Enron's problems with federal regulators; and, until he was named Republican National Chairman, Marc Racicot {former Montana governor, and partner in Bracewell & Patterson} was Enron's Washington lobbyist.
"The legislation reducing government oversight of energy trading was muscled through Congress —— without a Senate committee hearing —— with the aid of U.S. Sen. Phil Gramm of Texas. Gramm was chairman of the Senate Banking Committee, which had jurisdiction over the legislation he co-sponsored, but he chose to bypass his committee, and the bill was quietly tacked onto a "must-pass" appropriations bill late in the session.... As a lame-duck chairwoman of the Commodity Futures Trading Commission, Wendy Gramm {Mrs. Phil Gramm} exempted Enron and other energy futures traders from oversight in response to a request by Enron. At the time, Enron was a significant source of political funding for her husband. Five weeks later, she joined the company’’s board and served on the board’s audit committee..."
And, catbirdseat quoted from a Reuters report on CNN, Citigroup {currently being bailed out of their "subprime mortgage-related" financial woes by Abu Dhabi} faced a lawsuit from angry investors and "well-known distressed debt funds Angelo Gordon & Co. and Appaloosa Investment LP, who charged ... that Citigroup concocted a fraudulent scheme to raise billions of dollars from the sale of notes called 'Yosemite' securities. Citigroup, the investors said, then used the funds to make 'disguised' loans to Enron 'to reduce its own Enron credit risk, prop up Enron’s failing financial condition and generate significant fees in the process.' ... Charles Prince {now, the former CEO} said at the time, 'We feel very comfortable in saying that, with our advisers helping us, we have established a reserve that will cover all of our meaningful exposures.' Not only was Citigroup involved in the Enron scandal, but so were other financial giants - JP Morgan Chase, American International Group, AON, ... Canadian Imperial Bank Corp., Credit Suisse First Boston, Dresdner Bank, General Electric Capital, ... Lehman Brothers, Morgan Stanley, Merrill Lynch, and Wachovia Bank, and Deutsche Bank.
Note also that Qwest was involved in Enron - in 2001, Arthur Andersen approved a $500M swap of fiber optic capacity, which inflated both companies' revenues (with Joe Nacchio {currently, in litigation over "insider trading"} running Qwest at the time).
On November 13, Mary Flood had an article on the Houston Chronicle ("Prosecutors ask court to uphold Skilling conviction") {no longer up, possibly in its archives now} which discussed DOJ's reply to Skilling's appeal; and noted "Lay died six weeks after their four-month trial ended in convictions for both of them. Lay's record was later wiped clean." {Lay was a victim of a "heart attack".}
John Kelly (Pulitzer prize nominated journalist), former federal agent Rodney Stich, and DeepBlackLies (UK), all note the aftermath of CIA-front companies, those "in the know" in the companies, and the journalists investigating the companies: companies are "blown-up", those "in the know" at the companies are assassinated, and investigative journalists are discredited and/or reassigned.
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Tom Kirkendall’s blog – Houston’s Clear thinkers has a good wrap-up in his November 30 entry:
"... The prosecution in the NatWest Three case alleged that the three bankers defrauded NatWest, their former employer, by conspiring with former Enron CFO Andrew Fastow and his sidekick, Michael Kopper, to underpay NatWest for its interest in an entity named Swap Sub, which was an affiliate of one of Enron's special purpose entities (LJM1) that Fastow and Kopper ran.
Swap Sub was involved in one of LJM1's primary transactions, which was to hedge Enron's valuable but highly volatile interest in a technology company called Rhythms NetConnections, Inc ("Rhythms"). The NatWest Three were responsible for overseeing the banking relationship between Enron and NatWest, including NatWest's interest in Swap Sub. Another investor in Swap Sub was Credit Suisse First Boston ("CSFB"), which owned the same percentage interest in Swap Sub as NatWest.
In early 2000, Fastow and Kopper offered to buy NatWest's interest in Swap Sub for $1 million. NatWest evaluated its interest in Swap Sub in response to the offer and concluded that its interest was worth zero. At the time, NatWest was in the process of being taken over by Royal Bank of Scotland and, thus, was amenable to disposing of the Swap Sub interest. So, NatWest agreed to accept Fastow's $1 million offer, Fastow and Kopper created an entity called Southampton specifically to buy NatWest’s interest in Swap Sub, and the deal closed on March 17, 2000.
After NatWest had agreed to accept Fastow's offer to buy the bank's Swap Sub interest, Fastow offered to sell a portion of the that interest to the three bankers personally for $250,000 after Southampton completed the purchase of the interest from NatWest. The NatWest Three still worked for NatWest at the time of Fastow's offer, but they were all contemplating leaving the bank because of the impending takeover by the Royal Bank of Scotland. Inasmuch as acceptance of Fastow's offer while they were still working for NatWest might run afoul of the bank's conflict of interest rules, the NatWest Three took an option to acquire the Swap Sub interest rather than buy it outright.
Subsequently, one of the bankers (David Bermingham) resigned from NatWest, exercised the option in late April, 2000 and paid Southampton $250,000 for the interest. At the time that Southampton bought NatWest's interest in Swap Sub, the NatWest Three did not disclose to NatWest that they had bought the option to acquire a portion of that interest through Southampton. That non-disclosure ultimately became an important fact in the plea bargain of the NatWest Three.
Shortly after Fastow offered to buy NatWest's interest in Swap Sub for $1 million, Fastow and Kopper -- unbeknownst to NatWest or the NatWest Three -- offered CSFB $10 million for its interest in Swap Sub. CSFB, like Natwest, also evaluated its interest in Swap Sub at the time of the offer and concluded -- as did NatWest -- that the interest had zero value.
Inasmuch as Fastow and Kopper didn't have $10 million to buy CSFB's Swap Sub interest, they reached an agreement with Enron on March 22, 2000 to unwind the Enron-LJM1 hedge transaction on the Rhythms stock, the result of which was that Enron would buy a large chunk of Enron stock from Swap Sub for $30 million. Inasmuch as the unwind transaction would not close until the end of April, Fastow borrowed $10 million from Enron on March 22nd to pay CSFB for its Swap Sub interest. Neither NatWest nor the NatWest Three knew anything about these developments.
Subsequently, in late April, 2000, Fastow arranged with former Enron chief accountant Richard Causey to close the unwind transaction between LJM1 and Enron on the Rhythms stock. The transaction has since been subject of a substantial amount of scrutiny in the various investigations and litigation relating to Enron and it appears reasonably probable that Enron should not have paid a dime (much less $30 million) to LJM1 for agreeing to unwind the hedge. The best explanation that I have heard is that Fastow and Kopper pulled a fast one on Causey, who received nothing from the unwind transaction.
After receiving the $30 million in connection with the unwind transaction, Fastow used $10 million to repay the loan from Enron that he had used to pay CSFB for its interest in Swap Sub and paid the NatWest Three $7.3 million for their interest in Swap Sub. Fastow spread the balance of the money around to some of his underlings, including Enron treasurer Ben Glisan, who received about $1 million. Glisan's failure to disclose his receipt of that $1 million eventually led to his termination in early November, 2001 as Enron's treasurer. It also formed the basis of the criminal case against him.
Interestingly, the first time that the NatWest Three had any indication that the $7.3 million that they had received for their interest in Swap Sub may have resulted from a Fastow fraud on Enron was when they heard that Glisan had been fired in early November, 2001 over his failure to disclose his receipt of $1 million from Southampton. As a result, the NatWest Three immediately and voluntarily reported everything to the UK Financial Services Authority (the UK equivalent of the Securities and Exchange Commission) -- their involvement in the sale of NatWest's interest in Swap Sub to Southampton, their purchase of the option from Fastow to acquire a portion of that Swap Sub interest, their non-disclosure to NatWest of the option at the time, their exercise of the option and purchase of the Swap Sub interest from Southampton, and their eventual receipt of $7.3 million for that interest.
The UK authorities passed along that information to the SEC and, the next thing you know, the NatWest Three had become the subjects of a criminal complaint filed on June 27, 2002 in Houston (that really encourages voluntary disclosure of information, now doesn't it?). No US investigator ever contacted the NatWest Three to get their side of the story before filing the criminal complaint against them. UK criminal authorities never pursued any charges against the them."
UK criminal authorities never pursued any charges against the them.
Now ... looking back at Ben Laurence's August 12, 2007 article in the Sunday Times -- NatWest Three cry foul over witnesses, we find the Royal Bank of Scotland and its attorney formed the baricade to the NatWest Three's witnesses, who, surprisingly, never knew that Travers Smith was their legal representation, and had never authorized Travers Smith or the RBS to represent them.
From Tom Bowden and Suzy Jagger -- City watchdog's findings were crucial in US case against NatWest Three -- "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.'"
Tom Bawden notes "The biggest loser in the Enron deal was undoubtedly NatWest, a UK bank, and the trio awaiting trial were all British. However, since neither the Crown Prosecution Service, the Serious Fraud Office or the Financial Services Authority sought to prosecute them, America’s request to try them seemed fair enough.
What really raised the hackles of opponents of the extradition was the fact that the treaty, which was negotiated without parliamentary scrutiny after the September 11 attacks and designed to clamp down on terrorists, was not reciprocal.
Initially, America failed to ratify it for application to US citizens, meaning that Briton continued to need significant evidence to justify extraditing an American to the UK. However, America has since ratified the treaty at its end."
Martin Wolf in the Financial Times reiterates -- What made the case of the NatWest three more remarkable is that the bank, alleged victim of the fraud, never pressed for a British investigation of the events.
All this, combined with the fact that the NatWest Three were not allowed to associate with each other, just smells FISHY.
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