Three former National Westminster bankers were indicted on Thursday on seven counts of fraud for their role in a scam they hatched with two senior Enron executives that allegedly looted millions of dollars from Enron investors and the bank.
The bankers, David Bermingham, Giles Darby, and Gary Mulgrew had already been the subject of a criminal complaint filed by the Justice Department this spring and were thought to be in discussions with prosecutors to assist in their case against Andrew Fastow, the former Enron chief executive at the centre of the company’s collapse.
Prosecutors’ decision to seek the indictment is a clear indication any such talks have broken down. The three are still in the UK and were not arrested when the original charges were filed. They are still not in US custody and the Justice Department did not say if it would seek to extradite them.
The assistance of the NatWest bankers was made unnecessary with the guilty plea last month of Michael Kopper, the Enron executive who helped to hatch the plan. Mr Kopper is now co-operating with prosecutors.
According to the indictment, the three worked with Mr Kopper and Mr Fastow to convince NatWest to sell its stake in an Enron-related partnership for only $1m, when the true market value was much higher. The two Enron executives and the NatWest bankers bought the stake though a partnership called Southampton Place, then quickly sold it again for $20m.
The three bankers pocketed $7.5m, according to the indictment; the rest of the funds are believed to have gone to Mr Kopper, Mr Fastow and three other Enron executives who invested in Southampton. The Justice Department convinced a judge last month to freeze the assets of Mr Fastow and the three other Enron executives, including former treasurer Ben Glisan, involved in the partnership.
Prosecutors claimed the three NatWest bankers had been concerned about their future, because NatWest was soon to be sold to rival Royal Bank of Scotland. In their concern, they thought up the plan to make millions before they lost their jobs in the meger.