What the case of the 'Natwest Three' means for British business

published 13 July 2006

The extradition to the US of the NatWest Three' is unjust and will be a blow to business confidence in the UK. Why is Britain the only country that lets this happen? asks Simon Wilson

The 'Natwest Three': Who are they?

They are David Bermingham, Gary Mulgrew and Giles Darby, three former executives at Greenwich NatWest, now part of Royal Bank of Scotland (RBS), who are accused of conspiring to defraud the bank with the help of ex-Enron executives. Although the defendants are British, the offences took place in Britain, and the alleged victim is a British bank, the three now face trial in the US, having just lost a long legal battle against extradition.

In February, the High Court ruled that their alleged offences were extraditable. In mid-June, the law lords rejected an appeal. And then, last week, the bankers' last remaining legal hope, an appeal to the European Court of Human Rights, also failed.

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The 'Natwest Three': What exactly are they accused of?

In the UK, where the alleged crimes took place, nothing at all.

In the US, each is accused of seven counts of wire fraud' illegally gaining money via international banking systems each carrying a maximum term of five years. The US Department of Justice claims that when the three worked for NatWest in 2000, they conspired with Enron executives to siphon off $7.3m from an Enron subsidiary. They did this, it is claimed, by dishonestly advising NatWest to sell its stake in the subsidiary for less than its true value. After leaving the bank, they bought back into the business and sold it for a higher price. Two ex-Enron executives are charged with making a further $12m from the deal.

The 'Natwest Three': Did they commit a crime?

The evidence against them is, on the face of it, extremely weak. The reason there can be no trial in the UK is that the supposed victim, NatWest, has never claimed any wrongdoing against the men. According to correspondence between the Financial Services Authority and the Serious Fraud Office, NatWest's parent firm, RBS, looked again at the deal in 2002 and concluded that they got a fair price for their asset. Nor did the three try to hide what they'd done: they reported the deal to the FSA and paid a total of £1.8m in income tax to the Inland Revenue on their £4.5m profit. Their lawyers say they are the victims of the US justice system, with its heavy reliance on plea-bargaining. The US authorities assumed the men would choose to plea-bargain and implicate other Enron suspects who'd had dealings with NatWest.

The 'Natwest Three': How can they be extradited without evidence?

In 2003, the British Government passed legislation that allows it. Under the new fast-track' extradition treaty between the two countries signed in 2003 to facilitate the extradition of suspected terrorists American authorities do not have to provide any solid, prima facie evidence of wrongdoing in order to extradite British citizens. By contrast, it won't let its own citizens be extradited to the UK without evidence because (unlike Britain) it hasn't yet bothered to ratify the treaty and doesn't look in any hurry to do so. Ironically, given the anti-terrorist purpose of the high-speed extradition agreement, it is thought to be pressure from Irish-American lobby groups, concerned at handing the UK the right summarily to extradite suspected Republican terrorists, that has delayed ratification.

The 'Natwest Three': Is this imbalance fair on Britons?

Obviously not. At least, hardly anybody claims to think it fair, other than the present government. The Liberal Democrats and the Tories are both critical of the current situation, and high-profile supporters of the NatWest three include both the boisterously libertarian Tory MP, Boris Johnson, and Shami Chakrabarti, the more sober-minded head of civil rights group Liberty. Of particular concern to business leaders is the suspicion that US authorities are taking advantage of the terrorist-inspired legislation to target executives. The Home Office says that of the 44 requests under the new system, 24 have been for financial crimes, and just three for terrorist offences. Of the 12 people sent to the US, half were in the financial crimes category.

The 'Natwest Three': What are the implications for business?

If the UK remains content to subcontract part of its criminal justice system to another sovereign state, it has disturbing implications for all British citizens. But as the record to date shows, business people have most reason to fear from this kind of US justice. If an alleged fraud is committed in various cities around the word, the Americans claim the right to try the case if a single e-mail has crossed a US boundary as in this case.

For anyone with business interests in the US, or any business trying to trade with America, the case is potentially highly worrying and at the very least a blow to confidence. For the City of London, whose activities are necessarily transnational, it is particularly damaging. The UK is the only country that allows the United States such astonishing and unreciprocated powers over its citizens, so any international financial concern considering a London base might do well to have a rethink.

The 'Natwest Three': What happens to them now?

Barring some kind of unforeseen (and highly unlikely) political intervention, the men will be flown to the US under armed guard by 17 July and charged with fraud. As "fugitives from justice" who tried to avoid extradition to the US, they will not be eligible for bail, but instead, thanks to the grinding slowness of the US court system, will face more than a year in a maximum-security prison facing trial. They will be obliged to spend their own money (an estimated $1.5m each) fighting the case in the US paying for 32 witnesses to fly over. If found guilty, they face 15-23 years in prison.

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.