WASHINGTON – Three former employees of the British bank National Westminster Bank Plc (Nat West) have pleaded guilty to a charge of wire fraud in connection with a secret investment with former executives of the Enron Corporation, Assistant Attorney General Alice S. Fisher of the Criminal Division announced today.
Gary Steven Mulgrew, Giles Robert Hugh Darby, and David Bermingham, all of Great Britain, entered guilty pleas today before Judge Ewing Werlein, Jr., at U.S. District Court in Houston, Texas. All three defendants pleaded guilty to a single count of wire fraud. As part of a plea agreement with the government, the defendants have each agreed to a 37-month prison sentence and agreed to repay approximately $7.3 million to the Royal Bank of Scotland, the successor bank to Nat West.
The former bank officers admitted secretly investing with Andrew Fastow, Enron’s former chief financial officer, and Michael Kopper, Enron’s former managing director of global finance, in Southampton, L.P., an entity that Fastow created for the purpose of purchasing an asset the three defendants were selling on behalf of Nat West. The defendants invested a total of $250,000 in Southampton in order to gain an ownership interest in the very same asset that they were charged with selling for Nat West. The three defendants concealed their scheme from Nat West through a series of financial transactions, including the use of options and off-shore entities.
According to plea documents, in May 2000, within weeks of their investment, Bermingham, Darby and Mulgrew each received approximately $2.83 million – an approximate total of $7.3 million for all three. Kopper, Fastow and others received a total of approximately $12.3 million for their part in the scheme. Kopper and Fastow were able to achieve these gains for the benefit of Bermingham, Darby and Mulgrew by purchasing the asset from Nat West for $1 million, and then liquidating the asset to Enron for $20 million. The $19 million difference was then split among Fastow, Kopper, the three defendants and others.
“These three defendants admitted today that they defrauded Nat West by entering into a secret and illegal deal with officers from Enron – a deal that yielded millions in profits for them personally at the expense of their employer,” said Assistant Attorney General Fisher. “Thanks to the hard work of the federal prosecutors from the Criminal Division and agents from the FBI and other law enforcement agencies, these defendants are being held accountable for their actions in a U.S. court of law.”
“Today’s guilty pleas demonstrate that the extent of the fraud at Enron went well beyond U.S. borders,” said Assistant Director Kenneth Kaiser, FBI Criminal Investigative Division. “The FBI remains committed to bringing to justice those responsible for corporate fraud, no matter where our search may lead.”
Fastow and Kopper each pleaded guilty to charges related to their roles in Enron’s collapse, including their roles in the Southampton transaction. Kopper pleaded guilty to conspiracy and money laundering, and was sentenced to three years and one month in prison. Fastow was sentenced to six years in prison after pleading guilty to conspiracy to commit securities and wire fraud.
As part of plea deals with the defendants, prosecutors have agreed to advise the Justice Department’s Office of Enforcement Operations that they support the defendants’ application to the international prisoner transfer program, to serve some of the sentence in the United Kingdom. The bankers were extradited to the United States from the United Kingdom in July 2006 to face the charges filed at U.S. District Court in the Southern District of Texas.
Charges against the three former British bankers were initially brought in July 2002 by the Enron Task Force, a team of federal prosecutors and agents formed to investigate matters related to the collapse of Enron Corp. Any remaining Enron Task Force cases are now being handled by the Fraud Section of the Criminal Division. The case of the former British bankers was handled by Fraud Section Trial Attorneys Jonathan E. Lopez and Wes R. Porter. The Criminal Division’s Office of International Affairs assisted in the extradition of the three defendants to the United States.