3 sentenced in Enron scheme
Three British bankers were sentenced Friday to just over three years in prison for their roles in a fraudulent scheme with former Enron Chief Financial Officer Andrew S. Fastow.
A federal judge sentenced David Bermingham, Giles Darby and Gary Mulgrew each to 37 months.
They each pleaded guilty in November to one count of wire fraud as part of a plea agreement after initially saying they were innocent of colluding with Fastow in a secret financial scam in 2000 to enrich themselves at their employer’s expense.
During the hearing, all three apologized for their actions.
“I’d like to apologize to the people hurt by my decisions,” Mulgrew said.
Enron, once the seventh-largest U.S. company, crumbled into bankruptcy in December 2001 after years of accounting tricks could no longer hide billions in debt or make failing ventures appear profitable. The collapse wiped out thousands of jobs, more than $60 billion in market value and more than $2 billion in pensions.
“Three more individuals have accepted responsibility for their role in the widespread fraud at Enron,” Asst. U.S. Atty. Gen. Alice Fisher said. “This case demonstrates the [Justice] Department’s unwavering vigilance in addressing corporate fraud matters.”
All three men will remain free on bond until they report to prison. The reporting date and prison location have not been determined.
The bankers are hoping to serve part of their sentences in Britain.
Their attorneys Friday asked that they be ordered to a federal prison near Allenwood, Pa., where they plan to apply for a program that allows sentences to be served out overseas. Personnel at the Pennsylvania facility have experience in the Justice Department’s International Prisoner Transfer Program, the attorneys said.
DeGuerin, speaking for all defense attorneys, said he believed all three men would have to serve as long as nine months in a U.S. prison before they could be eligible for transfer.
All three former bankers have been forced to live in Houston for nearly two years while their cases were pending.
They’re not eligible for parole in the U.S., but if transferred to Britain they would be eligible after serving half their sentences, said Luke Tolaini, a British lawyer who works on extradition issues with the Confederation of British Industry, a business group.
The sentences matched the recommendation of federal prosecutors. The former bankers had faced as long as five years and a $250,000 fine. The fine was waived because in the plea deal all three had agreed to pay their former employer $7.35 million in restitution and an additional $6.1 million as part of a British civil judgment.
U.S. District Judge Ewing Werlein Jr. told all three men that to “fully redeem” themselves, they would have to pay back all the money they owed to their former employer.
The three former executives at Greenwich NatWest, a unit of Royal Bank of Scotland Group, became a cause celebre in Britain throughout extradition proceedings that lasted two years. They were dubbed the “NatWest Three.”
Greenwich NatWest had invested in a subsidiary of an Enron partnership controlled by Fastow, the architect of myriad fraudulent Enron schemes that helped fuel the company’s spiral into bankruptcy proceedings.
In early 2000, the bank had valued its interest in the subsidiary at zero, but the three British men knew it actually had significant value.
A company under the control of Michael J. Kopper, Fastow’s former top aide, purchased the bank’s interest in the subsidiary for $1 million.
The bankers, who came to Houston, paid Kopper $250,000 for an interest in this company. Fastow falsely represented to Enron that the energy company would pay $20 million to Greenwich NatWest for its shares of the subsidiary.
But the $20 million actually went to the British bankers, Fastow and others. The bankers got $7.3 million while Fastow, Kopper and others skimmed about $12.3 million, according to the plea deal.
