We won't pretend we're a not at least a little disappointed by the guilty pleas offered in a federal court in Houston by three British bankers yesterday. The bankers—Giles Darby, David Bermingham and Gary Mulgrew—pled guilty to one charge of wire fraud each and are expected to be sentenced to 37-months in jail.
Those who have cheered on the criminalization of Enron's collapse will no doubt wear vindicated smiles when they talk about the guilty pleas. But their glee will be misplaced is they regard the guilty plea as a confirmation of wrong-doing. Plea bargains have become quite common in white-collar criminal cases not because prosecutors select only the guiltiest of defendants but because the threat of enormous jail sentences make fighting charges too risky.
There seems little doubt that this guilty plea—far from being a confirmation that the defendants actually engaged in "wire fraud" (whatever that is)—is a strategic, risk-management move by the 45 year old bankers who have already been in custody for 18 months and faced up to 35 years in prison if convicted at trial. And so, while we note our disappointment that the prosecutors seem to have won another victory, we don't begrudge anyone the desire to avoid spending the rest of their lives in a federal prison.
The prosecutors had charged the British bankers with conspiring with Enron’s chief financial officer, Andrew S. Fastow. Because the case was held in Houston, you might be forgiven for thinking that the men stood accused of actually defrauding Enron. But this would be a mistake. The men were charged with defrauding the bank that employed them, the National Westminster Bank of England (now part of the Royal Bank of Scotland).
So what was an American federal court doing prosecuting the Brits for allegedly cheating a British bank? Many times we've had it explained to us and many times we've failed to understand the reasoning. If anything, the entire affair has left us more convinced than ever that a criminal trial is a wildly inappropriate forum for dealing with these kind of corporate governance matters.
3 Bankers Plead Guilty in Case Tied to Enron [New York Times]
Natwest Three hope plea will speed up ordeal [Telegraph]
Posted by , Nov 29, 2007 9:53AM
Ridiculous that they were even extradited in the first place.
Posted by , Nov 29, 2007 10:01AM
Giles is like the most BRITISH name ever.
Posted by just me , Nov 29, 2007 10:07AM
maybe they'll stage a Houston black tea party?
Posted by girl , Nov 29, 2007 10:21AM
ok I understand that excessive greed and corporate wrongdoing should be punished but it is simply not the same as rape or murder, which often get lesser sentences. It's an outrage if you ask me...
Also the thought of these poor british bankers getting bum raped by hoodlums is slightly more than i can bare...
Posted by Anonymous , Nov 29, 2007 10:29AM
And the employer they supposedly defrauded seems not to agree, as it hasn't made any move against them. Nor have the English authorities. Definitely the pleas risk management. Scary country we live in.
Posted by bill , Nov 29, 2007 10:32AM
Wow they stole millions--they should have gotten 20 years.
If I stole out with all the PCs in a 10,000 person company and sold them for 1K each--is that just a corporate goverance issue?
Are you really that stupid?
Posted by just me , Nov 29, 2007 10:41AM
girl--maybe they agreed the plea in hopes of getting 'bum raped'....
Posted by girl , Nov 29, 2007 10:56AM
bill, i certainly think they should be punished, i just think we have a skewed justice system. I would argue that physical harm is more damaging than financial harm- you might not agree and im okay with that.
@just me- ouch
Posted by Matt , Nov 29, 2007 10:57AM
Bill @10:32,
Are YOU really that stupid? Did you care to read through the Telegraph article? If you stole all the PC's, would the company (or would it not) file a case against you? Do you realize that Natwest (the employer they supposedly 'stole' from) never filed charges because it did not consider it to be 'stealing'? And Enron wasn't duped in ANY way?
So lets see. British bankers employed by a British bank did something that the British bank doesn't have issues with.
So the American law enforcement decides to press wire fraud charges. How awesomely logical is that?
So I guess you also strongly support the 'extraordinary rendition' program, secret prisons, torture and other such 'you gotta deal criminally with criminals' tactics?
Oh, did I just sense some 'moral outrage' there? Funny, no?
Convicted terrorists and mass murderes shouldn't be waterboarded but bankers accused of questionable crimes should be bum-fuked?
Way to go commies.
Posted by bill , Nov 29, 2007 11:11AM
Matt: Do you know anything about the Enron?
Let me try to make it simple: Fastow stole a bunch of money from Enron and these crooks helped him.
I read the moronic Telegraph article--they stole 10's of millions of $ boo hoo.
Brition is a haven for financial criminals so as long as a British person is not hurt they don't care.
Financial crimes are not serious unless you care about the savings of people who worked all their lives being wiped out by criminals.
Posted by bill , Nov 29, 2007 11:21AM
No crime here: Just those laddies behaving badly!
"
At the time of the alleged crime the Three were working for Greenwich NatWest, then a unit of NatWest bank.
The Three allegedly engaged in a corrupt deal with Andrew Fastow, CFO of
Enron, whereby they would persuade Greenwich NatWest to sell its stake in a Cayman Islands investment company at a fraction of its real market value to a small company controlled by Fastow.
The stake was then sold to Enron at its true value, and the difference was split between Fastow, Fastow's assistant Michael Kopper, and the Three. "
Posted by Ripper , Nov 29, 2007 11:28AM
I can no longer sit back and allow Communist infiltration, Communist indoctrination, Communist subversion and the international Communist conspiracy to sap and impurify all of our precious bodily fluids.
Posted by Anonymous , Nov 29, 2007 11:28AM
Bill, you don't know how this works. You are reading and repeating allegations by an arm of the most trustworthy government on earth. The three's own employer apparently disagrees. One way to look at this is that the three admitted, in their pleas, that they are witches, to avoid burning. You believe in witches Bill? At best, we'll never know what really happened.
Posted by Spelling Bee Champion of Elementary School 1992 , Nov 29, 2007 11:29AM
bill @11:11 - Your mispelling of Britain as "Brition" has rendered your credibility in question.
On my keyboard, the "a" and "o" keys are on opposite sides, so it doesn't appear to be a simple typo.
Posted by Bill , Nov 29, 2007 11:37AM
Ms. Spelling Bee champ:
You are too young to remember the Enron disaster.
Try reading the Smartest Guys in the Room, 24 Days, Conspiracy of Fools
Fools.
Fraud does matter in finance but spelling does not.
Posted by Matt , Nov 29, 2007 11:42AM
Thanks for quoting from the newspaper of the comrades - NYT. Removing all the editorializing here is what happened
- Natwest took 50% stake and marked it at $0 on its books (they were potentially compensated for it elsewhere as always happens in such deals)
- These bankers (in charge of that stake) then approved a sale to some shell companies for $1MM (breach of fiduciary duty in not getting correct valuation - but actual PROFIT booked on Natwest's ledger as Natwest had the stake marked at 0)
- Fastow then bought the same stake (on Enron's behalf) from the shell companies for $20MM - Pure fraud: Enron overpaid for something and Enron shareholders lost money
- The bankers were given a part of the profits
Now, for all we know about the stake in the company, Natwest may as well as have gotten a good deal - the reason why Natwest did not pursue charges against its employees. Fastow committed fraud - he was punished.
Now these bankers committed an act (selling off the stake at $1MM) which might have actually benefitted their shareholders. Irrespective, they were paid out of money someone else had made out of a fraud - but their act in itself was not a fraudulent one - questionable definitely and that is why courts exist.
But 35 years criminal for a questionable act, when convited child rapists are getting off with 6 months probation and therapy! Leave the class warfare and hatred for the rich aside, how do you justify it?
Posted by michael schumacher , Nov 29, 2007 11:53AM
So Matt is this the new vernacular?? That is something cannot be proved outright then it did not happen or exist??
Just like the stock options issue......I suppose you think that Steve Jobs did'nt benefit from committing document fraud?? Then why did Apple take a charge of over $20 million for stock options that never existed?
You also believe that McLaren did nothing wrong in having a 780 page manual on how to run Ferrari's 2007 F1 car because you cannot prove that any of it's material was transferred to the McLaren car.
Grow up Matt.......your answers on this and other posts show you are truly disconnected from any sort of reality.
But I guess a dead body and a smoking gun would'nt do it for you either....
>>but their act in itself was not a fraudulent one - questionable definitely and that is why courts exist.>>
Purposely mismarking an asset so that it can be sold to another criminal entity for what amounts to a profit (since it was always mis-valued) is questionable????
Good luck with your Karma....
Posted by , Nov 29, 2007 11:54AM
matt: just wonderin, what do you think is fair punishment for the boys, given that what they've done is hardly child molestation, but nor is it nothing
Posted by girl , Nov 29, 2007 11:55AM
Hear Hear Matt!
You bring up an interesting point about class warfare. These cases are so heavily publicized precisely because they give the disenchanted population something to cheer for- retribution for the rich! Instead of imprisoning our best and brightest, and by that I mean those clever enough to chest the system, why not put their mental capacity to its best use- i.e. force them to rework the appropriation of tax dollars for example towards public welfare? Just an idea of course
Posted by John Carney , Nov 29, 2007 11:57AM
Anon 11:28: great line about accused witches confessing to avoid burning.
Posted by bill , Nov 29, 2007 12:01PM
- Natwest took 50% stake and marked it at $0 on its books (they were potentially compensated for it elsewhere as always happens in such deals)
Fraud
- but actual PROFIT booked on Natwest's ledger as Natwest had the stake marked at 0)
Stupid point. They set an asset to zero and you call it a profit when they sell it for a small fraction of its true value.
- The bankers were given a part of the profits
No they took the loot--not given but taken.
If their case was so great, they should have gone to trial.
Posted by michael schumacher , Nov 29, 2007 12:01PM
Purposefully mismarking an asset to a lower value so that it can be sold to another criminal entity for a huge profit (because the act of mis valueing it creates the crime in the first place) is a questionable act????
Outright fraud and deception is what it is. if these three did'nt try to outsmart the system and valued it correctly they would have had a profit.....just not the huge profit it garnered by misrepresenting it in the first place.
I suppose you also think that back dating options is ok as long as no one benefits from it........tell that to Apple who took a $20 million charge on options that no one got a benefit from.....
Matt....you continue to display a total disconnect from reality but that's ok as long as no one got a benefit from placing the wrong value on your comments.
Good luck with you're karma
Posted by Spelling Bee Champion who Remembers Enron , Nov 29, 2007 12:05PM
I for one would suggest they join the non-profit that was on CNBC yesterday and "aks" banks to redirect bonus pools to keeping homeowners in the houses.
Shit, wait, I'm not a communist. Nevermind. Scratch that.
Posted by bill , Nov 29, 2007 12:09PM
girl:
1) These are not the best the brightest. You have to be as stupid as shit to come up with a scheme like this. Making $ in the US legally is easy.
2). The poor criminals get plenty of pain.
3). "enough to chest the system" Post a pic.
Posted by Anal_yst , Nov 29, 2007 12:12PM
@ Bill/12:01 -
What was its "true value"?
Was it the maximum amnt Fastow, in breach of his fidicuary responsibility, could get away with paying for it?
Otherwise, how do you justify your argument based on some unknown 'fair value' of the asset?
Pulleth thy head out of thine ass.
Posted by Anonymous , Nov 29, 2007 12:15PM
Bill and Michael, I think you miss the point. You are assuming the truth of the allegations. I think the three's position was that they had no idea that Enron had been cheated by Fastow, assuming that even that was true. (Oh yeah, and there were weapons of mass distruction in Iraq.) And telling Matt to grow up? Seems like you two have a dearth of experience in how these things work. Why would one chose not to go to trial even if innocent? Look at the leverage the prosecutors had here, as Carney notes -- a trial penalty of 35 years!
Posted by girl , Nov 29, 2007 12:20PM
Bill
a) not as easy as cheating the system for it
b) Perhaps, but along the same lines I suggested, they are also forced to give back in a manner that mazimizes their contribution (i.e. picking trash out of public gardens, building highways, etc)
c) you wish.
:)
Posted by Give-up Agreement , Nov 29, 2007 12:24PM
This is a travesty, but it doesn't bother me all that much. Every British banker I've dealt with has been a condescending prick. I don't know these three, but if they're anything like the Brit bankers I know, they had it coming.
Posted by michael schumacher , Nov 29, 2007 12:47PM
>they had no idea that Enron had been cheated by Fastow, assuming that even that was true.>
You can't make up shell company names like "chewco" and not know what the hell you are doing.........
But marking an asset at $0 knowing full well that it was going to be purchased for $20m.(or whatever the "agreement" was for)..and you get to keep the profits because you intentionally mismarked it in the first place. That's not knowing what is going on???
and the reason they did'nt go to trial??? Simply put why would NATWEST want to discourage it's employees from making the firm more money?.....these three were obviously stupid and got caught...you can bet it's already happened again and the firm has already made $ from it.
all in the details...
Posted by Lumbergh , Nov 29, 2007 12:57PM
I agree with girl completely. Violent criminals are usually released early so they can continue to rob, kill and rape while highly publicized white collar criminals get sentences that are way too harsh for the crime.
You're right that one reason for this is that the poor, slovenly "American public" loves to see someone they envy (because that person is richer, better looking, etc.) get cut down. The news media obstructs justice by publicizing these cases so much.
Posted by Ramblin' Wreck , Nov 29, 2007 1:05PM
"That is something cannot be proved outright then it did not happen or exist??" -Michael Schumacher
Uhhh...does that mean that circumstantial evidence and hearsay are now admissible in court? Because I always thought, at least in the US, that you had to prove things beyond a shadow of a doubt, aka there is actual physical evidence. If there was a tape of them proving they were colluding with Fastow, well, do not pass go and do not collect $200. The "evidence" against them really does seem circumstantial. Just because you deal with a crook does not (necessarily) make you a crook.
Posted by inIT4the$ , Nov 29, 2007 1:10PM
I think Bill and Schumacher don't really understand the business. Marking an asset at $0 is not a crime in itself, nor is selling it for a fraction of its "potential" worth. Who's to say what that asset is worth when there is no readily transparent market. Hate to tell you but assets get marked at all kinds of wacky figures and GAAP allows for it (or in NatWest's case IAS).
Matt is correct.
Posted by Matt , Nov 29, 2007 1:13PM
- Natwest took 50% stake and marked it at $0 on its books (they were potentially compensated for it elsewhere as always happens in such deals)
Fraud
Had you ever structured a deal, you would have realized that many times when some party picks up the resid in a deal (which is essentially an equity stake), they have wide latitude so as to where they can mark it on their books. Marking resids to 0 is actually a conservative valuation move.
Btw Natwest isnt even part of any crime here, and your act of labelling a conservative valuation technique as 'fraud' clearly shows your ignorance. Hene the subsequent vitriol towards a certain class of people, without knowing (or caring to know) the details is highly misplaced. Talking about the technical part of the deal with you is pointles because you are clueless - you will go by anything the NYT feeds you.
That said, there is CLEAR criminality on part of Fastow, and reasonable doubt of conspiratorial behavior towards in fraudulent act on part of the bankers.
The whole debate is not about whether they should be punished or not. It is about whether the nature of the trial (outside of jurisdiction) was fair and whether threatening someone with a 35yr criminal penalty for this kind of a crime is correct.
Now I know that the communist in you wants to take out the pitchfork and publicly hang anyone suspected of any criminality in any capitalist enterprise (whereas the same communist wants to get therapy for child rapists, good food and holy books for convicted terrorists and short prison terms and no death penalty for serial killers, gangsters and the rest).
However, punishment has to be commensurate with the crime. If you are (using whatever socialist logic you can gather) trying to argue that what these bankers did was worth 35 years of hard time - given the punishment given to other criminals in this country - I have nothing to say but that you are wrong.
Also, socialists like you (led by your shining lights like Spitzer) have implicity crushed all remnants of fair trial, discovery or innocence till proven guilty as part of the class warfare. Suspect some wrong doing and then threaten the person with 40 years in the prison if he doesnt plead guilty. Understandably, people have little choice. No one wants to take such a risk. And the cycle is self feeding - every 'confession' brings out a - see I told you they were crooks - reaction.
And as we have learnt recently, a few who had the balls did come out on top and Spitzer los. But those cases do not make it to the headlines in NYT or LAT. Just the other kind.
Posted by Anal_yst , Nov 29, 2007 1:26PM
Yes, I'm curious when did extortion on the part of the prosecutors become legal, yet doing one's job (in another jurisdiction nonetheless!) became illegal?
As Matt points out above, what they did with the asset purchase/valuation/sale was not illegal (ceteribus paribus) and if your argument is to the contrary than you should probably cut your losses now lest you make yourself sound even more ignorant than you already have.
Posted by , Nov 29, 2007 1:29PM
whats new Bessicakes, whoah whoah whooooaah.
Posted by michael schumacher , Nov 29, 2007 1:45PM
Apples and Oranges...try taking a reading comprehension course as I never questioned the sentence they got just your stupid reasoning as to why it "should have been less" because child molesters and rapists get less........Go cry to the sentencing board......NONE OF THAT CHANGES THE FACT A CRIME WAS COMMITTED ...KNOWINGLY.
If there is smoke there is fire....constantly trying to use the legal system as a defense against what you deem "questionable" is not exactly what a discussion should be based on. Afterall this is not a legal discussion
You might think it is but it's not. The fact is that they three of them KNOWINGLY marked down an asset so that they could later resell it at a huge book profit.
That's called Fraud....no other thing to call it.
I do not care what sentence they got or if it was circumstantial or not. They are guilty of conspiracy to commit financial fraud.
Get over yourselves.....and quit being apologists for the financial system that allows this sort of crap to continue
Just because you can use the legal system to somehow show a shred of doubt (and thus mitigating any crime in the first place) does not mean that these people UNWILLINGLY marked the asset down so that it was then sold at a huge profit to them.
You do a crime.....you do the time..
Show me where that is socialist in nature.....
If you find a dead body in the front of your house and track marks, in blood, leading up to your door it does'nt make you guilty but it does make you a suspect.....go ask OJ...
Same thing...
Posted by Ramblin' Wreck , Nov 29, 2007 2:00PM
Requiring the state/prosecution to bear the burden of proof is not "using" the system, it IS the system. Also, circumstantial evidence can make you a SUSPECT, but it its not grounds for indictment. It seems like such a plea deal (offering 30+ mos. to bypass a potential 30+ yrs) is tantamount to a forced confession, which I'm pretty sure have been grounds for mistrial in the past. I don't have a JD, but I don't think I'm far off base here.
Posted by Matt , Nov 29, 2007 2:03PM
Oh and I almost missed this :
Brition is a haven for financial criminals so as long as a British person is not hurt they don't care.
Wow. Just wow.
Somehow from you leanings I am guessing that you are part of the camp that takes umbrage every time someone calls Iraq or the middle east hotbeds of terrorism.
Posted by Anonymous , Nov 29, 2007 2:08PM
Michael, not only are you wrong about the criminality of the "crime" you so confidently identify -- as Matt and others point out -- you don't understand what the DOJ's theory was about what was criminal about the three's role in the transaction. Pack it up, my friend. And I hope you are not using your real name.
Posted by Anonymous , Nov 29, 2007 2:13PM
Ramblin' is right, except its not 30+ months, as if the three get to the UK they can get out much earlier than if stuck here in the good ol' USA.
Posted by Anonymous , Nov 29, 2007 2:16PM
Ramblin' is right, except its not 30+ months, as if the three get to the UK they can get out much earlier than if stuck here in the good ol' USA.
Posted by Matt , Nov 29, 2007 2:45PM
The fact is that they three of them KNOWINGLY marked down an asset so that they could later resell it at a huge book profit
Ha ha. For all the angst, you didnt even get the crime right!!
They didnt knowingly mark 'down' an asset dufus, Fastow overvalued an asset he purchased on Enron's behalf as an officer, an asset he personally owned and knew had a different value.
There isn't any doubt about Fastow's cime, the question is whether (and to what extent) these bankers were complicit and if the US courts even have jurisdiction.
See, I get the whole 'we hate rich' people thing in socialists. As is clearly evident, other than the fact that there were 2 bankers (understandably rich) involved in this episode and it had something to do with Enron - you have NO CLUE what this is about.
Yet that didn't prevent you from making multiple leaps of faith in terms of logic to convincingly convict them of crimes more horrible than baby raping, murder etc etc.
THAT is the 'socialism' I am pointing out. A 17 yr old delinquent black juvenile with a prior criminal record almost beats a white guy to death and is charged with attempted homicide (Jena) - the entire socialist junket ends up in the small village screaming injustice.
2 bankers from UK are threatened with 35 yrs in prison for a questionable and technical transaction - where there is sufficient cause for the decision going either way - and you pre-declare extreme guilt and are smug at the outcome.
girl is right, it is class warfare where the masses get a kick out of seeing someone higher up having it shoved up his ass. All the same, that doesn't make shoving it correct. Or logical.
You can pass judgement on crimes of rich and successful people without knowing shit about the crime and still be politically fashionable with the socialist crowd.
However, dare you even say a certain race has disproportionate levels of criminal activity (backed by statistics) and you get whacked from every direction for 'jumping to conclusion'.
That is another fatal deceit of the communist/socialist brigade (with due apologies to Milton Friedman).
Posted by , Nov 29, 2007 3:04PM
matt: you must be either a) a very fast typist or b) unemployed
Posted by , Nov 29, 2007 3:05PM
good luck with the holier than thou attitude Matt...it drips from each and every post.
You don't even read what was posted...just steadfastly clinging to the same legal bullshit that is espoused from people WHO KNOW THEY ARE GUILTY yet do not have the common decency to admit and actually take the punishment.
That is where our entire financial system is RIGHT NOW.
But go ahead and make it out to be something else and use the legal system as a backdrop to support common financial thugs because they are better than rapists and murderers. The fallacy of using that logic is well.....you should already know that.
Did you even consider that the sentencing was used as a carrot??? No because you (along with a few other misinformed people here) think you have it all figured out that financial crimes are a lower form and thus should be prosecuted as such.
If I murder someone I have committed a crime however by using your flawed logic if I murder that same person and then steal money from them I have committed a lesser crime???
Too funny...
Posted by , Nov 29, 2007 3:19PM
"If I murder someone I have committed a crime however by using your flawed logic if I murder that same person and then steal money from them I have committed a lesser crime???"
????????????????
Posted by just me , Nov 29, 2007 3:26PM
I applaud the sentence - it sends a signal to Brits what will happen if they even think about crossing the US. Imagine US jails filled with brits - more crumpets, less popcorn. How civil. In either case, the buggering will be non-stop.
Posted by , Nov 29, 2007 4:33PM
Anon @3:05 - Are you retarded? Your murder and murder+stealing analogy is something even medically insane will be ashamed of.
murder + stealing INCLUDES murder. How, then, can it be a lesser crime? The correct comparison is between someone committing a murder (no stealing) and someone stealing money (no murder). Do you think that punishment should be same for both?
Gosh. And then people like these claim they are equal and deserve equal treatment.
Posted by , Nov 30, 2007 10:05AM
>>Do you think that punishment should be same for both?>>
Talk to Matt as he thinks the punishment doled out to these three is excessive since "murderers and child molesters" get more.
Read before you type....