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]