June 27, 2002

U.S. Charges Three U.K. Bankers Over a Scheme Involving Enron

WASHINGTON -- The Justice Department charged three former U.K. bankers with wire fraud for their roles in an alleged $7.3 million scheme involving an Enron Corp. enitity.

The trio -- Gary Mulgrew, Giles Darby and David Bermingham -- were bankers with Greenwich NatWest, a securities firm that is now part of Royal Bank of Scotland. The firm was an investor in at least one of Enron's controversial partnerships and a lender to the now-bankrupt energy-trading company

The complaint, filed in Houston by the Justice Department's Enron task force, claims the former bank officers secretly invested in an Enron entity named Southampton LP through a series of financial transactions and then used the investments to siphon off $7.3 million in income that belonged to their employer.

Messrs. Mulgrew, Darby and Bermingham were employed by the finance group of Greenwich NatWest at the time, a division of National Westminster Bank with offices in Greenwich, Conn., and London. All three men later moved to Royal Bank of Canada and have since left that firm.

The government's complaint also alleges that the three men recommended that an interest in an Enron-related partnership held by NatWest should be sold for $1 million even as they schemed with Enron executives to purchase that interest for $250,000.

"This complaint shows that we intend to address the conduct not only of Enron but also of those who capitalized on Enron's willingness to enter into account-driven transactions that lacked business purposes and served merely to enrich those involved, " Leslie Caldwell, the task force's director, said.

The government also may be hoping that the three will help unravel some of the complex financial dealings that led to the demise of the Houston energy company, people familiar with the matter have said.

The charges against the bankers were the first involving Enron as a company, as opposed to the March indictment of its auditor, Arthur Andersen LLP, which was convicted of obstructing justice earleir this month.

Enron considered NatWest a "Tier 1" bank, which meant it was among a small group of banks that did the most business with Enron and were given preferential treatment by the company.

Within the banking world, the three bankers were known for their fun-loving ways. "They were larger-than-life characters," says Robert Kelsey, who wrote a semifictionalized book entitled "The Pursuit of Happiness: Overpaid, Oversexed and Over There" about his experiences at Greenwich Natwest, where he was a vice president from early 1998 to late 1999. "They worked hard and they played hard."

In his book, Mr. Kelsey says he offered a flavor of the way in which the structured finance team at Greenwich Natwest operated. At one point in the book, he writes, without naming Greenwich Natwest, that the structured finance department of the fictional bank portrayed in the book would "take simple banking deals and make them much more complicated." By the time his group had finished explaining the transaction, the client wasn't sure whether "to repay his loan or change onto the Piccadilly Line" subway because of the sprawling charts used to illustrate the complexity of the loan, according to a passage in the book.

Updated June 27, 2002 8:47 p.m. EDT