Enron and the British connection: Bankers accused of £5m fraud

Prosecutors in United States accuse three former NatWest employees of secretly profiting from illegal offshore deals

One of the three British bankers accused of fraud modelled himself on the Scottish film hero Braveheart, as relentless and competitive while playing five-a-side football as he was in the dealing rooms of New York and Houston. Another saw himself as the Energiser Bunny, tireless and limitless in his energy.

All three saw themselves as womanising buccaneers who played as hard and as fast as they pursued their deals. A fictionalised account of their lifestyle bore the less than subtle title The Pursuit of Happiness – Overpaid, Oversexed and Over There.

But yesterday these three investment bankers, Gary Mulgrew, Giles Darby and David Bermingham, were revealed to be the first people to face criminal charges over the collapse of the Enron corporation. In a 14-page affidavit, the FBI accuses the men of defrauding a former employer, an arm of NatWest, of more than $7.3m (about £5m). They have also been named in a civil suit that accuses their subsequent employer, the Royal Bank of Canada, of duping a bank into taking on an unsafe $500m loan.

The FBI affidavit signed by Deanne Simpson, a special agent, says: "I submit that Gary Mulgrew, Giles Darby and David Bermingham did knowingly execute a scheme and artifice to defraud and to obtain money and property by means of materially false and fraudulent pretences.... The $7.3m received by [the three men] rightfully belonged to NatWest."

None of the men was available for comment yesterday. Mr Mulgrew is known to own property in Halstead, Essex, while Mr Bermingham lives in Goring, Oxfordshire. Whether the United States will try to seek the men's extradition is not yet clear. Their lawyer, John Reynolds of the City law firm McDermott, Will & Emery, said yesterday: "I can confirm I am acting for all three but I am not in a position to talk further."

The accusations against the Britons are complex and have their origin in the labyrinthine world of partnerships linked to Enron, which last year filed the biggest bankruptcy in US history and subsequently set into motion a huge investigation into what rapidly became a massive financial scandal.

Just two weeks ago, the US Justice Department achieved a court victory over its accountant, Andersen. The firm was found guilty of obstructing of justice over its audit of Enron, which said in November last year that it had overstated earnings for the past four years and actually owed more than $6bn.

The men are accused of defrauding Greenwich NatWest, a branch of the banking house based in Connecticut, with the assistance of Andrew Fastow, a former chief financial officer of Enron at the centre of investigations into the collapse of the energy trader. No charges have been been brought against Mr Fastow.

Mr Mulgrew, 40, a Glasgow-born former nightclub bouncer, was the head of the bank's structured finance group, Mr Darby, 39, was an expert in energy industry banking, and Mr Bermingham reported to the pair. The FBI affidavit says the men cheated NatWest out of millions by recommending that it sell off a stake it owned in an Enron partnership controlled by Mr Fastow. Shortly after they had done that, Mr Fastow returned the ownership rights for that stake to the three men for $250,000. A few weeks later they sold that stake for a staggering $7.3m, according to the FBI statement.

The FBI's case is based on partnership documents, bank records, hotel and telephone records, transcripts of tape-recorded statements as well as a series of e-mails between the three British bankers, which threw light on to the internal workings of Enron's murky off-the-books partnerships, whose debts triggered the collapse last December.

An investigation by Enron's board revealed that Mr Fastow and his associates used these partnerships to conceal debt and liability and to make millions of dollars for themselves. Mr Fastow alone is said to have made at least $30m from the partnerships.

Observers believe the prosecutors might be using this case to build a criminal prosecution against Mr Fastow who, the Enron board believes, masterminded most of Enron's most suspect financial transactions. John Fahy, a former US prosecutor, said the charge was "an old prosecutor's trick designed to elicit co-operation. This is meant to send a message ... that we the prosecutors know what's going on and if you're smart you'll have your lawyers come in and talk to us."

The affidavit says that in one e-mail Mr Bermingham told Mr Mulgrew he would be "the first to be delighted if he has found a way to lock it and steal a large portion for himself" – allegedly a reference to Mr Fastow and a deal worth millions of dollars. He added: "We should be able to appeal to his greed."

While the three prosecutions have again focused attention on Enron, after a week in which other financial scandals have dominated the agenda, the case has highlighted the swashbuckling world of high finance, where the participants play for huge stakes.

In the real world, it seems, the three men were no strangers to a fast-paced life, lavishly entertaining senior Enron executives to luxury holidays, skiing trips and visits to lap-dancing clubs in Houston, Texas, where the collapsed energy trader was based. On one occasion, Mr Mulgrew took a group of executives to Peter de Savary's Skibo Castle resort in Scotland to work on the controversial financing schemes at the centre of the Enron investigations.

Mr Mulgrew, whose mother Trish Godman, is a Member of the Scottish Parliament, was also among a group of 30 Enron executives and clients who went on an annual luxury skiing trip to Chamonix in the French Alps.

The allegations do not end with the FBI affidavit. They are also named in a suit against the Royal Bank of Canada, which the men joined after Greenwich NatWest was taken over by the Royal Bank of Scotland in March 2000. The suit, filed by the Dutch bank Rabobank, accuses the Royal Bank of Canada of duping Rabobank into assuming a $500m loan to a company associated with Enron. It says the three men would have known Enron's finances were controlled "by a charlatan ... engaged in looting corporate assets for his own personal enrichment".

The Royal Bank of Scotland, which took over NatWest, was keen to distance itself from the alleged $7m fraud. Howard Moody, the group director of communications, said: "The Greenwich NatWest relationship with Enron predates our takeover in March 2000. Greenwich NatWest was [subsequently] disbanded.

"We have looked at the conduct of Greenwich NatWest during the time of its relationship with Enron and are satisfied that it acted properly. As the three ex-Greenwich NatWest employees are subject to criminal proceedings, it would not be appropriate to comment further."

The Enron link

*Andrew Fastow

Chief financial officer at Enron

*Gary Steven Mulgrew

Managing director at Greenwich NatWest

*Giles Robert Hugh Darby

Director at Greenwich NatWest who specialised in energy industry and reported to Mulgrew

*David John Bermingham

Head of the structuring group at Greenwich NatWest. Reported to Mulgrew and Darby