Enron trio’s burden of evidence

“It was the worst moment of my life — I was facing extradition to America and expected them to come and take me away in the dead of night,” recalls Mulgrew.

“Calum had told one of his friends that some Americans were coming to get me and that he had a spear under his bed to defend me with. I went up to his bedroom and, sure enough, there it was. That was hard, it was painful.”

Two years on, Mulgrew, 43, a former managing director of Greenwich NatWest, the former investment arm of the high street bank, still faces extradition to the United States. He faces charges relating to the collapse of Enron, the giant energy trader which went bust with debts of £8.5 billion. Mulgrew, together with David Bermingham and Giles Darby — former colleagues at Greenwich NatWest — has been accused of conspiring with senior executives at Enron to defraud NatWest in a deal which earned each of them £1.5m.

Although NatWest was the alleged victim in the case, and the deal was struck in Britain, the authorities here have turned down repeated requests from the men for an investigation in this country. The case has been investigated by the Financial Services Authority, the City regulator, the Serious Fraud Office (SFO) and investigators at NatWest, now owned by Royal Bank of Scotland. No charges have been brought.

Mulgrew and his co-accused say they will not be given a fair trial in America because of the enormous pressure on the FBI to secure high-profile convictions following the decision by many senior executives at the firm to plead the fifth amendment or enter into plea-bargaining deals.

Last week, in a last-ditch attempt to avoid extradition, the men applied for a judicial review in the High Court to question the decision of the SFO not to investigate them. They hope that being investigated in Britain will allow them to subpoena witnesses who, they argue, will clear their names. The group, which has been nicknamed the NatWest Three, are still awaiting a decision by Charles Clarke, the home secretary, on whether they should be extradited. It follows a decision last October by Judge Nicholas Evans that there was “a good and proper basis” for prosecuting them in Houston, Texas, Enron’s former home.

The case is also the first big test of the extradition laws which were introduced in the wake of the September 11 terrorist attacks, allowing the American authorities to extradite British citizens without having to present any prima-facie evidence against them. “People are getting sent home from Guantanamo Bay because there is no evidence against them. There is no evidence against me and I am getting sent over there,” says Mulgrew, who believes he has been sold out by the British government.

“The extradition treaty is a disgrace,” he says. “Tony Blair was asked about our case and went on about what a great relationship we have with America. I am a Labour voter and always have been, but it is hard to believe that the government believes this an acceptable path to take. I am going to be taken from my family, my home and my businesses and be banged up, and I cannot even present one shred of evidence to contradict what is being said about me.

I have been told it will cost me $1.5m to prepare my case in the US, and even if we win we won’t get a penny back. My minimum tariff is two years in a penitentiary and I will end up bankrupt.”

Raised in a council house in Pollok, Mulgrew earned a degree in marketing at Strathclyde University, where he studied with Tom Hunter, the entrepreneur who is Scotland’s richest man, and quickly moved into the world of banking. He started out behind the counter, cashing cheques, but his management skills and flair for delivering huge financial returns from extremely complicated financing deals soon saw him travelling the world.

“It was a great career for someone who had grown up in Dormanside Road in the tenements in Pollok,” he recalls. “I was amazed at the salaries and bonuses that people were earning. I earned more money than I could have dreamt of when I was a boy. I could give someone a bonus of £100,000 and he would be delighted for all of 10 minutes until he heard that someone sitting beside him got £110,000, and suddenly it wasn’t enough.”

In 1998, Mulgrew was appointed the managing director of Greenwich NatWest, the bank’s ailing investment arm which he transformed into a hugely profitable operation in a matter of years. The transformation was, in part, due to the increasing number of lucrative deals which Mulgrew clinched with Enron.

“Now Enron is a byword for corruption, but back then it was a byword for dynamism and innovation. Never in my wildest dreams did I believe they were corrupt,” says Mulgrew. “My role was problem solving, and they were very aggressive in the way they approached business. The banks that were in its top 10 could expect to earn up to $12m a year in fees. NatWest wanted to become one of its top 10 banks.

“Aside from the fees, Enron was cutting-edge in terms of its technical knowledge. It would come up with really sophisticated ways of sharing risk to finance its projects.”

One of the most imaginative players at Enron was Andrew Fastow, the firm’s chief financial officer. Fastow is widely seen as the mastermind of Enron’s false accounting. He has already paid fines of about $23m and is facing up to 10 years in prison. In 2000 Fastow offered Mulgrew a deal he felt he couldn’t refuse. At the time NatWest was facing a takeover from Royal Bank of Scotland. Mulgrew claims he wanted to make as much profit as possible for his team to stop them defecting to other companies in the face of an uncertain future. Fastow offered NatWest $1m for its stake in an offshore tax vehicle named Swap Sub, which the bank had set up with Enron and Credit Suisse First Boston. Mulgrew, who was in the process of resigning to take a job with the Royal Bank of Canada (RBC), says he accepted the offer because NatWest’s stake was “worthless”.

After the deal went through, according to prosecutors, Fastow invited Mulgrew, Bermingham and Darby to invest £250,000 in a new company that had bought the NatWest stake. Within weeks, their share was worth $7.3m.

Meanwhile, Credit Suisse First Boston, which had the same stake as NatWest, had received $10m for its holding. According to Thomas Hanusik, the FBI’s Enron Task Force trial attorney, Mulgrew, Bermingham, Darby and others “devised and executed a scheme to defraud NatWest and Greenwich NatWest (GNW) and deprive them of money and their right to honest services by recommending to GNW that it sell its interest in Swap Sub for only $1m, when the defendants knew GNW’s interest was worth far more, and when the defendants were planning fraudulently to convert the balance of GNW’s interest to themselves and others”.

The prosecution also claims that the bankers travelled to Houston to present a slide-show to Enron executives explaining how the alleged fraud would work. It is a claim, the Scot says, that “beggars belief”.

But perhaps the nub of the case against him is simply that it was human nature to take the money which was so temptingly on offer.

“This wasn’t a case of finding a till open and dipping my hand in and picking up some cash,” responds Mulgrew to the suggestion. “Of course we are all capable of a dark moment. But the accusation is that it was a systematic planned and difficult thing to do. Why would I have bothered? I could have got the money legitimately elsewhere and I was earning big money anyway.”

He adds: “I didn’t need to defraud anybody, the amount of money that I was being offered by other banks when I left NatWest was incredible.” Mulgrew has since resigned from the Royal Bank of Canada and now runs a Brighton-based consultancy firm.

The case has taken its toll emotionally on the man and his family. Last year he separated from his wife, Laura, and admits that the case has caused his mother tremendous anxiety.

“My Mum gets frightened about what is going to happen to me,” says Mulgrew. “She hoped, like me, that at some point someone would say this is nonsense. Now, she worries more and more about how aggressive and unfair the Americans are in what they are doing.”

While some of his friends have since disowned him, Mulgrew has found an unlikely ally in the form of an old friend from his days in Dormanside Road. Earlier this month, Tommy Sheridan led calls for the Scottish parliament to pressure the Home Office into refusing to extradite the NatWest Three. The irony of Scotland’s most famous Socialist fighting for him is not lost on Mulgrew.

“Tommy has taken a lot of flak for speaking out and taking up my case, but he believes that injustice is an injustice whether it affects a rich man or a poor man,” he says.