A Price to Pay

Those who read this blog regularly will know that I am a big exponent of locking up white-collar criminals. I believe that white-collar crime, and particularly fraud and wrong-doing in the financial sector is the biggest cause of concern to our way of life, and the losses and damage caused by the level of unmitigated greed possessed by so many financial practitioners is undermining the very fabric of our democratic society. I believe that the biggest disincentive to city criminals is the likelihood of being prosecuted for ordinary criminal offences, and treated in the same way as burglars, robbers and thieves. That in fact is what they are, except they commit their crimes in a slightly different way, albeit the damage they cause is far greater and has a far-longer lasting effect.

However, when you prosecute a city boy, you send a message to all his friends and fellow-criminals that you are really serious about your intention to keep the financial sector clean. You see, as opposed to a burglar or street thief, a successful prosecution of a city thief spells the end of his career in the financial sector, because he will never, ever get employment again in the financial milieu. Just the fact of the jury coming back with a finding of 'guilty' is the kiss of death to the city fat cat. The inner city burglar or street mugger looks upon a criminal conviction as a rite of passage, it is all part of acquiring street accreditation among his peers. Spells away in institutions are nothing more than the equivalent of time spent acquiring a post-graduate qualification in more serious crime, prisons are merely universities of crime for most crims, but you don't even need to lock up a banker or broker, the mere fact of a finding of guilt is more than enough to banish him or her to social and commercial oblivion.

So, I am all in favour of applying the same standards of social control to bankers as I am to burglars, if for no other reason than to prove that there is one law for everyone.

However, despite my enthusiasm for such treatment, and my unashamed belief in the superiority  of American methods of dealing with financial criminality, I also firmly believe that any society which seeks to impose its standards on its citizens by taking away their liberties and their ability to earn a living in their chosen way, must do so fairly, justly and by the rule of law.

The American approach to law enforcement is entirely different to the British model. In America, the law enforcer is looked upon as an iconic figure, conjuring up images of the lone sheriff in the white hat, riding into town with both six-guns blazing, rendering the streets safe for widows and children and driving the bad guys out of town. It is a scene played out in just about every Western movie of the genre, and in so many ways, Americans still see their law enforcement agencies in a not-dissimilar light. This is why America has so many such agencies, whether federal, state, city, county and town. Americans still tend to see life through Hollywood images!

Law enforcement in America is still a fairly basic and brutal function, and many judges see it as part of their role to ensure the maintenance of the status-quo. This is because in so many parts of the country the judge, the chief of police, the sheriff, marshal, call it what you will, is still a political role, and these men and women get elected, or appointed as part of the political process. If they want to get re-elected, then they reflect the views of their voters. It used to be said of Mayor Daly of Chicago back in the 1960s that the only qualification to be a Chicago cop was to be an Irish-American looking for work. This is not said to denigrate many of the superb Chicago cops I know and have known in my career, who do great work in policing their city, I merely repeat what one of my Irish-American police friends told me.

English law enforcement methods and standards are very different to those of the United States. Our laws of evidence are different, our standards of proof are much higher, we outlaw many forms of evidence gathering, wire-taps, hidden secret taping of conversations with a view to entrapment, the use of agents-provocateurs, incitement to commit criminal offences, all of which are lawful and widely-used in US cases, and we do not seek to impose our jurisdiction on US citizens who have not committed any offences in the USA.

 It is against this background of introduction that I strongly recommend the book 'A Price to Pay', written by David Bermingham, probably more infamously known as one of the 'Nat West Three'.

This book should and must be read by anyone who is concerned about the enforcement of the law within the financial sector because it contains information about the process which now exists in this country vis-v-vis its legal relationships with the United States, which make for very uncomfortable reading indeed.

David Bermingam and his colleagues were investment bankers at Nat West, prior to its absorption by the vampire squid, RBS, led at the time by the biggest vampire squid of all, Fred Goodwin, and who got involved in a series of structured financing deals with the US company Enron.

What those deals were and how they were done is described in mind-boggling detail in the book, and throughout my reading I kept on asking myself what social significance any of these entirely artificial deals existed to perform, except the making of huge sums of money which were syphoned out of the ether, and always at someone else's expense, usually the public shareholders of Enron.

I found myself sickened by the sheer wanton greed and destructive quality of some of these deals, which were structured and created entirely with a view to maximising secrecy and opacity, to generate vast paper profits which could be later realised and parked in third-party offshore jurisdictions, coupled with a major exercise in tax avoidance. The aim was to earn huge fees for Nat West, and thereby, making bigger bonuses for the creators.

Revolting and morally dubious though it all was, the vital thing to remember is that none of it was unlawful or illegal. These guys were doing nothing that no other bank in the City was doing, creating vast amounts of phantom wealth out of thin air, using the alchemy of derivatives to create structures that would subsequently unwind, paying out millions of pounds. Not one penny of it went to fund any form of social development, alleviate any suffering, build any infrastructure (except presumably the extensions to the vast houses bought by city grandees), or provide any form of valuable addition to the fabric of the societies from which the money was squeezed. It was nothing more than a vast money-go-round, which created vast wealth for a select group of insiders, and paid the banks vast fees for so doing. It was a huge self-fulfilling prophecy, and it was all perfectly legal.

Indeed, it was so legal that Tony Blair, and later Gordon Brown, in an orgy of de-regulatory zeal, actively encouraged this kind of wanton excess, in the hugely misguided belief that this kind of industry was benefiting UK plc. Well, we all know where it has ended up!

The problem for the Nat West Three is that they were dealing with Enron, the then biggest and most important employer in Houston, Texas. Led by a crook, managed by a bunch of crooks among the wider group of executives,  Enron would later go down in history as one of the biggest frauds on investors in the history of scams. It seems that apart from their everyday skulduggery ripping off their investors, many senior people in Enron were also running their own sideline scams against the company as well. It was one of these sidebar scams of which the three British bankers inadvertently became an integral part.

You will have to read the book to understand the  scope of the facts, but suffice it to say, that whether I want to admit it or not, these men committed no crime in the UK known to UK law. There were no complainants, no victims, at least none who wanted to make any complaint. They behaved throughout with a complete lack of any dishonest motive. Whether what they did was moral, decent or honourable is another matter, but we do not judge men in the criminal sphere by their lack of morals, decency or honour, and David does manage to explain the background of the City culture at the time to demonstrate why they continued with the deals when any merely half-witted, but sensible person would have said 'let's get  the fuck out of here'! And yet these three men were extradited to America and stood trial and went to prison for defrauding Nat West Bank.

Yes, you read that right, they were prosecuted in America for an offence which, even if it were half true, which it wasn't, could only have taken place in the UK. But as I have said, US law doesn't allow the matter of a few inconvenient facts to get in the way of a good prosecution. In America, being perceived as an aggressive prosecutor is one of the best ways to get ahead, and to rise in the political sphere. Many politicians start off as Assistant US Attorneys or Assistant District Attorneys, looking to make cases which will bring their name to public attention as 'ball-breaking' prosecutors. With the Enron case, with so many Houstonians out of work and facing a bleak future because of the absence of their pension funds, prosecuting someone who could even peripherally, at the very least, be said to have had something to do with the frauds at Enron, was going to be like shooting fish in a barrel. The Houston prosecutors knew that and they set their sights at the Nat West Three,

None of this is surprising in the least, what is the really shocking aspect of this story is the way the British institutions, behaved. Like the FSA to whom the three men went voluntarily and told their story when they first became aware that there was a hint of fraud in the dealings at Enron. They told the FSA at the first opportunity and they told them the whole truth. The FSA merely parcelled up their evidence and sent it straight to the US authorities, and it was used as the basis of the case against them in America. The FSA clearly realised that no offence had been committed in the UK, but they like to play hugger-mugger with their regulatory mates in the US, in the hope of reciprocal information in the future, so they sold three innocent men down the river.

Institutions like RBS, who could have easily provided the evidence to prove the innocence of these three men, but who refused to help; Like the British legal establishment which bent over backwards to facilitate the US request for extradition, despite the fact that there were no reciprocal offences being alleged against the accused; like the politicians who washed their hands of them because they wanted to keep on-side with the Americans, and particularly so the Americans would continue to keep sharing intelligence material with our spook establishments; and generally how these three men were deprived of all help and comfort that they should, as British citizens have expected to receive, to fight these trumped-up and ridiculous charges.

The fact that they did not, is the true shocking story which needs to be told.

This book outlines the problems which foreigners face in confronting the US justice system if they are unfortunate enough to fall foul of its grasp. It demonstrates the ludicrous costs and expenses these men had to pay to try and clear their names, and it shows how, at the end, worn down with repeated adjournments of their trial, they were faced with the choice of pleading guilty to a crime they genuinely had not committed, simply to be able to serve a fairly short period of imprisonment which would enable them to return to their homeland in a reasonable time frame, and spend their lives with their families, rather than fight the case in court, be inevitably convicted, and spend many, many years locked up in an American institution, with no hope of parole, reconciliation or return to their loved-ones.

It is a shocking story, it is a terrifying story, and it needs to be read.

I have met and talked to David Bermingham and I believe him, I like him, and I hope in time, we will become good friends. The story of the Nat West Three is a disgrace to the concept of English justice, and the politicians who connived at this travesty should be ashamed. They won't because the words politician and shame when used together are an oxymoron, but there is work that needs to be done here to ensure that before any other person is extradited from this country at the mere bald request of the Americans, the courts need to be satisfied that they have at least allegedly committed an offence in America which our Courts would recognise and that there is credible evidence to back up the allegations. No one should be sent for trial to a foreign country when there is evidence to prove their innocence available in this country, except that the persons holding it refuse to give it up.  

We will never know what pressure was applied to RBS by the US prosecutors to with-hold the exculpatory evidence from the Nat West Three. Suffice it to say that despite personal pleas to the bank, their lawyers and even to the great vampire squid-in-chief, Fred the Shred Goodwin, at no time did RBS make any move to help their former colleagues. There is no pit in hell low enough to hold the people who made these decisions, and we can only hope that in some way they will get their come-uppance at some future time.

No, I am not going soft, and I have told David that in my view he and his colleagues were the architects of their own downfall, least of all through the daft move of speaking to the FSA in the misguided belief that telling this feeble agency the truth would be a proper way to deal with the issue. It did not occur to them that the FSA would use the information as a bargaining chip, but the moral of this episode now is 'never talk to the FSA'.

Read this truly scary book and learn its lessons. It should be a mandatory addition to the bookshelf of every CEO of every UK financial service company.

'A Price To Pay' by David Bermingham is published by Gibson Square.