In the first criminal indictments in the Enron Corp. case, three former British bankers have been charged in Houston with fraudulently making off with more than $7 million in profits through an Enron third-party entity. The entity is one in which several Enron executives also benefited, including former CFO Andrew Fastow. The indictments are a signal that investigators are beginning to focus on the bankrupt company’s former executives.

Gary Steven Mulgrew, 40, Giles Robert Hugh Darby, 40, and David John Bermingham, 39, were charged with wire fraud in a complaint filed by the U.S. government’s Enron Task Force, according to court documents. Allegedly, they were part of an elaborate hedging scheme set up by Fastow and his aide Michael Kopper.

“It’s like an onion. They’re beginning to peel back the layers,” Philip Hilder, a former federal prosecutor who represents Enron whistle blower Sherron Watkins, told the Houston Chronicle. “The top layers happen to be these bankers….It’s quite clear that their main targets in this transaction would be…Fastow and Kopper,” he said.

Hilder said he believed the U.S. Department of Justice was attempting to get leverage from the three indictments, either by obtaining a conviction or a plea, so that the former bankers might cooperate and provide details on the transactions involving Fastow and Kopper. If this is the case, it would parallel the same strategy federal prosecutors used in its case against Arthur Andersen LLP, in which it used former chief auditor David Duncan — who had pleaded guilty — as its star witness in the conviction.

According to legal documents, the three men indicted apparently used a series of transactions involving Enron entity Southampton LP to defraud the British bank they worked for. The fraud occurred when the men secretly invested in Southampton, eventually gaining $7.3 million in profits that belonged to the bank that employed them, the Justice Department charged.

Deputy Attorney General Larry Thompson said, “The Department of Justice is committed to the vigorous investigation and prosecution of criminals who prey on the liberties of our financial system. As these charges demonstrate, our investigation into the collapse of Enron Corp. is active and ongoing.”

According to the special report completed by Enron’s board of directors, in early 2000, Fastow and Kopper each turned a $25,000 investment in Southampton into a $4.5 million gain within a few months. Other executives, including former Enron treasurer Ben Glisan and lawyer Kristina Mordaunt also gained handsomely from Southampton investments.

The three men charged had been employed in Greenwich, CT by Greenwich NatWest, a U.S. subsidiary of British bank National Westminster. NatWest also has offices in London and Houston, and was considered a “Tier 1” bank by Enron, one of a small group of banks that conducted major business deals and was given preferential treatment.

According to the allegations, the three men, “secretly negotiated their own purchase of NatWest’s interest while still employed at NatWest (and) along with Enron executives, set up a series of offshore entities to carry out their scheme.” Apparently, e-mails between the men described in the criminal complaint detail transactions between LJM Cayman and Southampton.

Leslie R. Caldwell, chief Enron prosecutor, said, “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 accounting-driven transactions that lacked business purpose and served instead merely to enrich those involved.”

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.