HOUSTON (AFX) - Three British bankers facing Enron-related fraud charges learned Friday that they must stay in the United States pending trial under restrictive conditions that one of them said could be regarded as 'psychological torture.'
U.S. Magistrate Stephen Smith sided with federal prosecutors in granting a bond that blocks the trio from returning to England and possibly launching another lengthy extradition battle after losing a string of appeals over more than two years.
'The problems posed by allowing the defendants to return to the U.K. are very substantial,' Smith said.
The judge said he was concerned about lack of U.S. jurisdiction in England, and noted that the men would have to voluntarily waive extradition before a British court upon their return home for their promise to do so to become official.
'I have never released a defendant on bail to reside somewhere beyond the jurisdiction of the United States courts,' the judge said. 'My authority and this court's authority doesn't go beyond the water's edge.'
The three men -- David Bermingham, 43, Gary Mulgrew, 44, and Giles Darby, 43 -- appeared stricken at Smith's ruling.
'This is going to be tough. We are tough people, but I'm not underestimating the difficulties we face. It might be regarded as a form of psychological torture, if you wish,' Bermingham said as he and his co-defendants left the courthouse Friday. 'Primarily, we went into the courtroom this morning hoping and praying we'd be able to go back and see our families, and that was the first thing denied us.'
The trio was extradited to Texas last week. They each face seven counts of wire fraud for allegedly colluding with former Enron Chief Financial Officer Andrew Fastow in a secret financial scam in 2000 to enrich themselves at their employers' expense. They have pleaded not guilty. Their trial is slated for Sept. 11, but is likely to be postponed.
Under their bond conditions, they cannot leave the Houston area and surrounding counties. Smith denied their request to live together and share expenses, as bonds routinely forbid co-defendants to commingle without their attorneys present.
Smith also ordered Bermingham and Darby to post $500,000 and Mulgrew to post $200,000 in cash and letters of credit to secure $1 million bonds. They must continue wearing electronic monitoring devices they received last week, and are banned from airports, bus stations, train stations and seaports. Their passports remain seized.
All three have families and jobs in London. Reid Figel, Mulgrew's lawyer, questioned how three indicted defendants awaiting trial far from home could find jobs.
'I'm not sure it's impossible for these individuals to find some means of subsistence here,' Smith replied matter-of-factly.
'I feel that my sentence has begun today, for me, my family, my children and people I care about. It's going to be tough,' Mulgrew, the primary caregiver for his 10-year-old son, after the hearing.
Other higher-profile Enron defendants have had less restrictive bonds, though the British three are the only non-U.S. citizens among those who have not already cut plea deals with prosecutors.
Enron founder Kenneth Lay, the most public face of the disgraced company, was granted a $500,000 bond when he was indicted two years ago. He also was allowed to keep his passport -- a departure from routine surrender of passports upon indictment -- but needed court permission for international travel.
Lay's bond was hiked to $5 million, his passport was seized, and his movements were restricted to Houston and Colorado only after he was convicted in May of conspiracy and fraud at the conclusion of the government's premier criminal case to emerge from the Enron scandal. Lay died of heart disease July 5 while awaiting his Oct. 23 sentencing.
Lay's co-defendant, former Enron CEO Jeffrey Skilling, who was convicted of 19 of 28 counts of fraud, conspiracy, insider trading and lying to auditors, is free on a $5 million bond that allows him to travel throughout the continental United States. He is set to be sentenced Oct. 23 and faces decades in prison.
The British trio, former executives at Greenwich NatWest, a unit of Royal Bank of Scotland Group PLC, became a cause celebre in Britain throughout extradition proceedings.
But in the United States, their case is a loose end of an investigation launched after Enron's 2001 flameout. Charges initially filed against them in 2002 alerted Fastow that he was in the government's crosshairs.
The indictment against the so-called 'NatWest Three' alleges they came to Houston in 2000 to concoct a fraudulent scheme with Fastow, from which they siphoned $7.3 million while Fastow and others skimmed $12.3 million from a deal NatWest had with Enron.
Fastow, the architect of myriad fraudulent Enron schemes that helped fuel its spiral into bankruptcy proceedings, pleaded guilty to two counts of conspiracy in January 2004 and is awaiting sentencing. The British trio was arrested three months later, in April 2004.
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