NatWest 3 Plea Could Have Affect on European Online Gambling OperatorsEuropean online gambling operators anxiously await a decision on the iMEGA vs. US Government matter, which is now 60 days past due. The folks from iMEGA, a trade organization which believes a law banning online gambling in the States is illegal, feels confident about the delay in decision.
But European operators, anxious to have legal barriers removed, can't be elated by a recent plea bargain made in the notorious NatWest 3 case.
The NatWest Three, also known as the Enron Three, are three British businessmen - Giles Darby, David Bermingham and Gary Mulgrew - who were extradited to the United States on July 13, 2006 on charges relating to a transaction with Enron Corporation in 2000 when they were working for the City of London firm Greenwich NatWest.
At the time of the crime the Three were working for Greenwich NatWest, then a unit of NatWest bank. The Three engaged in a corrupt deal with Andrew Fastow, CFO of Enron, whereby they would persuade Greenwich NatWest to sell its stake in a Cayman Islands investment company at a fraction of its real market value to a small company controlled by Fastow. The stake was then sold to Enron at its true value, and the difference was split between Fastow, Fastow's assistant Michael Kopper, and the Three.
The three bankers netted £1.1m ($2.3m) each, while Fastow and Kopper made a considerably larger sum.
Some of the most damning evidence against the Three comes from a presentation made by the Three to Fastow which included the words:
"Problem is that it is too obvious (to both Enron and LPs) what is happening (ie, robbery of LPs), so probably not attractive. Also no certainty of making money ..."
Prosecutors allege that the use of the word "robbery" shows that the Three knew that what they were planning to do was a crime.
The case of the “NatWest three” has stirred up huge concern among business people in the UK. This week, however, we learn that the three former NatWest bankers have pleaded guilty to wire fraud.
Judicial Torture
Martin Wolf of the Financial Times calls it "Judicial Torture"
"The fact that these three men pleaded guilty does not prove they were. It demonstrates that the offers made by US prosecutors are of a kind sensible people cannot refuse. The pressures the former can exert make it rational, even for the innocent, to plead guilty. I do not know whether that happened here. But it would not be very surprising."
This case had yet another disturbing feature: the fact that the three men were extradited under a treaty agreed with the US in 2003 that allows US courts to extradite people without establishing a prima facie (preliminary) case in a British one, according to Wolf.
"Many believe the good reason for this change was the need to co-operate over terrorism. Yet it has, in practice, been used extensively against British business people by US prosecutors who are targeting white-collar crime.
"Because so many British businesses have some US involvement, their vulnerability to this judicial activism is self-evident. What made the case of the NatWest three more remarkable is that the bank, alleged victim of the fraud, never pressed for a British investigation of the events."
Case Mirrors That of Carruthers
David Carruthers (born September, 1957 in Edinburgh, Scotland) was the CEO and a board member of online gambling company BETonSPORTS plc. He served as CEO from July 2000 until July 24, 2006. He was arrested in the United States on July 16, 2006 on charges related to his role as CEO of that company and is currently under house arrest at a hotel in St. Louis awaiting trial.
Like the individuals from NatWest, Carruthers was not a US citizen.
The hotel he resides at is among the nicest in the St. Louis area, but he is only permitted to leave a few hours a day and he cannot go far (he is monitored 24 hours a day). Gambling911.com has learned that Mr. Carruthers has ventured to some local museums and the library and has even checked out the St. Louis Arch. But that's about the extent of it.
The US Government is not paying for his hotel room either. But Carruthers isn't there by choice.
Upon his arrest, officials immediately confiscated his passport. Carruthers has told those close to Gambling911.com that is is impossible for him to rent an apartment in the area without the proper identification (not to mention the ankle monitoring device can't help matters).
The good news is that Carruthers remains in good spirits, has been exercising, eating nutritionally and has been in constant contact with some close friends within the online gambling industry who form an excellent support base. He is also "free", unlike BETonSPORTS founder, Gary Kaplan, was deemed a "flight risk" and must remain behind bars. Kaplan is said to be suffering due to a medical condition (severe back pains).
The bad news is the US Government continues to put off Mr. Carruthers trial.
Why Did They Plea Bargain?
Wolf says that plea-bargaining is effective because of four salient features of American justice: the exceptional severity of punishment; the justified terror of what might happen in prison; the uncertain outcome of fighting cases before juries; and the possibility of obtaining a far lighter sentence by agreeing to pleas of guilty.
In the case of the NatWest three, the accused faced the possibility of up to 35 years in prison for their alleged offences. It is a reflection of the gulf in culture that has grown up between the US and the UK that what are in effect life sentences might be imposed for their alleged involvement in helping Andrew Fastow, then Enron’s chief financial officer, defraud Enron.
"Such a sentence would be far longer than all but the tiniest proportion of murderers could expect to serve in the UK. Yet, apparently, it is regarded as perfectly reasonable in the US. Nor is this all. A sentence in a US prison, particularly for middle-class men, is likely to be entry into a lifetime of torment."
Longtime Houston attorney Tom Kirkendall's observations are similar to that of Mr. Wolf over at his blog:
"On one hand, the defendants could risk a trial in a virulent anti-Enron environment (see also here) that could result in a long prison sentence that would have to be served in the US prison system thousands of miles away from their families. Or, on the other hand, they could enter into a plea deal that gives them the hope of being able to serve a considerable amount of a definite sentence in the UK prison system near their families.
"Given those choices, my sense is that the NatWest Three's choice was a rational and reasonable decision. It's simply not a choice that they should have been forced to make."
A statement was issued by those attorneys involved.
"Today is an important first step, if not the last, in bringing this terrible ordeal to an end," the attorneys for the three men said in a joint statement. "By changing their plea . . . Gary, Giles and David have fully accepted responsibility for the significant lapse of judgment that led to the filing of these charges, and that has caused them to be apart from their families and friends in the UK for an agonising 17 months."
But this terrible ordeal is far from over in the whole scheme of things.
Precedent Setting and Ongoing Arrests Possible
"The greater UK business community is up in arms," points out Joe Brennan, Jr. of iMEGA.org. "How the US can unfairly reach into their country (Great Britain) to prosecute their people. This is a pretty big precedent being set."
And many now speculate that the NatWest 3 (plea bargained) and David Carruthers (still awaiting trial in the States) are just the beginning to a long string of arrests that could be coming down the pike.
Immediately following the Carruthers arrests, the online gambling community and those in the entire European business sector, were stunned to learn that a former Chairman of Sportingbet was taken into custody at New York's JFK Airport. Peter Dicks was wanted on an arrest warrant from the state of Louisiana. The warrant charges Mr. Dicks was running a gambling enterprise by computer, a crime under Louisiana law. Yet Dicks was hardly active on the Sportingbet board and was in the US on "unrelated" business.
Dicks was released on $50,000 bail on September 9; shortly thereafter he tendered his resignation as Sportingbet chairman and announced plans to fight extradition to Louisiana. A hearing scheduled for September 28, 2006 was postponed until the following day to allow New York court officials time to reach a decision. On September 29, Judge Gene Lopez announced that the warrant would not be enforced, and that Mr. Dicks was free to return to the UK. New York governor George Pataki stated that because internet gambling is not a crime in New York, the state does not have the authority to extradite Mr. Dicks to Louisiana.
But what if Mr. Dicks had landed in Washington State instead?
Washington recently extradited three of its citizens to the state of Louisiana on similar charges. Likewise, Dicks arrival in New York was a case of "good timing". Pataki has since served his term as New York State Governor. Serving in that role now is Eliot Laurence Spitzer, the former New York State Attorney who brought charges against PayPal (an online payment solutions company) for its role in taking Internet gambling transactions.
Filed Under Online Gambling News
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Christopher Costigan, Gambling911.com Publisher
Originally published December 3, 2007 1:48 pm EST
