don’t have to read too far into the City pages, these days, to come across a story about individuals or institutions under investigation by either regulatory or prosecutory authorities.
Whether it’s to do with mortgage securities, Libor setting, insider dealing, or another ill, there’s little doubt that working in financial services has never been quite so perilous.
It’s easy to think that you can’t fall foul of the authorities by mistake, but in an ever-shrinking world that’s simply no longer the case. Automatic cross-border sharing of information among regulatory bodies effectively leaves individuals at risk of enforcement action, or even prosecution by a foreign authority, for an activity conducted at a desk in London.
Twelve years ago, I unwittingly trod on such a landmine. I was living in London and working in the City. In a transaction which has since become infamous, I invested personally, along with two colleagues, in a deal connected to the US energy company Enron. The transaction was organised by Enron’s chief financial officer, and as I was in the process of leaving my employer, NatWest, I didn’t report it to them. Big mistake.
Eighteen months later, when Enron was in deep financial difficulties, the three of us were spooked by one of Enron’s filings into believing that there’d been some insider dealing in the transaction in which we’d been involved. So we self-reported to the FSA, who interviewed us at length, thanked us profusely for coming in, and passed on all the materials we’d given to them to the Securities and Exchange Commission. We sat around and waited for a call that never came.
Then one morning, seven months later, we woke up to find ourselves on the breakfast news, accused by the US Department of Justice of defrauding NatWest Bank in London. Eighteen months later, a new law came into force which allowed the US government to request the extradition of UK citizens without having to provide any evidence to support the requests. Within a month our extradition was sought.
A lengthy and very public battle to defeat the extradition and change the law followed. We failed on both counts and were sent to Texas in July 2006, facing up to thirty-five years in prison.
Eventually, in November 2007, we bowed to the inevitable and agreed to plead guilty to one count of wire fraud in return for an agreement to expedite our return to the UK. We were sentenced to thirty-seven months in prison, and served seven months in the US, and a further eleven months in the UK, before being allowed home on electronic monitoring.
To a degree we were the architects of our own misfortune. But our case became a cause celebre because we highlighted the dangers in a piece of legislation that had been shovelled through parliament on the back of the “War against Terror”, and which has since caught many British businessmen in its tentacles.
The issue is this: a US prosecutor can obtain an indictment with the minimum of effort and in a process that has no judicial oversight, conducted behind closed doors. Armed with that charging document, and no more, he can request the extradition of a UK citizen, and our extradition laws give that individual substantially no defence against extradition. Once in America, he or she will be thrown into prison and will languish there until ready to confess to the “crimes”, however spurious the allegations.
You may think I exaggerate and that your company or the UK authorities would protect you if this happened to you, but you’d be foolish to believe so. The UK authorities will turn the other way. Your employer will most likely fire you to avoid an indictment of the firm itself, the threat of which is a routine tactic of US prosecutors to make sure individuals are isolated.
Since returning to the UK, I have been directly involved in several cases of British businessmen caught up in this nightmare. Ian Norris, the former chief executive of Morgan Crucible. Jeremy Crook of Peregrine Systems. David Carruthers, former chief executive of Betonsports. And most recently Christopher Tappin, who is currently in a prison in the middle of the New Mexico desert.
It’s easy to believe that you won’t be next. Every one of the above thought exactly that. But all bar Tappin now have a criminal record to show for their experiences, and Tappin’s plea bargain will surely be a next-step formality if he is unable to get bail.
The villain in the piece is the UK’s Extradition Act, which positively encourages overreach by zealous US prosecutors. In opposition, both the Tories and Lib Dems knew what was wrong with the law and tried to change it. In government, however, the Tories have come over all squeamish on the subject. If you are reading this, the chances are that you are very much at risk, and will remain so until the politicians can be persuaded to change this Orwellian law.
David Bermingham’s book A Price to Pay is published today by Gibson Square Books at £8.99, with an e-book at £2.99. www.apricetopay.co.uk. All the author’s profits will be divided between Liberty and Fair Trials International.