NatWest 3

With their sojourn in Houston now a fact of life, just a quick note that things are not going well for the prosecutors in related Enron fraud cases. A federal appeals court has thrown out convictions of several Merrill Lynch bankers for defrauding Enron; the bankers had arranged a complex transaction involving Nigerian barges to keep Enron's income statement looking good (WSJ, subs. req'd).

Since there was no actual material loss to Enron, the prosecutors had relied heavily on a theory that the bankers had deprived Enron of "honest services" -- a phrase that features repeatedly in the NatWest 3 indictment. The appeals court ruled that the prosecutors can't invoke some supposed services not provided when everyone agrees that the actions undertaken were intended to benefit Enron.

At one level, this is not directly relevant to the NatWest 3, who are accused of defrauding NatWest, not Enron. But it's consistent with the theme of prosecutors alleging fraud where it's not so obvious fraud occurred; in particular, if NatWest felt defrauded, it always could have pursued the case in the UK, but chose not to do so. Further appeals are pending in the Merrill Lynch case, but so far it looks like a small sign of optimism for the three.

UPDATE 9 AUGUST: The Wall Street Journal (subs. req'd) brings out its sensible side and editorialises against the arrest of David Carruthers in the BetOnSports indictment; does this part of the argument sound familiar? --

No doubt there is potential for online gambling abuse. But BetOnSports and Mr. Carruthers are not charged with dishonest behavior toward their customers. They are being told that a business they believed was legal was a criminal enterprise even if it was being run in the open. That suggests that prosecutors believe they have the right to enforce compliance with even ambiguous U.S. laws on any business, wherever based, solely because some of the people accessing their site happen to be Americans. As a legal theory, this is a stretch. But as an excuse to incarcerate a foreign national just passing through, it smacks of a politically opportunistic prosecution.