Thursday, July 13, 2006

The NatWest 3

With the 3 now in Houston, the hometown Houston Chronicle will be recommended reading for those interested in tracking their fate. The sidebar to their story on the 3 has an excellent set of links, including to the actual indictment. The indictment makes clear what the 3's supporters have always said: that any fraud was against NatWest and that the US jurisdiction is quite flimsy (arising from faxes, e-mails, and a wire transfer travelling in US territory).

Furthermore, one can virtually guarantee that (assuming the 3 can afford good legal representation) that a professor of finance will be on the witness stand. The entire case rests on the fact that a corporate vehicle to hedge financial risk, which by construction has an economic value of zero when set up (because its risks are exactly offsetting), can gain or lose value over time as the price of the assets it holds fluctuates. Indeed, it seems from the indictment that the hedging vehicle was still exposed to risk when the three bought it, which will surely be part of their argument that NatWest was not defrauded by the purchase price.

UPDATE: The 3 got bail (which seems to be $100,000) pending a longer hearing next week on whether they can return to the UK until the trial date. Gary Mulgrew posted his bail mostly in the form of shares in Glasgow Celtic FC!

More on the Celtic connection here; at the end, Mulgrew's mother makes reference (though the story doesn't explain) to the fact that government MPs referred to the 3 as the "Enron 3," a clearly prejudicial tag in view of their trial in Texas. Michael Howard got Home Office Minister Mike O'Brien to stop doing it during the debate on Wednesday.

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