Time To Be Tough - UK Regulator Must Show Crime Doesn't Pay

The NatWest Three were back in the headlines this week, after pleading guilty to an Enron-related crime in exchange for a lenient sentence. A dodgy extradition was followed by 17 months in the US away from their families and the prospect of up to 35 years in clink if they were convicted as charged - little wonder they coughed. Anyway, here's our 'Highly Placed Profesional's' take on the affair.

'Spare a thought for the Natwest Three.  Most patriotic Brits found something pretty distasteful about three British bankers being hounded by the US authorities and extradited to the USA, especially as the extradition treaty in question remains completely one-sided. Questions were even raised in the House over the affair, and some thought that this was just another example of how then UK Prime Minister Tony Blair was a poodle to American imperialism.
But I was always a little sceptical about all this nonsense because, as a market professional, I know that all too often a little scam does comes along and it can tempt even the most proper among us.  I am not trying to judge the Natwest Three here, because they have done that themselves by pleading guilty to one count of wire fraud, but we're all only human. Their lawyer says that the bankers are 'contrite', and  I doubt we'll hear a peep from them now until after their sentences are served and they are back in Blighty. But I do suspect that one day they will be seen on the sofa on a morning TV show decrying the unfairness of the American justice system. In the US, of course, 'you does the crime, you serves the time' - unlike in the UK.

I don't know the exact figures for successful financial crime prosecutions in the UK, but I do know that there have literally been only a handful at most of insider dealing scandals uncovered by the market regulator the Financial Services Authority (FSA). It's also public knowledge that the last big fish to get fined by the FSA left a major hedge fund and promptly set up another shop in Switzerland as if nothing had happened. And although the fine that the regulator levied - just over $1.5m - wasn't exactly small, it was but a rounding error compared to the sort of money these top hedgies make (especially if they have the inside track).

It's now almost exactly 6 years since Enron's demise for falling into a web of structured finance trades, tax scams and illegal reporting that lost billions for investors and saw thousands of employees lose their jobs and their pensions. And in the US, several Enron executives have paid the price for that scandal - former company CFO Andy Fastow and CEO Jeff Skilling are currently in clink. Company founder Ken Lay, of course, arguably paid the ultimate price - with his life (he died of a heart attack soon after jurors found him guilty of fraud). Former WorldCom CEO, Bernie Ebbers, also got banged up, as did several other big corporate names of the 1990s for their various shenanigans.  But who has served any time in the UK for either insider dealing or any other of the dodgy market practises that have come to light over the last few years ? A few of the 'little people', that's who.

Maybe the Natwest Three were just unlucky - they were an easy target for the US authorities. But at least the message is clear on the other side of the pond - no matter who you are, you will get pursued and prosecuted for financial crime over there. We can't say that in the UK'. 

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