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'NatWest three' claim to have evidence of their innocence

HOUSTON (Bloomberg) — Three British ex-bankers have told a US judge they've discovered evidence in Enron Corp. civil litigation files that could prove their aren't guilty of defrauding the defunct energy trader, as prosecutors claim.The bankers, all formerly with Greenwich NatWest Bank in London, asked the judge to force the US to turn over the documents for use in their criminal fraud trial, which begins October 22 in federal court in Houston.

David Bermingham, 44, Giles Darby, 45, and Gary Mulgrew, 45, are accused of bilking the bank out of $7 million from the sale of NatWest's stake in an Enron off-books partnership designed by convicted ex-Enron chief financial officer Andrew Fastow. The men were extradited in July 2006 and remain in Houston under electronic monitoring until their trial.

"We believe these documents will show there was no crime under British law and no crime under US law," Dick DeGuerin, Darby's lawyer, said in an interview on Friday. "We found reference to these documents in the Enron civil litigation, and we have to have them in an admissible form" for evidence at the trial.

Prosecutors say the bankers persuaded NatWest, now a unit of the Royal Bank of Scotland Group Plc, to sell its stake in the partnership, known as Swap Sub, for $1 million when they knew it was worth far more. Fastow and the British bankers later sold the partnership back to Enron for $30 million, and prosecutors say the bankers, Fastow and others pocketed the difference.

DeGuerin said the bankers have spent months in their lawyers' Houston offices, reviewing millions of pages of depositions and e-mails uncovered in Enron's bankruptcy case and litigation between Enron shareholders and Wall Street banks accused of aiding the company's income-manipulation schemes.

"These three guys know what happened, and they know what to look for," DeGuerin said. "They've had the time on their hands to do that. The guys themselves are finding these things."

The bankers' motion, filed July 9, includes passages from depositions given by five employees of Credit Suisse First Boston and Fastow. The depositions show CSFB valued its 50 percent stake in the Swap Sub partnership at "a negative $1 million" days before the British bankers told NatWest its stake was worth $1 million, according to the motion.

"This independent, contemporaneous valuation of CSFB's interest in Swap Sub is essential to establishing that the defendants' recommendation that NatWest sell its identical interest for $1 million was not part of a fraudulent scheme," the bankers said.

The bankers' motion quoted an e-mail in which a CSFB employee advised that "as long as we sell (Swap Sub) for something positive, given the negative value, we should be okay".

Prosecutors gave the British bankers a copy of that e-mail with the quoted passage blacked out, DeGuerin said. He said the US has similarly withheld or redacted other documents mentioned in Fastow's and the CSFB bankers' depositions, which might prove the NatWest bankers' innocence.

The bankers claim CSFB's independent valuation of its Swap Sub stake at "less than zero" was the reason both Greenwich NatWest and British fraud investigators declined to prosecute the three men criminally for profiting off Fastow's deal.