'NatWest Three' banker David Bermingham argues that businesses and executives hugely underestimate the risks of being drawn into a heavy-handed US justice system

Extradition is basically a minority sport: it tends not to affect too many people. But when it does, its impact is disproportionate. I want people to be able to understand the nature of the risk facing all of us and, in particular, what I like to regard as a conversion on the US-led model of criminal and civil enforcement.

One of the scariest things for people and companies here is the long-arm enforcement that is being increasingly employed by the US, and a fundamental lack of understanding of not only UK citizens but also UK legal advisers as to how the game over there works in practice.

Not how you think it works, not how the rules may say it works, but what happens behind the scenes, what motivates people to take decisions over there and what the likely outcomes are.

Because ultimately, the decision you make when the balloon goes up – that first decision can quite often be definitive as to the ultimate outcome.

In March 2000, Giles Darby (pictured, left), Gary Mulgrew (pictured, right) and I made an investment on personal account with Andy Fastow, the chief financial officer of Enron – now, of course, the poster child for corporate crime.

On 19 November 2001, prior to anyone going bankrupt, Enron filed a statement with the US Securities and Exchange Commission (SEC) re-stating their accounts, at the very bottom of which were a couple of paragraphs that gave us huge concern, regarding the investment we had been involved in with Fastow. We therefore made what in retrospect was a spectacularly poor decision to go forward to the Financial Services Authority (FSA) and self-report.

Now, the purpose of going in was because we were regulated by the FSA, we had a strong suspicion that there had been insider dealing at Enron, and we thought we had an absolute obligation to go forward to our regulator in good faith and tell him. So we did.

On 9 January 2002, the investigation which up to that point had been civil – it was conducted by the SEC into Enron's accounts – became criminal. President George W Bush put together a corporate task force which, it turned out, was comprised almost wholly of mob prosecutors from the Chicago area whose experience had been taking down major crime gangs and major drug gangs.

On 4 March 2002, the FSA came back to us and said: "Right, we've conducted our preliminary enquiries. We've spoken to the Royal Bank of Scotland. We don't feel that you've done anything wrong. But we're going to send everything you've given us, including a summary of our conclusions, to the SEC and they're probably going to want to talk to you. Are you happy for us to do that?"

We said: "Of course. That's why we came to you."

So we sat around and waited to be called by somebody from the SEC or somebody in the US. The next thing that happened – utterly unbeknown to us – was that on 12 June 2002, members of the FBI flew to London and went to the FSA and the Serious Fraud Office (SFO) and said: "We need these guys. Step out of the way, please." Both of those agencies said: "OK."

The first we knew about it was on 27 June when I woke up one morning and found myself on the BBC Breakfast News, along with Gary and Giles, having been accused of fraud.

Now, it's worth saying at no point had one single person from the US investigative authorities, civil or criminal, ever contacted us. To this day, I have never had an interview with anyone from a US enforcement agency.

On 1 January 2004, my good friend Tony Blair brought in a piece of legislation called the Extradition Act 2003. It came into force and it allowed many, many countries – not just the US – to request the extradition of UK citizens or people resident in this country without the support of any evidence behind the claim – somebody just says: "This is a bad man, put him on a plane."

On 13 July 2006, after a long and extremely public battle against this law and against our extradition, we lost and were shipped off to Texas.

On 28 November 2007, we finally decided that the only way home was to sign a piece of paper that said we were criminals. So we entered into a plea bargain, which is what 98% of people indicted in the federal system in the US will do – we were duly sentenced to 37 months in prison and came back after serving six months in the US to serve the remainder of our sentence here.

That was the key thing in the plea agreement, them saying: "We'll get you home if you sign this piece of paper."

In terms of international co-operation, we were faced with the fact that apparently all these agencies had conspired to call us criminals and therefore, we thought: "Hang on, this is a little bit unfair. Maybe we should go back and talk to someone about what the hell is happening."

We're three British guys who lived and worked in London, who were accused by a foreign government of defrauding our own bank here in London – a bank which to this day has never accused me of anything and whose card I still carry in my wallet.

We went, first of all, to the FSA and said: "Hang on a minute. Didn't we come in, sit down with you and give you everything we knew about this transaction – all the documents – have a three-hour taped and transcribed interview, during the course of which you said 'It is fantastic that you've come in. Thank you so much.'

"Then we gave our permission to send all this stuff to America? Don't you think you have some responsibility? We're supposed to have robbed NatWest here in London. Last time we looked, you regulated that. Last time we looked, you have criminal jurisdiction over that."

They said: "Well, I'm sorry, but it's got nothing to do with us if the US authorities want to charge you with this. And so, too bad, really."

So we thought 'Fair enough, we'll go to the SFO'. We said to the director: "Look, we're supposed to have committed one of the biggest bank frauds in UK history. Don't you think, because you have jurisdiction over this, it would be an idea if you got involved in this? Because supposedly, according to the Americans, you have been involved."

Their response: "Well, I'm terribly sorry, but it's absolutely nothing to do with us if the Americans want to bring charges against you."

At this point, we got a little bit p****d off, so we sued them. We took the SFO to court and said: "You must have an obligation, at least, to investigate this case. It's absolutely squarely within your jurisdiction. The absolute implication of you not investigating it is that we're going to get carted off to Texas because you won't investigate.

"And if we get to Texas, we're going to have no ability to defend ourselves. Because there are no proceedings here in the UK, civil or criminal, we have no access by way of subpoena or anything else to any of the documents or any of the witnesses that we would need to defend ourselves."

They said: "No, sorry. We have no obligation to do that," and the High Court agreed with them that they didn't.

So there we were in a legal la-la-land and the outcome of that obviously was that we went from being the crusading 'trying-to-change-the-law-and-point-out-how-bad-this-extradition-law-was' cause celebre to being flung on a plane and put in manacles.

Moving on from the specifics of our case to the more general concern: the US dimension, which I think a lot of people still to this day aren't quite up to speed with. The fact of the matter is the US operates an enormously aggressive extra-territorial jurisdiction. Whether it is civil or criminal enforcement, as far as the US is concerned, the individual prosecutors or individual enforcers are the policemen of the world.

It can, and regularly does, criminalise the acts of people who have never set foot in the US. The constant, ever-pushing-out of the boundaries as to what constitutes a violation of US law has been ongoing and appears in some areas to be gathering pace.

In the vast majority of cases, the moment you are charged, it will end in a plea agreement. The system is characterised entirely by threat and bargain, whether at individual level or corporate.

Big stick; enormously aggressively wielded; very, very effective in terms of outcomes. Individuals over there trade information – they never give it. When the balloon goes up in America, the very first thing that happens is that the US citizen or the company reaches for their attorney.

The very first thing he will say is: "Say nothing. Say nothing to anybody because anything you say can and will be used against you. So say nothing."

Say nothing. Trade information, don't offer it. Companies, individuals may well get caught in the crossfire and frequently do. There's so much collateral damage in the US federal criminal system, it's just horrible. Truly horrible.

The two most dangerous statutes out there – although there is a growing number of them – are the wire fraud statutes, which are what were used against us. They enable the Department of Justice effectively to criminalise pretty much anything.

If there is a single electronic transmission, the wire fraud statutes are the technical means by which the US can claim jurisdiction over those actions.

If it affects a financial institution, even tangentially, the possible penalty for each count of wire fraud – every single transmission is a separate account – is 30 years.

From 1 January 2004, the US Government can request the extradition of anybody without producing any evidence to support its request.

It is an entirely non-reciprocal arrangement, whatever the UK Government may want you to believe. It's very, very simple: if we want to extradite somebody from America, there is a probable cause hearing as part of the extradition proceedings in a US court where evidence can be challenged, where a decision is made by a US magistrate judge as to whether probable cause has been established. It is a purely 'tick the box' exercise.

Some of you may well have seen Gary McKinnon all over the newspapers. What was less well covered in the media was that the UK Government also announced a change to the law.

It announced that henceforth, there will be the ability for a UK judge to look at all the facts and circumstances and to say 'No, actually this case ought to be heard here'.

From that perspective, this forum [test] is a massive victory for the campaign that we've been running all these years, but a) the devil will be in the detail – we haven't seen it yet; and b) it still doesn't in any way, shape or form cover the underlying problem that we've got in our relationship with the US. No changes are anticipated to the US-UK treaty, so this imbalance is going to continue.

I mentioned earlier that corporate indictments kill companies. We've heard about the case of Arthur Andersen. We've talked about plea bargaining. Plea bargaining is game theory – there's no other way to describe it.

Put two men into different rooms, each with a prosecutor, and say to them 'Right, whichever one of you does the deal first gets the best deal. The other guy's singing like a canary, by the way. Do you want to tell me anything?' That's what it is.

In the US system, you have two choices: stand by your principles and end up in jail; or do what 98% of people do, which is to play the 'get out of jail or get out of jail early' card and enter into whatever agreement the US Government wishes you to.

This piece is an edited transcript of a presentation given on 18 October at the Legal Week Governance and Risk Forum. David Bermingham runs his own consultancy firm, DB Strategic Consulting.

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