ON MONDAY, a court in Houston gave one of the lightest sentences likely to be handed down over the collapse of Enron. Perhaps the name helped. Larry Lawyer — a colleague of Andrew Fastow, Enron’s finance director — was put on two years’ probation on one charge of failing to tell his tax inspector about the $79,000 that Fastow and his right-hand man, Michael Kopper, slipped him over his help with one of Fastow’s schemes.
This mercy will be of no comfort to the NatWest Three, the former bankers who could find themselves sent to Texas by the weekend under the terms of the Extradition Act to face trial there for “wire fraud”. Three senior Enron executives have yet to go to trial as the NatWest Three await their fate. Before the bankers are tried, they are liable to spend a year on remand in a maximum security prison with limited access to the outside world. And, so far, all three have maintained their innocence.
Mr Lawyer tearfully repented to the court for “the things that brought me here”. The charge and the sentence reflected his co-operation on the wider Enron case. Like nearly all those accused of commercial crimes in America, including most of those connected to Enron, he copped a plea.
Kopper, the first to co- operate, still cherishes a remote hope of escaping prison. Fastow, the man at the centre of the Enron circus, will get up to ten years because he also copped a plea, helping to convict Kenneth Lay and Jeffrey Skilling, respectively the former chairman and chief executive; they seem likely to be sentenced to a minimum of 20 years in jail in October, a tough sentence for Mr Lay, who is 64. But they were not jailed under maximum security in advance.
Under the Extradition Act, the US authorities need not show a prima facie case for extradition, although the judge said they had done so when he threw out the bankers’ plea to be tried in the UK. The Act, and the one-sided, unratified treaty that privileges the US, were designed to fight terrorism by making it easier to hand over suspects without public evidence.
The US federal legal system routinely abuses it own laws. It is now abusing the treaty and the loyally enacted UK law to extend its legal reach beyond its own shores. The NatWest Three are accused of a corrupt scheme in the UK to cheat their employer of nearly £4 million, but in co-operation with Fastow and Kopper. The law is being used to extradite Ian Norris for allegedly taking part in a cartel when this was not a crime in the UK.
Giving British business an incentive to behave well abroad is fine. Frightening UK business away or facing UK executives with harsher treatment than US defendants is crazy. Even dealings on the the London Stock Exchange will become liable to US legal action if it is taken over by Nasdaq. This may not be the intention on either side of the pond. Once lawyers work out what can be done, however, it will happen.
Pack of woes
MORE than 81,000 new mortgages were approved in May, the most since April 2004. It is more evidence that the housing market is buoyant without, so far, daft price increases. But worry is growing thick and fast, among lenders as well as housebuilders and estate agents, that all this could end in 11 months’ time. That is when it becomes illegal (except for the public sector) to market residential property without a £700-plus Home Information Pack.
The latest warning to ministers comes from GMAC RFC, the US-owned lender, which commissioned a study of wider consequences from Oxford Economic Forecasting. It makes alarming reading. A 10 per cent cut in the volume of housing transactions would cut Treasury revenue by £2.3 billion a year because loss of stamp duty far outweighs the VAT on the packs. A 25 per cent cut would cost the Exchequer £5.6 billion a year overall, a ridiculous price to pay for compelling people to adopt a bright idea.
The figures are high because the economists project an immediate 0.2 per cent cut in national income (0.5 per cent on the more drastic estimate). Half of that would be consumer spending linked with moving, such as carpets and curtains, but consumption eventually would be diverted elsewhere. The main long-term projected loss of output comes from reduced labour mobility, which would put unemployment up by between 40,000 and 93,000.
All this assumes that the market will shrink because costs of selling rise and fewer people put property on the market speculatively in the hope of trading up. This is a fair bet, but no one can be sure how much.
One certainty is that the market will be heavily distorted in 2007 as potential sellers rush to beat the deadline and the hassle. The spring should, therefore, be frantic and possibly good for buyers, but the second half of the year will be dead.
Patent truths
BRITAIN’S trade with India has been dogged for decades longer than necessary by a long-gone imperial past. The two countries, though so different, form the most natural partnership of flexible maturity with exciting growth and future economic power. Symbolically, this is being realised by agreeing a framework to respect and protect intellectual property. The agreement on the trade-related aspect of intellectual property rights has been a key to trade agreements and simmering in the World Trade Organisation’s agenda for many years. But its true importance has not been realised except by those affected.
Respect for intellectual property, rigorously monitored and enforced, provides the key to a new era of relations between developing and developed countries. The developing world as a whole, if not its smaller members, demand that the West stop spoiling world produce markets by subsidising surplus production, and that they are able to exploit their advantage in producing food. That is clear even if the fear of rioting French farmers stops it happening.
The West’s demands are a hotchpotch of lobbyists’ interests and the need to exact some price for concessions. Instead, the West should concentrate on genuine enforcement of patents. copyrights and trade marks worldwide, including in China, wider Asia, the Middle East and West Africa.
Rights to drugs are no different from software or Disney characters. Piracy must give way to market-based licensing on the sensible terms that legal protection will encourage.
- FOR Reckitt Benckiser, planting a million trees to counteract a year’s output of greenhouse gases is a gesture to make staff see the group as responsible and give a green tinge to a company best known for household chemicals, rather than to save on environmental taxes. It should not be. Planting trees will not spray away global warming with a squirt of the company’s Vanish, but it is a positive way to approach the problem. Let’s look forward to Shell and Corus forests in Britain and to welcoming the first ecological forestry group into the FTSE 250 index.
