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Is the US a safe place for business? Globalised business has become a minefield for 'innocent' law breaking, as John Heffernan reports.

Byline: John Heffernan

GROW up is the best advice anyone can give to a British businessman pondering the risks of doing business in the US after what has happened to the NatWest Three.

These bankers appear to have had a view of the business world which is now outdated. As "good citizens" they had seen it as their duty to volunteer the facts about their relationship with collapsed US energy giant Enron and sent the documents to the British FSA (Financial Services Authority).

Subsequently, the US Department of Justice asked if they could have the papers. "Sure," was the response from the three. Bingo! They now know this means handcuffs, leg chains and being marched about in a line of assorted Texan villains.

Yes, they are admittedly now out on bail and even have work permits: "They can slap burgers" as one American lawyer sarcastically put it, knowing that no bank will employ them for fear of incurring (by association) the wrath of the US prosecutors.

They had made the mistake of believing that because they were "innocent" nothing bad could happen to them. Surely they must have watched the O J Simpson trial and absorbed the message that in the US if you are rich and guilty you have little to worry about. Whereas if you are poor (which they are by US standards) and innocent you are in big trouble if some element of the US administration takes it into their head that you have been involved, however remotely, in wrong-doing.

Anyone who has worked in one of the law enforcement agencies, not just those of the United States but also those of the European Union and the UK, will admit that they had colleagues whose attitude was: "They are all guilty of something - and if they are judged innocent it was a miscarriage of justice and we'll get them next time."

One Liverpool-based firm is so concerned by the potential pitfalls of doing business in America that it has chosen to abstain from doing so. Sportech, which operates Littlewoods Pools, runs an online poker and casino operation offering gaming services to customers in the UK and overseas.

Sportech chief operating officer Gary Speakman said that much of the concern in the US seems to focus on sports betting and his company sold its online sports betting business, Betdirect, two months ago.

As for the gaming sites, Mr Speakman added: "We don't accept bets from Americans. We have systems and controls which don't allow that to happen. You have to deposit money. An American would have to have a non-US address and credit card and they would have to have dual citizenship

One local company that is highly dependent on US trade is Ellesmere Port based Innospec. While its operation headquarters is in the Cheshire town, it is listed on the NASDAQ stockmarket in the US. It also sells 30 % of its $500m turnover in the US.

Its fuel additives business is based in Denver and it has two other subsidiaries in New Jersey and North Carolina

The company has had to implement big changes to corporate governance rules that have been introduced in the US following the collapse of Enron. Chief executive Paul Jennings said: "The key thing for us is because we are a US-registered company we have had to improve our controls and make sure people are aware of our code of ethics and have them audited and verified and we formally sign these off every quarter.

"It's the cost of doing business. In Europe, the controls are also getting stricter, it's just we have had to deal with them earlier."

Liverpool Chamber of Commerce chief executive Jack Stopforth said his organisation took overseas regulation very seriously.

"Whenever we organise a trade mission to the US or anywhere else we always advise clients about regulatory issues.

"Anybody thinking of doing business in a different country would be well advised to take these issues seriously."

It has recently been revealed that the US Government has been routinely engaged in covertly tapping into the Swift transfer system. As a result it has had access to every single international banking transaction. Nominally this is being done to fight terrorism. But it effectively means there is no longer any such thing as banking privacy.

Likewise, UK money laundering laws require your bank, your accountant and your solicitor not simply to disclose but also to take positive steps to report suspicious transactions.

And they must do so without telling you. So welcome to the real world, one where there is no hiding place for business "outlaws".

That includes those who transgress rules (ours or theirs) on price fixing, cartels or fraud (including being associated with fraud by a third party as appears to be the problem of the NatWest three).

Just in case you think this is a minor problem that cannot possibly be of concern to an upright citizen such as yourself, perhaps you should know that the number of requests for extradition from the UK to the US has soared to 47 in the past 18 months. Moreover, there are already 20 non-US citizens serving jail sentences in America for pricefixing alone.

Most of them are there after voluntarily surrendering to avoid a lifetime of being hounded. But 62-year-old Ian Norris, former chief executive of respected FTSE250 company Morgan Crucible, in spite of being turned down by the House of Lords, is taking his case to the European Court of Human Justice. A Bow Street magistrate had approved his extradition even though the price-fixing of which he is accused was no crime in the UK at the time.

Mr Norris is unusual in having been charged on what is becoming known as a "hearsay" affidavit - based on a statement by Lucy McClain, a lawyer in the Philadelphia anti-cartel office of the Department of Justice, that he is believed to be guilty.

Well, yes. Mr Norris's name is certainly prominent in price-fixing matters because a few years ago he was the one who reported to the European Commission (which was then getting tough on this area) that his company, along with five others in Europe, had been involved in fixing the price of carbon. The others were fined pounds 69m. But his company received no fine.

You might think that this would have meant that his grateful company would now be giving him full backing in his present predicament.

Not a bit of it. In 2002, Morgan Crucible had made a plea arrangement with the Department of Justice. For unknown reasons Mr Norris was left outside its protection. Now for legal reasons the company will not even speak to him.

So that is the first thing any director has to understand. You are on your own. Stand by your man is no longer the rule. Your company (and your other board members) have to look to their own welfare. At best they will be seeing themselves as "innocent bystanders" (and thus vulnerable to collateral damage). At worst they will be finger-pointing at you.

If you are rich and guilty, you have little to worry about

CAPTION(S):

Setting foot in a US airport can electronically alert authorities, leading to airport arrests' The advent of computers and email leaves a permanent 'paper chain' of evidence' The Natwest Three, from left, David Bermingham, Giles Darby and Gary Mulgrew
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Title Annotation:Business
Publication:Daily Post (Liverpool, England)
Geographic Code:1USA
Date:Jul 26, 2006
Words:1227
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