July 14 (Bloomberg) -- Three ex-British bankers pleaded not guilty to fraud charges related to a deal with bankrupt energy trader Enron Corp. after losing a three-year extradition fight.

David Bermingham, Giles Darby and Gary Mulgrew, extradited from the U.K. yesterday, are accused of bilking their former employer Royal Bank of Scotland Group Plc's Greenwich NatWest unit out of millions of dollars from the sale of an Enron off- the-books partnership. A bail hearing has been scheduled for July 21 in Houston federal court, where they entered their pleas.

U.S. Magistrate Judge Stephen Smith released the men into the custody of one of their lawyers, Houston attorney Dan Cogdell, until the hearing. Smith accepted the $100,000 offered by both Bermingham and Darby and the $20,000 offered by Mulgrew to secure their temporary release. The defendants, who must wear electronic monitoring devices and submit to a curfew, asked Smith to let them return to the U.K. after bail is set.

``I don't have all the information before me to make a determination this afternoon,'' Smith said.

Assistant U.S. Attorney Leo Wise asked that the defendants post ``a significant amount of cash'' for bail and allow access to the equity in their homes in England. They should reside in the U.S. during the length of their prosecution, Wise said. Trial was scheduled for Sept. 11.

``We believe the defendants pose a serious risk of flight for several reasons,'' Wise said, including having no ties to the community and their battle against extradition. Lawyers for Mulgrew and Darby said their clients have commitments from 85 people to provide money for bail. Mulgrew has 50 people who pledged $50,000 each for a total of $2,500,000, defense lawyer Reid Figel said.

`NatWest Three'

Bermingham, Darby and Mulgrew, known as the ``NatWest Three,'' were charged with seven counts of wire fraud in 2002 for allegedly skimming $7.35 million by misleading Greenwich NatWest about the value of an Enron partnership known as ``Swap Sub.''

If convicted on all counts, they face up to 35 years in prison. The indictment accuses them of devising the plan with ex- Enron Chief Financial Officer Andrew Fastow and former Enron executive Michael Kopper. Fastow and Kopper, who received $12.3 million from the same deal, have admitted involvement in the Swap Sub partnership and are cooperating with U.S. prosecutors.

The three bankers argued that as British citizens accused of defrauding a British bank, any charges should have been brought in the U.K. They also claimed they won't get a fair trial in Houston, where Enron was based, because of public animosity toward the company and its former senior officers.

`Unlikely'

Mark Spragg, the bankers' lawyer in London, told reporters yesterday that it was looking ``extremely unlikely'' the men would be allowed to return to Britain after posting bail.

The protracted defense battle against extradition shouldn't affect the court's bail decision, a legal expert said.

``The only factors in terms of bail in federal court are, are you a danger, are you a flight risk, and are you likely to reoffend?'' said Brian Wice, a Houston criminal attorney.

Wice said it's unlikely that they would be allowed to leave the country. Lawyers today also raised the issue of whether their clients would be allowed to work in the U.S. during their prosecution.

``My client has always maintained his innocence and we're pleased that he's being released today,'' said Darby lawyer Michael Sommer.

Off-the-Books

In the alleged scheme, one of Fastow's off-the-books partnerships, LJM1, in which Greenwich NatWest had invested, created the Swap Sub subsidiary to hedge Enron's 5.4 million shares of Rhythms NetConnections Inc., an Internet startup whose shares tripled in value after its April 1999 initial offering.

In early 2000, the prosecutors claimed that the three bankers were worried that Greenwich NatWest would be sold after parent company National Westminster was bought by the Royal Bank of Scotland. They and the Enron executives came up with a scheme to keep the money for themselves. They set up a partnership called Southampton to buy Greenwich NatWest's interest in Swap Sub, from which they reaped their profits, the U.S. claimed.

Enron filed bankruptcy in December 2001, wiping out thousands of jobs. Fastow pleaded guilty to two counts of fraud and conspiracy for his role in the fraud that destroyed the company in exchange for a 10-year prison sentence. Kopper pleaded guilty to fraud and money laundering conspiracies. He's scheduled to be sentenced Sept. 22.

Star Witness

Fastow was a star witness for the government against former Enron Chairman Kenneth Lay and former Chief Executive Officer Jeffrey Skilling, who were found guilty of fraud in May. Lay died of a heart attack July 5. Skilling awaits sentencing Oct. 23.

The three U.K. bankers have been extradited over protests by prominent business executives and U.K. opposition politicians, who said the British government's extradition arrangements with the U.S. are one-sided and fail to protect U.K. citizens.

Under Britain's fast-track extradition process, implemented in 2004, the U.S. was added to a group of countries that no longer have to produce ``prima facie,'' or clearly evident, evidence of a crime when seeking the extradition of U.K. suspects.

Critics say the arrangements are lopsided because the U.S. government has yet to ratify the treaty prescribing the new fast- track rules. The U.K. government must still show ``probable cause'' that an offense has been committed when requesting the extradition of a U.S. citizen.

The case is United States v. Bermingham, 02-cr-597, U.S. District Court for the Southern District of Texas (Houston).

To contact the reporter on this story: Thom Weidlich in Houston federal court at tweidlich@bloomberg.net.

Last Updated: July 14, 2006 17:44 EDT