- Prosecutors in court on Thursday accused Barclays executives of using secret agreements in 2008 to pay Qatari investors fees that were more than double the rate other investors paid.
- The court saw evidence that one executive had speculated that without the agreement, the bank would have been “dead.”
- The prosecution alleges that official prospectuses for capital raising during the financial crisis contained “false representations” signed off by key Barclays executives.
- The defendants, including the bank’s former CEO John Varley and coworkers Roger Jenkins, Thomas Kalaris, and Richard Boath, have all pleaded not guilty to all charges.
Barclays would have been “dead” without Qatari funding that is at the center of a trial over financial-crisis-era allegations involving former Barclays executives in London, Southwark Crown Court heard Thursday.
The court heard details of the negotiations between Barclays executives and Qatari investors. The bank would have been in a difficult position without Qatar’s investment. Richard Boath, then the European head of Barclays’ financial institutions group, said the bank would be “dead without it” in an email in late May 2008, according to prosecutors.
The Serious Fraud Office alleges then CEO John Varley and the three other defendants, Richard Boath, Thomas Kalaris, and Roger Jenkins misled investors in fundraisings during the financial crisis by paying the Qataris £322 million in secret fees that were not properly disclosed.
Qatar had demanded higher fees to invest in the struggling bank. Barclays eventually paid the equivalent of 3.25% via separate agreements – more than double what other investors received, prosecutors alleged. The existence of the extra fees was allegedly not disclosed in prospectus information on the deal.
Email correspondence indicated that executives were aware of likely “pressure on discount and fee” for the potential investment. “Without 1bn, at the very least, from Q we are basically dead” Boath said to his line manager, John Winter, in an email on May 28, 2008. Prosecutors alleged that Q stands for Qatar.
The Qatari tactics were also discussed by some of the executives. A message from John Varley, who was then still Barclays’ CEO, to Marcus Agius, then the bank’s chairman, on May 25, 2008, said the Qataris were “playing hardball.”
This was followed by an email sent by Tom Kalaris, who headed the bank’s wealth division at the time, to Varley on May 28, which added that the Qataris were playing “frankly a little harder ball than either Roger or I expected.”
“They have got us by the balls because the price is so low,” said Robert Morrice, the chief executive of Barclays Asia, on June 3, 2008, in a call to Richard Boath.
The Qatari companies in question, Qatar Investment Authority and Qatar Holdings, invested £6 billion in Barclays during capital-raising activities in 2008.
Barclays paid £322 million in additional fees to the Qataris, according to Ed Brown, a prosecutor for the UK Serious Fraud Office. These fees were disguised in the form of two separate “advisory services agreements,” of £42 million and £280 million, Brown said.
The jury was played recordings of phone calls between Kalaris and Boath, in which Boath is suggested that the fundraising’s subscription agreement declared that no other fees were being paid to investors other than those disclosed. The existence of the ASA was disclosed, but not the amount of fees.
In a conversation, played to the court, regarding a draft subscription agreement to be signed with Qatar, Kalaris said “None of us wants to go to jail here,” to which Boath responded “it ain’t worth it and apparently the food sucks.” Kalaris then added: “No the food sucks and the sex is worse.”
Varley, Jenkins, Kalaris, and Boath have all pleaded not guilty to all charges.
The trial at Southwark Crown Court is the first UK jury trial related to misconduct allegations from the financial crisis. The crisis threatened to collapse the global banking system, and several banks actually went under, including Lehman Brothers, Bear Stearns, and Northern Rock.
Other UK lenders were forced to take funding bailouts from the government to meet their capital ratios – the metric on which a bank’s stability is judged. But former Barclays executives’ activity in raising capital privately from Qatari investors was later investigated on suspicion of fraud.
The trial is ongoing.
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