Barclays’s Jenkins Says Bank Didn’t Try to Hide Qatari Fees

(Bloomberg) -- When Qatari officials demanded higher fees in exchange for saving Barclays Plc during the 2008 financial crisis, investment banking head Bob Diamond led the resistance, former bank executive Roger Jenkins said.

Jenkins is in court with ex-colleagues Tom Kalaris and Richard Boath, charged with disguising payments made to Qatar for a 4 billion-pound ($5 billion) capital injection as advisory service agreements. The men deny the charges.

The investment was crucial to allowing Barclays to avoid a U.K. government bailout amid the credit crisis. Hussain Al-Abdulla, an adviser to Qatar’s prime minister Sheikh Hamad bin Jassim Al Thani, demanded fees of as much as 3.75% of the total capital, which proved controversial at Barclays. Chief Executive Officer John Varley was willing to consider getting close to Al-Abdulla’s demand, telling Jenkins, then the bank’s Middle East investment banking head, to offer 3.5%.

“Mr. Diamond however gave me a very strong steer to go back to the Qataris at 3%,” Jenkins said. “I was a little bit uncomfortable with that, in the sense that you’re going from a 3.75% ask to 3%. That’s quite a big gulf to negotiate.”

To get the deal done, Jenkins was forced to go over Al-Abdulla’s head and leverage the friendship he had built up with Sheikh Hamad over the course of a year.

“It was a rather uncomfortable call to his excellency, but that was necessary to be done,” said Jenkins.

The sides eventually agreed on a fee of 3.25%, still more than double the typical rate of 1.5%.

Handshakes Over Contracts

Jenkins told the jury that, despite their name, the agreements went beyond advisory matters, encompassing concepts that were difficult to put into contracts. As a result, they may have been mislabeled, but didn’t amount to what prosecutors allege is fraud.

“If you had your time again, you would call it something else,” Jenkins told the jury. “It’s very hard to document an agreement that covers the understanding that we had between institutions.”

“You’re dealing with a culture in the Middle East where the handshake is more important than the paper,” he said. “What you seek is a piece of paper that confirms the handshake, because without trust you don’t have anything.”

Jenkins told the jury that at the time the country and Sheikh Hamad were “extremely well connected” to the rest of the region. The bank hoped to build a relationship with him in order to gain business throughout the Middle East.

Asked by his lawyer John Kelsey-Fry if the fees had to be kept secret within the bank, Jenkins told the jury “no, you can see from the correspondence that there was an awful lot of hand-wringing we can go through, but no, not at all.”

Eleventh Hour

On June 11 close to before the deal was due to be agreed, Jenkins was dining with a Barclays client in Johannesburg, South Africa, when he received a call from Al-Abdulla, who said that the proposed agreement between the Qatar and the bank was “quite problematic.”

The difficulty concerned the prospect of a joint venture between the Qatari Investment Authority and Barclays which would force the consolidation of one their balance sheets. Eventually the deal was made palatable to both sides, Jenkins told the jury that had it not been, the bank may have been forced to up the fees.

“I think, in extremis, the bank might have had to just increase commissions to everybody and just pay the 3.75% and deal with the consequences,” he told the jury.

To contact the reporters on this story: Eddie Spence in London at espence11@bloomberg.net;Franz Wild in London at fwild@bloomberg.net

To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net, Christopher Elser, Peter Chapman

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