Barclays Bankers Pondered Sex, Food in Jail Amid 2008 Qatar Deal

(Bloomberg) -- Ex-Barclays Plc executives on trial for alleged fraud jokingly worried about the sex and food they would face if they ended up in jail over a plan to secure a cash injection from Qatar and avoid a U.K. government bailout at the height of the 2008 financial crisis.

The comments were read to a London jury on Thursday, during the trial of Tom Kalaris, Richard Boath and Roger Jenkins, who are accused of illegally hiding commissions the bank paid Qatar from other investors.

When the executives mulled how to package the fees, they settled on making them through a side deal, which they ran past Chief Executive Officer John Varley as well as Barclays’ lawyers, prosecutor Ed Brown said. During one of the conversations, Kalaris and Boath mused what might happen if they got it wrong and ended up in jail.

“None of us wants to go to jail here,” Kalaris told Boath on a June 2008 phone call read to the jury.

“It ain’t worth it and apparently the food sucks,” Boath replied.

“The food sucks and the sex is worse,” Kalaris said.

The charges, which all three men deny, relate to 322 million pounds ($395 million) in fees Barclays paid Qatar in commissions for two investments totaling 4 billion pounds. The trial is the most high-profile U.K. case against senior bankers for wrongdoing relating to the financial crisis. Varley was acquitted of similar charges in June.

Kalaris, the head of the bank’s wealth unit, was the “quarterback” and “architect” of the team raising funds to allow the lender to get through the turbulence while Boath was tasked with scoping out the details of the transactions, Brown said. Jenkins, head of Middle Eastern banking, was the “gatekeeper” for investment discussions with Qatar and managed the relationship with the country, he said.

Varley, former head of investment banking Bob Diamond, in-house lawyer Mark Harding and head of compliance Steve Morse signed off on the side agreement, which stipulated that the Qataris would provide services in exchange for extra fees, Brown cited Kalaris as saying. The other men haven’t been accused of any wrongdoing.

“I don’t want to go to jail,” Kalaris told Boath, head of the financial institutions group in Europe, Middle East and Africa, relating a conversation he’d had with Harding about how to structure the payments. “So Mark, you’ve got to make sure you’re comfortable. He will have to vet this right beforehand.”

Mounting Pressure

Leading up to the deal, discussions between the defendants, Diamond and Varley revealed Qatar was “playing hardball,” fueling the team’s desperation to get the funding, Brown, a prosecutor for the Serious Fraud Office, told the jury.

“The necessity to secure investment from the Qataris was evident from a communication between Boath and his line manager, John Winter,” he said. He showed the jury an email where Boath said “Without 1 bn, at the very least, from Q we are basically dead,” with the Q standing for Qatar.

Deals with three other strategic investors that Barclays identified, including Temasek, a Singaporean sovereign wealth fund, Sumitomo, a Japanese conglomerate, and the China Development Bank, relied on a deal with the Qataris, Brown said. As a lead investor, Qatar demanded an investment commission of 3.75%, more than double the standard 1.5%, Brown said.

Varley signed off on a 3.5% commission for Qatar shortly after Boath told Barclays Asia head Robert Morrice that Qatar’s “got us by the balls because the price is so low,” Brown said. Boath had been referring to Barclays’s depressed share price. “We need to be less cute,” Boath continued. “Hurry up and pay the price. Just f--king make it happen.”

Once the initial 1 billion-pound commitment was obtained from Qatar, Diamond expressed his delight in an email to Varley. “This is HUGE, so pumped!!!!” he said.

Varley later told Chairman Marcus Agius that an investment had been secured, according to an email shown to the jury.

“Took longer than I had hoped, but these people are the new cocks of the roost,” Varley said once a deal had been secured at 2 billion pounds.

The desire to conceal the payments was driven not only by the fact that they were above market rates, but also because Barclays didn’t want to appear too desperate, Brown said. In one conversation relayed to the jury, Kalaris told Boath that the only way to do this was by having a “side deal,” which was entirely separate from the cash call, Brown added.

“This necessity is what drove the conspiracy,” Brown said. “How to pay the Qataris what they wanted without disclosing the fact to others.”

To contact the reporters on this story: Ellen Milligan in London at emilligan11@bloomberg.net;Franz Wild in London at fwild@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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