Ex-Barclays Executives Cleared Over Financial Crisis Fraud

(Bloomberg) --

Three former Barclays Plc executives were cleared of fraud charges by a London jury, ending a long-running saga stemming from the bank’s fight to avoid nationalization during the financial crisis a decade ago.

Roger Jenkins, Tom Kalaris and Richard Boath were cleared of charges Friday that they fraudulently hid 322 million pounds ($415 million) paid to Qatar to secure a 4 billion-pound investment in the bank. Appellate courts had already thrown out similar charges against Barclays and former Chief Executive Officer John Varley.

The panel deliberated for little more than a full day after the five-month trial and eight years of investigations and hearings. The men, all in their 60s, shook hands and Boath waved at the jury, saying “thank you” as they left the court.

The outcome follows months of delays, appeals and a previous trial, and largely ends a scandal that has hung over the bank for more than a decade. Barclays still faces a 1.6 billion-pound civil suit, an employment case filed by one of the defendants and scrutiny from the financial regulator in connection with the saga.

The charges related to Barclays’s desperate attempts to avoid nationalization, a fate imposed on two competitors as the financial crisis tore into balance sheets in 2008. Faced with narrowing capital reserves, executives turned to the gas-rich Gulf nation of Qatar for a 4 billion-pound investment -- part of more than 11 billion pounds in cash injections that year. The bank avoided a U.K. government bailout, but the deal has been a headache ever since.

Qatar had demanded the fees as a form of discount for its investment and agreed to be paid via advisory agreements. Prosecutors at the U.K. Serious Fraud Office claimed the agreements were fake and the executives concealed the payments from other investors because Qatar was getting a better deal.

Jenkins, Boath and ex-wealth boss Kalaris all denied the charges.

“I am very grateful that the jury, who sat through five months of evidence and speeches, concluded, what I have known to be true all along, that I did nothing wrong 12 years ago,” Jenkins, the former Middle East investment banking head, said in a statement. “For the last eight years, since these investigations began, I have lived under a cloud over my private and business life.”

The Financial Conduct Authority said the verdicts “removes the basis” for a stay in its criminal proceedings, which predate the SFO case. The regulator had fined Barclays 50 million pounds in connection with the allegations. In 2017, the FCA dropped an investigation into Boath, who ran the bank’s European Financial Institutions group, at the same time as the SFO brought the charges against him and his former colleagues.

“I’m delighted and relieved with this verdict having been cleared by the FCA in July 2017,” Boath said in a statement. “The SFO case was an invention and should never have been brought.”

The SFO rejected the criticism.

“Our prosecution decisions are always based on the evidence that is available, and we are determined to bring perpetrators of serious financial crime to justice,” it said in a statement. “Wherever our evidential and public interest tests are met, we will always endeavor to bring this before a court.”

The other defendants declined to immediately comment on the verdict.

Slowly Unraveling

Initially, Varley and the bank itself were also defendants, with Barclays accused of illegally lending Qatar some of the funds it invested right back into the lender, which traces its roots to 1690. Former Barclays Chief Financial Officer Chris Lucas, a co-conspirator according to the SFO, was too ill to stand trial.

But over the past 21 months the case slowly unraveled. First, Judge Robert Jay dismissed charges against the bank, after its lawyers argued that a corporate entity can only be held responsible if its entire board is part of a conspiracy.

Next, Jay dismissed the case against the four men, saying the SFO had failed to apply the law correctly, and there was insufficient evidence against Varley. The Court of Appeal confirmed Varley’s acquittal, but reinstated the charges against the other men, paving the way for the second trial to start in October.

The jury’s quick decision to dismiss the charges is a stunning setback for SFO. Since becoming director 18 months ago, Lisa Osofsky has tried to draw a line under long-running investigations wherever possible. She has bolstered cooperation with the U.S. and secured Britain’s largest-ever settlement agreement in a bribery case involving Airbus SE.

The Barclays trial was the last chance authorities had to hold senior bankers accountable for events during the financial crisis and carried a maximum prison sentence of 10 years. Barclays covered the defendants’ legal fees and their acquittal means they won’t have to repay them.

Experiencing an eye-watering gas production boom and the billions that came with it, Qatar became the linchpin to the plan. Jenkins turned an encounter on a yacht in the Mediterranean with Qatar’s wealthy then-Prime Minister Sheikh Hamad bin Jassim Al Thani, who also ran the Gulf state’s sovereign-wealth fund, into a valuable relationship.

The Qataris appreciated the leverage they had. In an email, Varley described them as the “new cocks of the roost.” In the end, the executives agreed to pay Qatari companies -- including Sheikh Hamad’s personal investment vehicle -- more than double the investment fees that others would get.

Side Agreement

But they had to find a way of making the extra payments and settled on a deal in which Barclays would pay the Qataris for strategic advice and introductions in the Middle East. The SFO argued that the advisory arrangement was a sham, a mechanism to hide the extra fees.

In the second trial, the prosecution didn’t call a single witness and relied almost entirely on emails and phone calls between the defendants and other Barclays employees. The conversations all included Boath, because his desk was on the Barclays trading floor, where regulations dictate that all phone calls are recorded.

Those calls were often entertaining, with the defendants and others at Barclays debating how to pay Qatar investment fees above the going rate. They joked about going to jail, where Kalaris said the “food is bad and the sex worse.” In a call with a senior Barclays lawyer, Boath jested he could always flee to his house in Brazil if the fraud squad came for him.

Attorneys for the executives said that the plan was genuine and had been signed off by Barclays’s top lawyers, who were conspicuously absent during the trials. The calls, the defendants’ lawyers said, were evidence that the men were conscientiously considering their options.

Jenkins and Kalaris both testified, calmly resisting the prosecution’s cross-examination and laying out a version where Barclays easily secured the kind of business from Qatar that would justify paying the fees. Boath didn’t testify.

Next Steps

The end of the trial gives a green light, however, to civil lawsuits against Barclays that have been on hold for years pending the resolution of the criminal charges.

Boath is suing the bank, claiming he was fired after Barclays received a copy of an interview he gave the SFO. He was the only defendant to speak with prosecutors. The other three gave prepared statements and declined to answer questions.

A bigger claim is the civil lawsuit from PCP Capital Partners, the investment vehicle founded by Amanda Staveley. PCP oversaw a 3.5 billion-pound investment into Barclays in October 2008 on behalf of Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan.

To contact the reporter on this story: Franz Wild in London at fwild@bloomberg.net

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

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