Barclays Banker Joked About Going to Jail Amid 2008 Fundraising

(Bloomberg) -- Former officials at Barclays Plc openly joked about going to jail as they worked through the details of an 11th-hour deal to save the bank from a government bailout during the 2008 financial crisis.

Richard Boath, who was the European head of the bank’s financial institutions group, found a flaw in the plan to pay Qatar a higher-than-normal commission to secure its 2 billion pound ($2.6 billion) investment. Barclays was going to pay the Qataris more through a side-deal, but a rights issue prospectus they’d published didn’t permit that.

That triggered another banker, Tom Kalaris, to say: “None of us wants to go to jail here."

"It ain’t worth it and apparently the food sucks," Boath responded.

"No, the food sucks and the sex is worse," Kalaris said, prompting high-pitched laughter from Boath.

The recorded phone call was played to jurors on the second day of a London trial against four former Barclays bankers accused of deceiving investors about the size of the payments to the Qataris after the side deal the two men were discussing went through. Boath, Kalaris, former Barclays Chief Executive Officer John Varley and ex-Middle East head Roger Jenkins have all pleaded not guilty to the charges.

Two Rounds

Ed Brown, a prosecutor for the U.K. Serious Fraud Office, walked the jurors through the drama engulfing Barclays during the height of the 2008 financial crisis when other lenders were forced to accept bailouts from the U.K. government. Barclays ended up raising more than 11 billion pounds in two fundraisings and avoiding a government bailout. Qatar contributed 4 billion pounds.

As it looked for ways out of the crisis, the bank launched Project Heron, a fundraising plan that called for attempts to interest the Singaporean sovereign wealth fund Temasek, Japanese conglomerate Sumitomo and the China Development Bank, known as CDB. The lender also started other rescue plans named after birds and collectively labelled them Project Birdcage.

Key to the plan was Jenkins, who one colleague described as the “gatekeeper” of Qatar, and who had direct access to Qatar’s Prime Minister Sheikh Hamad bin Khalifa Al Thani. On May 13, 2008, Jenkins told colleagues that Sheikh Hamad had just confirmed his “appetite” to buy shares worth between 1 billion pounds and 1.5 billion pounds.

‘So Pumped’

Copied on the email was Bob Diamond, who was then in charge of Barclays’ investment bank. He shot an email to Varley, saying: "This is HUGE, so pumped!!!! This, if we can close makes CDB so much more certain!!"

Varley, an Englishman, responded 90 minutes later in a measured tone: "Made my day. Know we have to get it over the line, but it’s a great starting point for the conversation."

The snag was that the Qataris wanted a 3.75 percent commission for its investment, more than the 1.5 percent that would be given to other investors, Brown said. At one point in late May, Varley updated then-Chairman Marcus Agius in an email, referring to Qatar by its code word, quail: "A lot of work with quail over the weekend. They are playing hardball."

The work on how to pay the Qataris the commission was to be done in secret, as Boath told then-Asia head Robert Morrice on a June 3 phone call. "They’ve got us by the balls, because the price is so low."

On June 5, Qatar agreed to the investment. Varley emailed Agius that "Quail is bagged. Very helpful underpin. Took longer than I had hoped, but these people are the new cocks of the roost."

Diamond, Morrice and Agius haven’t been accused of wrongdoing.

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, Paul Armstrong

©2019 Bloomberg L.P.