Ex-Barclays Official Says B Stood for Bung in Secret Pact

(Bloomberg) -- A senior ex-Barclays Plc executive said he was worried that a secret payment the lender made to Qatar to secure a bank-saving investment during the 2008 financial crisis would be seen as a bribe.

Richard Boath, who was then head of Barclays’ European financial institutions group, told in-house lawyer Judith Shepherd in July 2008 about his concerns that a journalist would come across a planned payment to Qatari companies, prosecutor Ed Brown told the jury in London. Boath said he was unwilling to use the word that would describe the arrangement, saying only that it began with B, according to a transcript of the phone call between him and Shepherd.

In a later interview with investigators from the Serious Fraud Office, Boath said that "the ‘B”’ word was probably “bung,” Brown told the London jury on Wednesday. Boath told the SFO that he understood a bung to be a "corrupt payment," Brown said.

The comments emerged on the sixth and final day of the prosecution’s opening in the U.K.’s first criminal trial against top executives connected with the 2008 financial crisis. Boath, ex-Barclays Chief Executive Officer John Varley, and two others are accused of secretly paying 322 million pounds ($422 million) to Qatar so that the country would commit to a 4-billion pound investment, which would allow the bank to avoid a government bailout. Part of the payments were destined for Qatar’s Prime Minister Sheikh Hamad bin Khalifa Al Thani, Brown said.

The defendants allegedly conspired to set up sham advisory services agreements, known as ASAs, to hide the fees from other investors who were getting less, according to the SFO. The men deny the charges.

Boath was the only one of the four defendants who agreed to answer questions from the SFO during its investigation, speaking to the prosecutor eight times in 2014 and 2016, Brown said.

Boath said that the ASA was set up and priced in order to pay Qatar the extra fees it was demanding, but that lawyers had told him that the mechanism was legal as long as the Qataris genuinely delivered those services, Brown quoted him as saying. The Barclays top lawyers knew about the arrangement and were "all over it," he cited Boath.

It was then-Middle East head Roger Jenkins’ responsibility to ensure that value was delivered, Brown cited Boath as saying, and he did so in October 2008, when Qatar helped win a further investment from Gulf neighbor Abu Dhabi.

Fellow defendant and former wealth boss Tom Kalaris joked with Boath about going to jail over the arrangement. That, Boath told investigators, was a "typical joke from Kalaris," but reflected that it was illegal to say something that wasn’t true in a prospectus, Brown said.

That wasn’t his responsibility as he wasn’t a director, Brown quoted him as saying. Boath also said comments he made about "feeling sick" about the deal were part of the "general levity" in his conversations with one of the lawyers, Brown said.

Boath told the SFO that he avoided sending some internal communications about the agreement with Qatar by email because it was "sensitive" and he didn’t want to create a record, Brown said.

He also said he thought a separate ASA with Qatar’s Hamad, which was considered at the time because he personally joined in the investment but then abandoned, “didn’t sound proper,” according to Brown.

Kalaris gave the SFO prepared statements and then declined to answer additional questions during three interviews, saying that decision-making authority rested with Varley and other members of the board, Brown said.

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