Barclays Girds for New Trial on Fraud in $2 Billion Lawsuit

(Bloomberg) -- The verdicts may be in but Barclays Plc’s legal troubles stemming from its financial maneuvers during the global financial crash of 2008 are far from over.

A British jury on Friday cleared three former Barclays executives of fraud in connection with deals to raise 11.2 billion pounds ($14.3 billion) in equity capital 12 years ago. Now the spotlight turns to a pair of lawsuits and regulatory probes that have been placed on hold for years while the criminal proceedings wound through the courts.

Amanda Staveley, the chief executive officer of PCP Capital Partners LLP, is seeking 1.6 billion pounds from Barclays for allegedly cheating her out of profits she claims she should have earned by bringing investors into the bank’s fundraising deal.

Barclays may still face a suit filed by one of the exonerated executives, Richard Boath, who said he was fired after the bank learned that he had talked to prosecutors probing the deal. In addition, the Financial Conduct Authority said it was restarting related disciplinary probes that had been stayed.

PCP’s lawsuit may serve up more revelations about Barclays’ executive suite during that tumultuous period. Staveley, a well-connected dealmaker with ties to the Persian Gulf, is prepared to show how top bankers, including Roger Jenkins, one of the defendants in the criminal case, tried to deny her credit for engineering an investment of 3.5 billion pounds from a billionaire member of Abu Dhabi’s royal family.

Even though the criminal trial was already rife with embarrassing banker talk, she is expected to produce more emails and other internal correspondence that will show the hardball tactics and language used to hash out the deal. PCP has already obtained about 13,000 documents from Barclays in pre-trial proceedings.

‘Foxy Blonde’

Jenkins referred to Staveley in an email as “a tart” and other executives called her a “foxy blonde,” PCP says in court documents. No bank executives are defendants in the lawsuit, however.

“The criminal trial dealt with the same circumstances as our case, but our claims are based on a totally different set of facts,” Staveley said in an interview. “Our case will not be affected by the outcome of the trial.”

Barclays said the Staveley claim was “misconceived and without merit.” It said it couldn’t comment on Boath’s employment case.

The FCA said in a brief statement Friday afternoon that it would restart disciplinary probes that began before the criminal case. Barclays said in its annual report this month that the regulator was considering a 50 million-pound penalty tied to “disclosure-related listing rules.”

The criminal case dealt with the bank’s negotiations with Qatar, but Staveley is focusing on how those moves affected her clients in Abu Dhabi. While PCP says it was initially owed 720 million pounds from the fundraising, that number has ballooned with interest added in the decade since the crash.

Boath, Barclays’ former co-head of global finance, had sued the lender for dismissing him after he spoke with prosecutors in connection with the criminal case. But the bank has paid his legal fees during the trial and it’s unclear whether he will move forward with the employment claim.

The PCP case, which is expected to go to trial in June, paints a picture of a bank that was so desperate to bolster its capital ratios and confidence in the marketplace it was willing to sell big stakes at fire sale prices. Over 20 frantic days in October 2008, Staveley hammered out a deal that would make Abu Dhabi’s sovereign wealth fund Barclays’ biggest stockholder through a combination of heavily discounted warrants and convertible debt.

Halloween Sunrise

The negotiation culminated shortly after sunrise that Halloween when John Varley, then the bank’s CEO, chatted on the phone with Sheikh Mansour bin Zayed Al Nahyan for about 60 seconds. Making the transaction even sweeter for PCP, it would obtain a 10% interest in Abu Dhabi’s side of the deal.

The deal was a big win for Staveley, a 46-year-old native of Yorkshire in northern England who dropped out of the University of Cambridge and eventually became a bridge between the royal families of the Middle East and the U.K. investment scene.

Yet her satisfaction in bagging the Barclays transaction didn’t last long. After the fundraising was announced, the bank’s stock tanked as other investors said they were entitled to buy shares at the same terms. With the deal in peril, Jenkins called Staveley on Nov. 12, 2008, and asked her to give up a chunk of her investment group’s shares to placate investors, her lawsuit says. To preserve her relationship with Sheikh Mansour and seal the deal, she agreed to forfeit PCP’s stake.

Staveley eventually pocketed 30 million pounds in fees for her work. But a few years later she learned she could have made multiples of that sum, PCP said in the lawsuit.

Abu Dhabi’s deal had been arranged in tandem with a similar investment by Qatar’s sovereign wealth fund and an affiliated vehicle owned by Sheikh Hamad bin Jassim Al Thani, then the prime minister of the wealthy Gulf nation. Barclays executives assured Staveley that the Qataris would get the same terms as Abu Dhabi.

Instead, PCP argues, Barclays rebated 280 million pounds in undisclosed fees and a $3 billion loan to the Qataris in exchange for their investment. The firm also contends that Barclays paid the Qataris an additional 66 million pounds for arranging Sheikh Mansour’s participation in the deal when it was Staveley who brought in the Abu Dhabi contingent.

That meant Sheikh Mansour and PCP were paying more for their investment than the Qataris, the lawsuit says. The hidden fees were also at the center of the criminal trial.

PCP argues that if the truth had been known Staveley would not have been forced to give up her warrants and lose out on hundreds of millions of pounds.

“Barclays October 2008 capital raising was a fraud on its shareholders perpetrated through a series of unlawful transactions and dishonest conduct,” PCP said in its court filings.

--With assistance from Franz Wild.

To contact the reporter on this story: Edward Robinson in London at edrobinson@bloomberg.net

To contact the editors responsible for this story: Pierre Paulden at ppaulden@bloomberg.net, Edward Robinson, Christopher Elser

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