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Dealmaker’s $2 Billion Claim Returns Focus to Barclays Bailout

Dealmaker’s $2 Billion Claim Returns Focus to Barclays Bailout

(Bloomberg) -- One of the final pieces of unfinished business from the 2008 crash is at last getting its day in court, as Amanda Staveley fights Barclays Plc for the 1.6 billion pounds ($2 billion) she says she’s owed for a deal that helped save the lender.

The lawsuit, originally filed in 2016, was held up because of a related criminal trial that ended earlier this year with not guilty verdicts for all involved. When Staveley’s case begins next week, it will include testimony from the former head of Barclays and one of the bank’s top rainmakers.

In February, three former Barclays executives were acquitted of fraud in connection with two investments made by Qatar in 2008.

The fight by Staveley, the dealmaker who runs PCP Capital Partners LLP, will have to be conducted under new conditions because of the Covid-19 pandemic.

Dealmaker’s $2 Billion Claim Returns Focus to Barclays Bailout

By the time of the deal in October 2008, Lehman Brothers Holdings Inc. had collapsed, and the U.K. government had bailed out Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. Barclays, in need of its own capital infusion, didn’t want to be next bank to be nationalized.

“Barclays had ambitions to be a globally competitive universal bank, but the government wouldn’t support that strategy as a shareholder,” said Philip Augar, the author of The Bank that Lived a Little, a 2018 book about Barclays. “So the bank was determined to raise funds from private sources.”

That’s where Staveley came in.

Abu Dhabi Royals

The well-connected chief executive officer of PCP, known most recently for bidding for Newcastle United Football Club, oversaw a 3.5 billion-pound investment into Barclays from Sheikh Mansour bin Zayed Al Nahyan, a billionaire member of Abu Dhabi’s royal family. The deal would make his sovereign wealth fund Barclays’ biggest stockholder through a combination of heavily discounted warrants and convertible debt.

She pocketed 30 million pounds in fees for her work. But several years later, she learned she could have made multiples of that sum, PCP said in its lawsuit. Her claim includes 720 million pounds in lost profits and about the same in interest.

The deal with Abu Dhabi had been secured alongside a similar deal with Qatari investors, which became the main subject of the criminal charges.

That criminal investigation and the resulting trials stretched over eight years and gave a black eye to the U.K.’s Serious Fraud Office. A London court dismissed criminal charges brought against the bank in 2018 before the case ever reached a jury. All its executives who stood trial were also exonerated from all criminal charges.

Barclays denies PCP’s claims and said the case is “misconceived and without merit” in an emailed statement.

PCP says that despite Barclays executives assuring Staveley that the Qataris would get the same terms as Abu Dhabi, Barclays rebated 280 million pounds in undisclosed fees and a $3 billion loan to the Qataris in exchange for their investment.

PCP 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, according to PCP.

Barclays will argue it didn’t make any false representations, and that PCP was merely acting on behalf of the Sheikh and had no intention of investing itself.

Embarrassing Emails

The case, which is expected to run for nine weeks, will cover much of the same ground as the criminal trial but is set to go even further in revealing the inner workings of one of Britain’s biggest banks at a time when the financial world was reeling from the mortgage crash.

PCP has obtained over 10,000 documents from Barclays in pre-trial proceedings. On Monday, a judge ordered the bank to hand over another 1,500.

Among the former high-flying bankers taking the stand is John Varley. He was CEO at the time, and last year, an appeals court dismissed criminal charges against him. He is due to give evidence later this month over six days.

Former Middle East head Roger Jenkins was cleared of criminal charges earlier this year by a London jury. He’ll be giving evidence over seven days in July. Jenkins was among the highest-paid bankers at Barclays. His reputation to complete critical deals led colleagues to describe him as a “rainmaker” and “anchorman.”

The most gripping part of the trial will likely be the stand-off between him and Staveley and the battle over credit for the deal. Staveley’s evidence includes a number of emails exchanged between Jenkins and other executives regarding her appearance, adding to the embarrassing phone calls and emails that were shown to the jury during the criminal proceedings.

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

PCP’s lawyers say Barclays is liable for the alleged deceit and vicariously liable for “the deceit perpetrated” by Jenkins. PCP’s lawyers declined to comment ahead of the trial.

It’s one of the first major civil cases to take place during the coronavirus pandemic. As the trial approached, the court held numerous hearings to discuss the mechanics of running the case remotely, particularly with so many witnesses.

Next week, some attorneys and witnesses will be in court, sitting separately, while other lawyers will join remotely via video. Journalists and the public can follow along on another video link from home.

“This case will mark the closing of the curtain on this chapter of financial history,” Augar said.

©2020 Bloomberg L.P.