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Barclays and Former Executives Charged Over Qatar Fund-Raising Barclays and Former Executives Charged Over Qatar Fund-Raising
(about 3 hours later)
LONDON — British officials brought criminal charges on Tuesday against Barclays and four former executives over deals it struck with Qatar to avoid a government bailout during the 2008 global financial crisis, in the latest in a series of regulatory blows against the bank. LONDON — Barclays, its former chief executive and three other former senior managers were criminally charged on Tuesday over agreements the bank struck with Qatar as it sought to avoid a government bailout during the 2008 global financial crisis.
The allegations, from the Serious Fraud Office of Britain, are the first time that a British bank and its former executives have been charged criminally with wrongdoing as a result of actions taken as the financial crisis worsened. The charges take aim at a cloud that has hung over the bank for years — namely, questions as to how Barclays was able to steer through the crisis without government assistance. The accusations by the Serious Fraud Office are the first criminal charges to have been brought in Britain against a bank and its former executives as a result of actions taken as the financial crisis worsened.
Nine years ago, the British bank raised nearly 12 billion pounds — more than $15 billion at today’s exchange rates — from an arm of Qatar’s sovereign wealth fund and other investors in two deals, in June 2008 and in October 2008. The deals allowed it to avoid a bailout as a number of major banks on both sides of the Atlantic floundered and sought government lifelines. They are also a major test for the agency, which has suffered several setbacks recently in its efforts to prosecute manipulation of a benchmark interest rate known as Libor. Theresa May, the British prime minister, has proposed merging the fraud office into a larger crime-fighting body.
The Serious Fraud Office has been scrutinizing whether Barclays properly disclosed an agreement it struck with Qatar at the time that led the lender to pay more than £300 million for “advisory services” as part of the fund-raising. The office has also been examining a $3 billion loan facility that Barclays made available to the Qatar government in November 2008. The criminal charges revolve around actions taken by Barclays as it sought to avoid a bailout during worsening economic conditions in 2008.
The fraud office said that it had charged Barclays, John S. Varley, its former chief executive, and the former bankers Roger A. Jenkins, Thomas L. Kalaris and Richard W. Boath with conspiracy to commit fraud by false representation related to the June 2008 fund-raising. Nine years ago, the British bank raised nearly 12 billion pounds — more than $15 billion at today’s exchange rates — from an arm of Qatar’s sovereign wealth fund and other investors in two deals, in June 2008 and in October 2008. The moves allowed it to avoid a bailout as a number of major banks on both sides of the Atlantic floundered and sought government lifelines.
Barclays and Mr. Varley and Mr. Jenkins were also charged with providing unlawful financial assistance. The Serious Fraud Office has been scrutinizing whether Barclays properly disclosed an agreement with Qatar that led it to pay more than £300 million for “advisory services” as part of the fund-raising. The office has also been examining a $3 billion loan facility that Barclays made available to the Qatar government in November 2008.
The former executives could not immediately be reached for comment on Tuesday. They are expected to appear in Westminster Magistrates’ Court in London next month. The fraud office said that it had charged Barclays, its former chief executive John S. Varley and the former bankers Roger A. Jenkins, Thomas L. Kalaris and Richard W. Boath with conspiracy to commit fraud by false representation related to the June 2008 fund-raising.
Barclays, along with Mr. Varley and Mr. Jenkins, was also charged with providing unlawful financial assistance and an additional conspiracy count related to the October 2008 capital raising.
A lawyer for Mr. Jenkins in London declined to comment on Tuesday.
Mr. Boath said that the fraud office’s decision to bring charges against him was based on a “false understanding” about his role and the facts. He said that he was “not a decision-maker” and that he would defend the charges “vigorously.”
Lawyers for the other executives did not immediately respond to requests for comment.
The former executives are expected to appear in Westminster Magistrates’ Court in London next month.
“Barclays is considering its position in relation to these developments,” the bank said in a news release.“Barclays is considering its position in relation to these developments,” the bank said in a news release.
Mr. Jenkins, 61, is the former executive chairman of investment banking and investment management in the Middle East and North Africa at Barclays Capital. He helped arrange the fund-raising. Mr. Jenkins, 61, was the executive chairman of investment banking and investment management in the Middle East and North Africa at Barclays Capital. He helped arrange the fund-raising.
Mr. Kalaris, 61, is the former chief executive of Barclays Wealth and Investment Management. Mr. Boath, 58, is the former European head of Barclays’ Financial Institutions Group. Mr. Kalaris, 61, was the chief executive of Barclays Wealth and Investment Management. Mr. Boath, 58, was the European head of Barclays’ Financial Institutions Group.
Barclays said that the fraud office had informed the bank that it had not decided whether it would also bring charges against Barclays Bank P.L.C., an operating unit, with respect to the loan. Barclays said it had been told that the fraud office had not decided whether it would also bring charges against Barclays Bank P.L.C., an operating unit, with respect to the loan.
The inquiry into the fund-raising is one of a number of regulatory issues that have bedeviled Barclays in recent years. In 2012, a scandal over the manipulation of an important benchmark interest rate, Libor, or the London interbank offered rate, shook the bank to its core. Barclays paid $450 million in penalties, and its American chief executive, Robert E. Diamond Jr., resigned. Jonathan Pickworth, who heads the white-collar practice at the law firm White & Case in London, questioned why the fraud office had moved forward with a case so long after the initial capital raising.
The bank’s current chief, James E. Staley, also an American, has been seeking to move the bank past its regulatory burdens and to turn its business around since joining in December 2015. He has moved aggressively to sell off businesses the bank does not consider core operations and resolve legacy misconduct issues that have dragged on its results. “Why is it in the public interest to prosecute the bank for its fund-raising efforts almost a decade ago?” Mr. Pickworth said. “Who does it punish and what purpose does it serve? All the former management team moved on many years ago. This will only hurt the current shareholders and today’s hardworking employees.”
Barclays has said it would no longer be in a restructuring mode by later this year, but it is still facing several regulatory issues. The decision to bring criminal charges against Barclays comes as some have questioned whether the Serious Fraud Office should even remain a stand-alone agency.
In December, the United States Justice Department sued Barclays, accusing it of fraudulently misleading the public in the sale of tens of billions of dollars in securities backed by home mortgages. Barclays has said the claims are “disconnected from the facts” and vowed to “vigorously defend” itself. Mrs. May promised last month to combine the fraud office with another agency, a move she also spoke of while in her previous job as home secretary, the cabinet post responsible for policing and domestic security.
In April, the bank disclosed that Mr. Staley himself was being investigated by the British authorities after he sought to learn the identity of a whistle-blower. Mr. Staley has apologized over his handling of the matter. The Serious Fraud Office has also stumbled recently in its efforts to prosecute individuals accused of plotting to manipulate Libor, or the London interbank offered rate, as several former brokers have been acquitted.
The Serious Fraud Office’s investigation in the Qatar arrangements has been continuing for five years, and a decision on charges has been delayed several times in recent months. The inquiry into the fund-raising is one of a number of regulatory issues that have bedeviled Barclays in recent years. In 2012, a scandal over Libor shook the bank to its core. Barclays paid $450 million in penalties, and its American chief executive, Robert E. Diamond Jr., resigned.
The bank’s current chief, James E. Staley, also an American, has been seeking to move Barclays past its regulatory burdens and to turn its business around since joining in December 2015. He has moved aggressively to sell off businesses the bank does not consider core operations and resolve legacy misconduct issues that have been a drag on its results.
Barclays has said it would no longer be in a restructuring mode by later this year, but it still faces several regulatory issues.
In December, the United States Justice Department sued the bank, accusing it of fraudulently misleading the public in the sale of tens of billions of dollars in securities backed by home mortgages. Barclays has said the claims are “disconnected from the facts” and vowed to “vigorously defend” itself.
In April, the lender disclosed that Mr. Staley himself was being investigated by the British authorities after he sought to learn the identity of a whistle-blower. Mr. Staley has apologized over his handling of the matter.
The Serious Fraud Office’s investigation into the Qatar arrangements has been underway for five years, and a decision on charges has been delayed several times.
A number of former executives had been interviewed as part of the investigation, including the former chief executives Mr. Diamond and Mr. Varley, the former finance director Chris Lucas, and Mr. Jenkins.A number of former executives had been interviewed as part of the investigation, including the former chief executives Mr. Diamond and Mr. Varley, the former finance director Chris Lucas, and Mr. Jenkins.
The Financial Conduct Authority, another British regulator, reopened its own investigation in the capital raising this year after new documents emerged in the matter.The Financial Conduct Authority, another British regulator, reopened its own investigation in the capital raising this year after new documents emerged in the matter.
The regulator had indicated in 2013 that it planned to fine Barclays £50 million in the case and that the bank was “reckless” in breaching disclosure rules related to the advisory agreements, the bank previously said. The regulator had indicated in 2013 that it planned to fine Barclays £50 million in the case and that the bank had been “reckless” in breaching disclosure rules related to the advisory agreements, the bank previously said. At the time, the Financial Conduct Authority’s inquiry was stayed pending the fraud office’s decision on its separate investigation.
The United States Justice Department and the Securities and Exchange Commission also are conducting inquiries into the matter.The United States Justice Department and the Securities and Exchange Commission also are conducting inquiries into the matter.
While the Qatar fund-raising showed off the new might and influence of the Persian Gulf’s oil-fueled investment funds, it came at a fraught time for the banking industry.While the Qatar fund-raising showed off the new might and influence of the Persian Gulf’s oil-fueled investment funds, it came at a fraught time for the banking industry.
Barclays initially raised £4.5 billion in June 2008 and was forced to raise another £7.3 billion in October that year, shortly after Lehman Brothers collapsed.Barclays initially raised £4.5 billion in June 2008 and was forced to raise another £7.3 billion in October that year, shortly after Lehman Brothers collapsed.
The capital raising allowed Barclays to avoid taking government support at the time, unlike its British rivals Lloyds Banking Group and the Royal Bank of Scotland.The capital raising allowed Barclays to avoid taking government support at the time, unlike its British rivals Lloyds Banking Group and the Royal Bank of Scotland.
Both Lloyds and the Royal Bank of Scotland sold large stakes to the British government as part of their bailouts. The British government recently sold its final stake in Lloyds and still owns 72 percent of the Scottish bank. Both Lloyds and the Royal Bank of Scotland sold large stakes to the British government as part of their bailouts. The British government recently sold its final stake in Lloyds, but still owns 72 percent of the Scottish bank.
It could take years before the government will be able to exit its ownership of R.B.S., and government officials have said that it may be forced to do so at a loss.
The British financier Amanda Staveley has separately sued Barclays over the capital raising, saying the bank improperly favored the Qataris in the deal and cost her firm nearly $1 billion in potential profit.The British financier Amanda Staveley has separately sued Barclays over the capital raising, saying the bank improperly favored the Qataris in the deal and cost her firm nearly $1 billion in potential profit.