Barclays Accused Of Making $3bn ‎Loan To Fund Qatar Share Deal

Barclays (LSE: BARC.L - news) loaned $3bn (£2.26bn) to Qatar to fund the purchase of the bank's shares as it sought emergency funding during the 2008 financial crisis, according to a ‎lawsuit brought by a prominent backer of the same deal.

Documents filed by PCP Capital Partners at the High Court, and seen by Sky News, allege that Barclays arranged loans to Qatari investors almost exactly matching the sum paid for its shares in October 2008, as executives scrambled to keep the bank independent of the Government.

‎Barclays' non-disclosure of that arrangement meant that its £7.3bn capital-raising was "a fraud on its shareholders perpetrated through a series of unlawful transactions and dishonest conduct towards existing shareholders and prospective investors," PCP's lawsuit alleges.

The explosive claims represent the latest development in a long-running legal battle between Barclays and PCP, the investment vehicle founded by Amanda Staveley, a financier on a string of high-profile City deals.

"Contrary to the manner in which Barclays presented the Qatari participation in the October 2008 capital-raising to the market, in fact the Qatari investors' entire investment was funded by Barclays," PCP's claim alleges.

Ms Staveley is suing Barclays for more than £700m in damages plus interest and costs after accusing the bank of failing to pay the same fees to her and her Abu Dhabi-based investors that it agreed to fork out to Qatar.

Thursday's reply by PCP to Barclays' previous filing in the case is significant because‎ of the allegation it contains of unlawful financial assistance - when companies lend money specifically for the purpose of buying their shares.‎

Therium, a litigation funding provider, has been signed up by PCP to fund its case, City sources said on Thursday.

‎Ms Staveley's firm has accused the British bank of handing Qatar - which is not accused of any wrongdoing - £346m in fees, £280m of which was not revealed at the time to Barclays shareholders.

It has described these fees as "a sham".

The Financial Conduct Authority (FCA) has already sought to impose a £50m ‎fine on Barclays for breaching listing rules in relation to the Qatari fees - a penalty disputed by the bank immediately after it was imposed in 2013.

The FCA fine is expected to remain unresolved until the conclusion of a separate criminal probe by the Serious Fraud Office (SFO), which has been investigating the affair for the last four years.

A number of former Barclays executives, including John Varley‎, its chief executive at the time of the 2008 fundraising, have been interviewed under caution as part of the SFO's inquiry.

One of the questions reported ‎to have been interrogated by the SFO is whether Barclays lent Qatar the money to acquire its shares.

Executives such as Mr Varley and Bob Diamond‎, the then head of Barclays' investment bank, were reluctant to cede control of the bank's pay and dividend policies to the Government, which they believed was inevitable if the state had taken a direct shareholding during the 2008 crisis.

No charges have been filed against individuals by the SFO.

Earlier this year, Barclays waived privilege on evidence about its 2008 capital-raisings that the SFO had been seeking, with executives keen to revive the prospect of a plea deal known as a deferred prosecution agreement (DPA).

Sky News revealed more than a year ago that a DPA had been discussed by the two sides, and it is understood to remain under consideration.

Barclays has previously dismissed PCP's claim as being "misconceived and without merit" and said it would be "vigorously defending it".

It repeated that position on Thursday.

Barclays has filed a formal defence to PCP's lawsuit and denies the allegations contained within it.

It has said that fees paid to Qatar were unrelated to its capital-raising and were for services to be provided by the Gulf state that PCP and its Abu Dhabi investors would be unable to offer.

The latest development in the case comes six months after Jes Staley, who joined Barclays as chief executive late last year, expressed his determination to resolve issues hanging over the bank from the financial crisis and its aftermath.

A number of other penalties, as well as restructuring costs, continue to hurt the bank, although analysts and shareholders believe that Mr Staley is making good progress with his strategy.

Without a settlement, the case between PCP and Barclays is expected to go to trial next year.

PCP declined to comment.