Barclays bankers fretted over payments to the then-Prime Minister of Qatar as part of a multibillion pound investment in the bank from the Middle Eastern state, a court heard on Friday.
Four former Barclays bankers stand accused of conspiracy to commit fraud by false representation. The UK’s Serious Fraud Office (SFO) alleges that the executives misled investors by hiding the true amount paid to Qatar in exchange for a multibillion pound investment that saved the bank from a state bailout.
The defendants in the case are: John Varley, who was CEO of Barclays between 2004 and 2011; Roger Jenkins, who formerly ran Barclays Capital’s investment management business in the Middle East and North Africa; Thomas Kalaris, the former CEO of Barclays’ wealth and investment management; and Richard Boath, the former head of European financial institutions group at Barclays Capital.
It is the first time senior banking executives have faced criminal charges for actions related to the financial crisis. If convicted, the accused could face prison sentences of up to 10 years.
Varley and Jenkins each face two counts, and Kalaris and Boath each face one. All four defendants have pleaded not guilty. Qatar is not accused of any wrongdoing.
‘It’s a bit dodgy’
Barclays raised a total of £11.2bn ($14.7bn) in June 2008 and October 2008 to secure the bank’s balance sheet as the financial crisis erupted.
Qatar Holding, part of Qatar’s sovereign wealth fund, and Challenger, an investment vehicle of former Qatari prime minister Sheikh Hamad bin Jassim bin Jabr al-Thani, invested almost £4bn across the two fundraisings. Edward Brown QC, the lead lawyer for the SFO, said on Friday that Barclays’ fundraising was “certain, or almost certain, to fail” without the Qatari money.
The SFO alleges that Barclays paid Qatar a commission fee of 3.25% in exchange for their investment, almost double the rate paid to other investors in the investment rounds. Barclays sought to cover this up, and avoid paying higher fees to other investors, by using fake Advisory Services Agreements (ASAs) with the Qatars to pay them the money, the prosecutor alleges.
Brown played the jury a series of tapes that he said showed “concern expressed as to how to deal with Sheikh Hamad’s investment.”
In one recording, defendants Richard Boath and Roger Jenkins discussed the possibility of signing a second Advisory Services Agreement with Challenger. Boath raised concerns that this may look improper given Sheik Hamad’s position as Prime Minister and Foreign Minister of Qatar at the time. Sheik Hamad is not accused of any wrongdoing, the court heard.
“It’s a bit dodgy,” Boath said.
“It is a bit dodgy. You can’t as a prime minister, take these services,” Jenkins replied.
In a separate call between the two around the same time, Jenkins said, “It’s like have the President of the United States advisors to JP Morgan; you just can’t have it.”
Brown told the jury, “What is clear then isn’t it is that in the minds of Mr Jenkins and Mr Boath it has dawned on them both that paying fees to… the Prime Minister is, in their words, ‘a bit tricky’, ‘a bit dodgy’.”
‘I’m already feeling sick’
The court was played a recording of Boath, one of the defendants, and two of Barclays in-house lawyers, Matthew Dobson and Judith Shepherd, from June 2008. Dobson and Shepherd are not accused of any wrongdoing.
“We need to find a way of getting Sheikh Hamad his extra fee,” Boath said on the call. Shepherd told Boath that if there was any advisory agreement with Sheik Hamad then “it’d have to be in exchange for value.”
Boath said he had an email from the Qatari’s “asking about the extra fees” that he had deleted.
“Richard, you know that these things can be retrieved,” Stephenson said. “Let me tell you, it’s not the — simple as that. You do need to be careful, Richard — they do need to be careful over there.”
On another call played to the jury, Shepherd told Boath that value must be exchanged for the Sheik’s fee in case the advisory agreement was challenged by “other investors, the FSA, the UKLA, the Criminal Authority, the Fraud Unit.”
“I’m already feeling sick. There’s no need to use all those words to make me feel sicker,” Boath said.
The jury heard Boath talking about how the Sheik’s representatives were unhappy with an early draft of a services agreement that included “all the crap about His Royal Highness’s assistants meeting politicians, all this kind of stuff.” The Qataris wanted “a nice short soft letter,” Boath said.
“He is going to have to give the services in exchange otherwise you are going to end up in front of the Fraud Squad explaining why,” Stephenson said.
“No I’ve got a house in Brazil, there’s no extradition treaty, I’m off,” Boath said.
Stephenson said, “There’s a limit beyond what I’m prepared to go.”
The case continues at Southwark Crown Court and is expected to last up to six months.
Read more on the trial of the Barclays four: