Former Barclays banker Richard Boath talks to the media as he leaves the Old Bailey Central Criminal Court in London, Britain, February 28, 2020. REUTERS/Tom Nicholson NO RESALES. NO ARCHIVES
Former Barclays banker Richard Boath leaves the Old Bailey after being acquitted following a flagship £10m, seven-year investigation by the fraud agency © Reuters

As three ex-Barclays bankers walked free from London’s Old Bailey on Friday into the pouring rain, attention immediately turned to how the Serious Fraud Office’s high profile prosecution unravelled so spectacularly.

This was the first landmark criminal trial to examine the conduct of senior UK bankers during the financial crisis and a flagship £10m, seven-year investigation by the fraud agency.

The acquittals of Roger Jenkins, Richard Boath and Tom Kalaris mean no British bankers will face prison for their actions during the 2008 financial crisis.

In a stunning setback for the agency, the case also raises wider questions about the SFO’s ability to prosecute corporate crime allegations and whether Britain’s fraud laws need overhauling.

The SFO’s director, Lisa Osofsky, last year dropped two high-profile probes into Rolls-Royce and GlaxoSmithKline, and faces mounting pressure over its falling conviction rate — of just 53 per cent of defendants in 2018-19 — a three-year low.

Lawyers said the agency’s job would now be harder after a potential far-reaching precedent set by the Barclays case.

Companies can only be charged under fraud laws if prosecutors can show that a senior executive was a “directing will and mind” behind an unlawful scheme. It had been thought that a chief executive would qualify — but the Court of Appeal ruled that former Barclays chief executive John Varley did not meet the criteria as he could be overruled by the bank’s board.

One lawyer said the ruling would “cripple the SFO in bringing fraud cases”.

“The effect . . . is to make it virtually impossible to bring cases against a large company with a proper board and management committees,” he said.

The decision to launch the Barclays case was taken by David Green, who was SFO director from 2012 to 2018 and Alun Milford, its then general counsel. Hannah von Dadelszen, a senior lawyer at the agency and Mark Thompson, its chief operating officer, who left the SFO in August, were the officials running the case.

The agency originally charged Barclays with fraud and illegal financial assistance relating to a $3bn loan to Qatar, in a blaze of publicity in July 2017. It also announced criminal charges against four senior bankers — including Mr Varley — whom it accused of secretly paying Qatari investors £322m extra in return for their investment in two emergency cash calls.

But the criminal prosecution suffered blow after blow. In May 2018, a judge, and later the Court of Appeal, scrubbed all charges against Barclays, leaving the SFO with a whittled down case against the four individual defendants who stood trial at Southwark Crown Court in January 2019.

The SFO appeared to get off to a flying start as it opened the case in front of a packed courtroom, showing the jury 860 pieces of evidence, including audio recordings of lurid exchanges between Mr Kalaris, Barclays’ former head of wealth, and Mr Boath, who as the former European head of the financial institutions group within the investment bank, had his phone line routinely taped.

But by the time the prosecution closed its case in April last year, the defence barristers argued that the SFO’s case against them was so weak it should be thrown out. The Court of Appeal acquitted Mr Varley in June 2019, saying there was insufficient evidence against him but ordered a retrial of the three other bankers at the Old Bailey in October 2019.

With Mr Varley out of the case, the SFO emphasised the role of Chris Lucas, Barclays’ ex finance director and an alleged co-conspirator, as a “central” linchpin of the alleged conspiracy.

However Mr Lucas, who is in poor health, was never charged and it was always going to be difficult for the SFO to base a conspiracy case around an absent defendant.

This time the SFO did not call a single live witness — other than one of its own investigators, David Webb — and instead relied on the contemporary documents and tapes.

Other tactical errors abounded. Whilst the SFO interviewed internal lawyers, including Judith Shepherd, Barclays’ deputy general counsel, it decided not to charge the lawyers or call them as witnesses. The defendants told the trial that everything they did was with the imprimatur of external and internal legal advice.

The SFO did not interview anyone from Qatar and did not ask for a court order to obtain legal documents from the London office of US law firm Latham & Watkins, which advised Qatar on the 2008 fundraising.

Thomas Kalaris outside the Old Bailey, London, as he and two other former Barclays senior executives, Roger Jenkins and Richard Boath, have been acquitted of fraud over a £4 billion investment deal with Qatar at the height of the banking crisis. PA Photo. Picture date: Friday February 28, 2020. See PA story COURTS Barclays. Photo credit should read: Kirsty O'Connor/PA Wire
Thomas Kalaris outside the Old Bailey, London: he and Roger Jenkins testified that the advisory agreements were genuine © PA

Both Mr Kalaris and Mr Jenkins testified that the advisory agreements were genuine to secure lucrative business from Qatar.

At the end of the five-month trial, the defence teams gave powerful closing speeches highlighting the flaws in the SFO’s case. John Kelsey Fry QC, barrister for Mr Jenkins told the jury the agency had set so many hares running over the trial that they are “all crashing into one another, and they are all fatally diseased with myxomatosis.”

Bill Boyce QC, barrister for Mr Boath, told the jury the “gaping hole” in the SFO’s case was “the lawyers knew everything. Mr Varley knew everything. [Bob] Diamond [Barclays’ former chief executive] knew everything. The entire deal team, 100 people plus, knew everything. The board knew everything. Everything that was done, was done with the scrutiny and approval of squadrons of advisers.”

The frustrations of the case were not lost on the SFO.

Speaking on the BBC this month, Ms Osofsky complained about “antiquated” laws, saying: “In fraud cases I’ve got to have the controlling mind of a company before I can get a corporate in the dock. That is a standard from the 1800s, when mom and pop ran companies. That’s not at all reflective of today’s world.”

Get alerts on Serious Fraud Office UK when a new story is published

Copyright The Financial Times Limited 2020. All rights reserved.
Reuse this content (opens in new window)

Follow the topics in this article