A top banker on trial for fraud in a landmark case worried that £320m of secret fees Barclays paid to the sovereign wealth fund and prime minister of Qatar at the height of the financial crisis could be viewed as a “bung”.
Richard Boath, one of four former Barclays executives now facing a jury trial at Southwark Crown Court, admitted during interviews over “numerous days” at the UK’s Serious Fraud Office that so-called advisory services agreements were merely a “mechanism to pay the Qataris additional fees” they demanded for their £4bn investment across two emergency capital raisings, the jury heard on Wednesday.
Mr Boath alleged to SFO investigators that all the defendants knew this to be the case — indicating John Varley, the chief executive of the bank at the time; Roger Jenkins, the “gatekeeper” of the Qatari relationship, who went on to make a £25m bonus from closing the negotiations despite a heart attack in August 2008; and Tom Kalaris, who headed the bank’s wealth unit and who “helped formulate the basic concept of using an ‘advisory’ relationship to pay the additional fees,” the court heard.
The two capital calls went on to raise more than £11bn from Qatar, which the bank codenamed “quail”, and other investors from Abu Dhabi, China, Singapore and Japan, saving Barclays from a UK government bailout as financial markets roiled. This is the first jury trial in the world of a big bank’s chief executive over events during the crisis.
The court has already heard that the Qataris were “willing participants” in the side deals, which purported to pay Qatar in exchange for strategic advice in the Middle East. The prime minister of the Gulf state at the time, Sheikh Hamad bin Jassim bin Jabr al-Thani, invested personally in Barclays alongside Qatar Holding, and demanded a parallel fee for doing so, the court has heard.
The SFO alleges that the agreements, or ASAs, were just a “sham” to funnel Qatar the extra fees they demanded as they played “hardball”, but has reminded the jury that the Qataris are not on trial. The SFO’s case is that the bankers did not properly disclose the fees paid to the Qataris, misleading the market and the other investors, who would probably have demanded the same treatment, or even been put off from investing at all if they saw Barclays’ desperation in yielding to the Qatari demands.
Mr Boath, who headed the European financial services group at Barclays’ investment bank in 2008, alleged in his SFO interviews that Barclays’ internal lawyers knew “full well” that the ASAs were a device to funnel the Qataris the extra fees they demanded. He named Judith Shepherd, the top internal lawyer at the investment bank, as drafting a memo emailed by Mr Jenkins that the SFO say was intended to create a fake “audit trail” by stating that the bank would not pay them extra fees.
“My worry is every journalist just gets it and says this is, you know . . .”, Mr Boath said to Ms Shepherd before the first of Barclays’ fundraisings, in June 2008.
“I hate to use the phrase so I’m not going to use it . . . it begins with a ‘B’.”
Mr Boath later told the SFO during his interviews under caution — when suspects are read their rights — that he was probably referring to a “bung”, or a corrupt payment, the court heard on the sixth day of the trial as Ed Brown QC for the SFO ended his opening arguments. The other three defendants declined to answer questions during their interviews under caution beyond their prepared statements, the court heard.
The SFO maintains that Barclays’ internal legal team and external lawyers at Clifford Chance signed off on the ASAs because they were misled by the defendants. The lawyers’ advice was that any side deal had to provide real value.
The defendants deny the charges, which carry a maximum 10-year sentence. The trial, expected to run as long as six months, continues.
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