The prime minister of Qatar demanded a personal fee for investing in Barclays during an emergency capital call in 2008, in addition to the extra commission paid by the bank to the Gulf state’s sovereign wealth funds, a court has heard.
Former Barclays senior executives arranging the fundraising as the financial crisis began to bite admitted that it was “dodgy” and “wrong” for a sitting prime minister to take a fee, a jury heard during the third day of a landmark fraud trial at London’s Southwark Crown Court. One of them discussed “the jeopardy that we’re rumbled”.
The UK’s Serious Fraud Office alleges that four defendants, including John Varley, the bank’s chief executive at the time, secretly paid £322m to Qatar in return for its investment in two capital calls, which prevented Barclays from needing a UK government bailout.
The SFO says that “advisory services agreements”, or ASAs, struck with Qatar at the time were just a “smokescreen” to funnel extra money to the Gulf state.
The jury heard on Friday that paying Sheikh Hamad bin Jassim bin Jabr al-Thani, the Qatari prime minister at the time, was even more problematic. The sheikh invested personally in Barclays alongside the sovereign wealth fund, and he wanted the same fee for doing so, the SFO said. But the executives realised that they could not strike a separate ASA with him.
“You can’t have the prime minister of Qatar as an adviser to Barclays Bank . . . It’s like having the President of the United States [as] advisers to JPMorgan; you just can’t have it,” said Roger Jenkins, known as “big dog” by his colleagues, and the “gatekeeper” of Barclays’ relationship with Sheikh Hamad. “F**k, I don’t know what to do with this . . . he wants his money.”
Judith Shepherd, an in-house lawyer at Barclays, warned another of the four defendants, Richard Boath, that unless Sheikh Hamad could show what services he could provide to the bank, “you are going to end up in front of the Fraud Squad explaining why”.
Mr Boath, who at the time was Barclays’ investment bank’s European head of financial institutions, replied: “No, I’ve got a house in Brazil. There’s no extradition treaty. I’m off.”
Ultimately, the sheikh agreed to Barclays striking one ASA with Qatar Holding, where he was chairman, for a higher fee of £42m, the court heard. In response, Mr Boath, said: “It’s the exercise of absolute power isn’t it? It’s fantastic.”
Sheikh Hamad’s Challenger vehicle invested more than £4bn alongside the Qatari sovereign wealth fund in the fundraisings.
Sheikh Hamad and the other Qatari investors are not party to the trial.
The SFO alleges that John Varley, Barclays’ chief executive, along with Mr Jenkins, Mr Boath and Tom Kalaris, who headed the bank’s wealth team, lied to the market and other investors about the bank’s fees to Qatar over the course of two emergency capital calls worth more than £11bn. It is the first jury trial in the world of a chief executive of a major bank over events during the financial crisis.
The jury heard how Mr Kalaris and Mr Boath were concerned about the appearance of the ASA.
“There’s obviously the jeopardy that we’re rumbled and people say: well, that was bullshit, you know, this is just a fee in the backdoor,” Mr Boath said.
Mr Kalaris said: “This is one of those things where, you know, if you go down the whole place goes down with you, right?”
In a reference to prison, Mr Boath replied: “That’s correct, we’re all going for the shit — we’ll all be going for the shit food and the bad sex. That’s not what I want.”
The prosecution alleged on Friday that the defendants created a fake “audit trail” through a memo written by Mr Jenkins after a meeting with Sheikh Hamad in June 2008, days before the first capital call.
It stated that the Qataris had reconsidered their position and would be happy with a fee of 1.5 per cent for a £2bn commitment, and then a memorandum of understanding for a broader strategic relationship.
This memo was “untrue, or seriously misleading”, Edward Brown QC for the SFO told the jury. The Qataris had been demanding a commission of 3.25 per cent of their commitment, double that offered to other investors from China, Singapore and Japan.
It transpired that Mr Varley signed the ASA quite by accident, without knowing the amount that was to be paid to the Qataris, after another in-house lawyer could not find Chris Lucas, the chief financial officer, to sign the document.
“I said well we’ll fill in the number when it’s agreed,” the lawyer said in a phone call to Mr Boath. He replied: “I hope that never emerges.”
The defendants deny the charges and the trial, scheduled to run for as long as six months, continues.
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