A former top banker on trial for fraud in a landmark criminal case admitted to investigators that Barclays agreed to pay Qataris outsize fees in exchange for their participation in an emergency fundraising at the height of the financial crisis.
During his five-day interview with the Serious Fraud Office in 2014, Richard Boath, the former European head of the financial institutions group at Barclays’ investment banking unit, said the senior negotiating team acceded to Qatari investors’ demands “in return for participation in the capital raising”, a jury at Southwark Crown Court heard on Friday.
Mr Boath is in the dock alongside John Varley, Barclays’ former chief executive, and two other former top brass at the bank. The SFO accuse the four of lying to the market by not disclosing more than £320m paid to the Qataris through side deals in exchange for their £4bn investment across two fundraisings in 2008, which ultimately saved the bank from a government bailout. It is the first jury trial in the world of a major bank’s chief executive over events during the financial crisis.
Played Mr Boath’s interviews with the SFO, the jury heard that markets rules require all investors to be paid the same. The Qataris ploughed money into Barclays twice in 2008; once in June alongside other investors from China, Singapore and Japan; then in October with Abu Dhabi investors.
The jury heard the defendant recall Mr Varley saying he was ultimately happy to pay Qatar fees of 3.5 per cent of the maximum number of shares for which they were subscribing in the conditional placement; other investors only got 1.5 per cent.
“The 3.5 per cent of fees that John Varley said he was happy with; are they in return for Qatar participation?” Mr Boath was asked by David Webb, an SFO investigator. Mr Boath replied that they were.
Ultimately Barclays officially paid Qatar a subscription fee of 1.5 per cent but entered two advisory services agreements at the same time as the capital calls, which funnelled another £322m to Qatar. The SFO said these deals were a sham.
Tom Kalaris, another defendant, told SFO investigators that he believed the first advisory deal, signed in June 2008, provided “genuine, stand alone commercial value to the bank”, according to the transcript of his interview read on Friday.
Described as the “eyes and ears” of Bob Diamond — who headed Barclays’ investment bank at the time and who went on to succeed Mr Varley — Mr Kalaris said the advisory agreement meshed with a strategy, spearheaded by Mr Diamond, of trying to improve the bank’s relationship in the Gulf after a legal spat with Saudi Arabia that had sullied the bank’s reputation locally.
The court heard that Mr Diamond was “very concerned about the ‘league table’ position of Barclays Capital, and to ensure that it was viewed as peer competitor of JPMorgan and Credit Suisse.”
The court has already heard a phone call between Mr Kalaris and Mr Boath where the latter points out that the fundraising’s subscription agreement declared that no other fees were being paid to investors beyond those disclosed. The existence of the ASA was disclosed, but not the amount of fees.
“None of us wants to go to jail here,” Mr Kalaris then said. “The food sucks and the sex is worse.”
Mr Kalaris told SFO investigators that he said this because he wanted to make sure the transaction was above board.
“I certainly did not mean that the matter should be disguised or hidden so that no one would be caught. I categorically and emphatically meant that the transaction had to be legal,” the court heard. “One cannot go to jail if no crime has been committed.”
The trial continues. The defendants deny the charges, which carry a maximum 10-year sentence.
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