Three senior Barclays executives lied about £322 million (Dh1.45bn) in secret payments to Qatar to secure billions of pounds in investment to save the UK bank during the 2008 global financial crisis, a court heard on Tuesday.
Under pressure from the looming economic crisis, the three "intelligent and highly-placed" bankers lied to the markets to ensure Barclays received about £4 billion in "vital" payments from the Gulf state and preserve their own high-profile positions, a London court was told.
“The Qatari investment had to be preserved at all costs,” prosecutor Edward Brown told the jury. “And this meant telling lies.”
The three executives – Roger Jenkins, 64, Tom Kalaris, 63, and Richard Boath, 60 – deny wrongdoing.
The lies were connected to the terms of two large investments made to the bank by the Qataris worth a total of £3.95 billion – more than a third of the total of £11.2 billion raised by the bank during 2008.
The desperate bank was in a weak position when it turned to Qatar in 2008. In return for its billions, the Gulf state drove a “hard bargain” and demanded commissions worth more than double what Barclays was prepared to pay other investors, the jury was told.
If other investors knew that Barclays was prepared to make above-the-odds payments to Qatar, the bank’s weakness would have been revealed and the entire capital raising operation could have failed, the jury heard.
The men faced the dilemma of either insisting all investors were paid the same and probably lose the Qatar investment – or cover up the higher fees it would give to the Qataris, the court was told.
The executives decided on the second course even though paying one investor more than the other was “quite contrary to well-established banking practice”, said Mr Brown.
“In the capital raisings we are concerned with in this case, all investors should have been paid at the same percentage commission fee for their investment,” said Mr Brown.
“The Qatari money was essential and those within the bank at that time commented that without it the consequences would be dire – that is for the bank and personally.”
The trio allegedly sought to disguise the extra payments within public documents released to other potential investors setting out who was investing and what fees they would receive.
"The defendants all knew that these public documents contained lies about the true position in relation to the Qataris," said Mr Brown. "Telling lies in this way is a criminal offence … They acted dishonestly in order to preserve the future of the bank and to preserve their own positions."
They cooked up two ‘pretend’ agreements to disguise the bumper commission payments as fees for additional services.
The “carefully contrived mechanism” to hide the fees resulted in Barclays raising more than £11 billion and staving off the threat of the UK government having to bail out the business and take control.
The three men are accused of committing fraud over the first agreement struck in early summer of 2008 worth £42 million in commission payments. Mr Jenkins alone is accused over a second agreement – worth £280 million to Qatar – struck four months later.
“The prosecution alleges that these agreements were an invention,” the court was told. “The total amount that found its way into these “agreements” as they were called was £322m.”
The three appeared in court on Tuesday at the start of a trial at London's Old Bailey which is expected to last about five months.
Mr Jenkins, 64, was the bank’s former chairman of investment in the Middle East, while Mr Kalaris, 63, headed the wealth division and Mr Boath, 60, headed the European corporate finance business.
A fourth director, former finance director Christopher Lucas, would have been charged but was too ill to stand trial, the court was told.
