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Barclays Series (Part 3): UK’s Serious Fraud Office Announces Criminal Charges Against Barclays & Former Employees

Posted: December 13th, 2017

In a previous updates, explained how the Qatari Investment Authority and the former Qatari Prime Minister bailed out Barclays bank in the midst of the 2008 financial crisis. Barclays’ £11.8 billion emergency cash-raising efforts have led to criminal charges and regulatory penalties, along with a whistleblowing claim from one of its most senior bankers and a $1 billion lawsuit filed by a financier with Persian Gulf connections.

Today we will discuss the criminal charges brought by the UK’s Serious Fraud Office against Barclays Plc and four former employees, including the former CEO.

Investigation: Serious Fraud Office Charges Barclays and Execs for Conspiracy to Commit Fraud

The UK Serious Fraud Office investigates and prosecutes white-collar crime and corruption. In August 2012, the SFO launched a criminal investigation into the £322 million paid from Barclays to Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA), in 2008 at the height of the financial meltdown under the auspices of two advisory services agreements. This was the same £322 million that sparked an earlier regulatory investigation by the UK’s Financial Conduct Authority.

The SFO sought to determine whether the bank violated the law when raising billions of pounds from Qatar Holdings LLC (a subsidiary of QIA) in 2008. Finally in June 2017, the SFO charged Barclays Plc and four individuals with conspiracy to commit fraud and the provision of unlawful financial assistance.

SFO News Release Excerpt

The charges of conspiracy to commit fraud centered on the advisory services agreements Barclays made with the Qataris, which were not disclosed to the market. According to s151 of the Companies Act 1985, unlawful financial assistance occurs when companies lend money specifically for the purpose of buying their own shares.‎ The unlawful financial assistance charges centered on the $3 billion loan Barclays gave to the State of Qatar.

The charges mark the only UK criminal case where senior financial executives face charges as a result of actions during the 2008 financial crisis.

According to an SFO press release, “The charges relate to Barclays Plc’s capital raising arrangements with Qatar Holding LLC and Challenger Universal Ltd, which took place in June and October 2008, and a US$3 billion loan facility made available to the State of Qatar acting through the Ministry of Economy and Finance in November 2008.”

Challenger Universal was the investment vehicle of Qatar’s then-prime minister Sheikh Hamad bin Jassim bin Jaber al-Thani (HBJ). HBJ and QIA have not been accused of wrongdoing by the SFO. However, the SFO has yet to decide if it will bring charges against a subsidiary called Barclays Bank PLC in respect to the issuance of the $3 billion loan, which Qatar allegedly may have used to reinvest in the bank.

The SFO has brought the following specific charges:

  • Conspiracy to commit fraud by false representation in relation to the June 2008 capital raising, contrary to s1 and s2 of the Fraud Act 2006 and s1(1) of the Criminal Law Act 1977 – Barclays Plc, John Varley, Roger Jenkins, Thomas Kalaris and Richard Boath.
  • Conspiracy to commit fraud by false representation in relation to the October 2008 capital raising, contrary to s1 and s2 of the Fraud Act 2006 and s1(1) of the Criminal Law Act 1977 – Barclays Plc, John Varley and Roger Jenkins.
  • Unlawful financial assistance contrary to s151 of the Companies Act 1985 – Barclays Plc, John Varley and Roger Jenkins.

The SFO has explicitly ruled out the possibility of a deferred prosecution agreement which had circulated in the press. David Green, the SFO director, is adamant that deferred prosecution agreements are only available to companies that fully co-operate: Barclays fought the SFO in court over accessing 100,000 documents, claiming they were covered by legal privilege, which protects the advice between lawyers and clients.

“The Most Significant Charging Decision for the SFO”

“This is the most significant charging decision for the SFO in recent times if not ever. In the last few years, Barclays faced an unprecedented number of investigations by worldwide regulators but this SFO criminal prosecution is the most serious,” Sarah Wallace of legal firm Irwin Mitchell told the Financial Times.

The charges come after the Conservative party pledged to abolish the SFO and roll it into a wider crime-fighting agency. Theresa May, the British prime minister, has a history of tensions with the agency dating back to her time as home secretary. But the result of the general election in June, which eroded May’s majority, has raised questions over whether those plans will materialize.

Putting aside the 2008 Barclays cash calls, the SFO is still investigating Barclays as part of the long-running Libor interest rate scandal. In June 2012, Barclays agreed to pay $453 million in fines to U.S. and U.K. regulators after admitting that its traders and executives tried to manipulate Libor, an interest rate tied to loans and financial contracts around the world. The SFO has already convicted four former Barclays’ bankers over the Libor scandal.

Part 4 of this series will discuss ongoing investigations into Barclays by the US Department of Justice and the Securities and Exchange Commission for possible violations of the Foreign Corrupt Practices Act.