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Barclays Series (Part 5): Barclays Sued by PCP Capital Partners in a $1 Billion Lawsuit

Posted: December 15th, 2017

In previous updates, explained how the Qatar 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 ongoing litigation brought by PCP Capital Partners against Barclays.

PCP Capital Partners’ litigation

In November 2008, Barclays worked with two parties to raise the £7.3 billion to save itself from government control during the height of the financial crisis. Those parties were: 1) Qatar Holding, the direct investment arm of Qatar’s sovereign wealth fund, the Qatar Investment Authority (QIA); and 2) the Persian Gulf royal Sheikh Mansour bin Zayed al-Nahyan of Abu Dhabi represented by private equity company PCP Capital Partners and PCP’s principal Amanda Staveley. Staveley has been described as “a one-time girlfriend of Prince Andrew and now financial fixer to the sheikhs.” Sheikh Mansour provided £3.5 billion. Qatar Holding (a QIA subsidiary) contributed the remaining £3.8 billion along with its CEO Hamad bin Jassim bin Jaber al-Thani’s (HBJ) British Virgin Islands-based family investment vehicle called “Challenger Universal” (incorporated in June 2008).

At the time of the cash call, PCP Capital Partners reportedly did not know that Barclays already agreed to pay the Qataris £322 million in two advisory services agreements. These two side-deals have become the focus of a $1 billion lawsuit filed by PCP Capital Partners.

In January 2016, PCP Capital Partners LLP and PCP International Finance Limited (PCP) sued Barclays Bank PLC in London’s High Court seeking damages totaling as much as £950 million for fraudulent misrepresentation and deceit, arising from alleged statements made by Barclays to PCP regarding the terms of the November 2008 fundraising. PCP accuses Barclays of deceit and argues that Staveley was promised the same deal offered to Qatar.

Ms. Staveley reportedly gave an interview in 2014 where she alleged that a so-called parity clause in the deal meant that all parties were due the same fee in return for investments. PCP Capital Partners and Staveley have argued that the £322 million in advisory fees were a “sham” designed to repay the Qataris for their earlier June 2008 investment, and to induce the Qataris to invest once more in November (SOURCE).

Barclays' non-disclosure of that arrangement meant that its £7.3 billion capital-raising was “a fraud on its shareholders perpetrated through a series of unlawful transactions and dishonest conduct towards existing shareholders and prospective investors,” PCP's lawsuit alleges. “Contrary to the manner in which Barclays presented the Qatari participation in the October 2008 capital-raising to the market, in fact the Qatari investors' entire investment was funded by Barclays,” PCP's claim alleges.

Barclays denies claims

Barclays denies this, saying that the advisory services agreements were not contingent on the fundraising and associated advisory fees were paid to Qatar Holding for legitimate services. Barclays describes the litigation HERE. Per the Financial Times, Barclays disputes that Ms. Staveley was an investor on the‎ deal, saying she was just an adviser to Sheikh Mansour. Barclays has dismissed PCP's claim as “misconceived and without merit”.

Also under scrutiny is an alleged £2.26 billion loan ($3 billion) to Qatar’s finance ministry, to which Barclays agreed in November 2008 before the fundraising was completed. PCP Capital Partners alleges this had the effect of loaning money to Qatar to then reinvest—which would be an illegal propping up of Barclays’ own shares. The bank says there was a clause prohibiting such reinvestment. PCP has accused Barclays of unlawful financial assistance—when companies lend money specifically for the purpose of buying their shares (see s151 of the Companies Act 1985).‎

PCP unleashes allegations

The case between PCP Capital Partners and Barclays will go to trial in January 2018, but court submissions have already been made.

PCP alleged in documents submitted to the court that Linklaters, a well-known British law firm, resigned from advising Barclays over fears that a controversial loan deal with Qatar would be illegal. Linklaters quit over worries that the deal “would involve unlawful financial assistance by Barclays for the purchase of its own shares”, it has been alleged.

PCP’s new documents allege that Linklaters quit a day after it urged Barclays to include in the loan documentation a caveat that the loan would not be reinvested in Barclays stock. According to the Financial Times, “The documents cite a November 2008 email between a Barclays’ managing director, Stephen Jones, and Roger Jenkins, the swashbuckling rainmaker who put the October cash call together.”

“They have resigned on our loan to [Qatar], ostensibly on conflict grounds. Clearly very concerned about being [sic] to control where cash ends up,” the email cited reads.

PCP’s documents continue: “It should be inferred from this email that i) Linklaters resigned (at least in part) because it was concerned that the Qatar loan would be illegal, specifically that it would involve unlawful financial assistance by Barclays for the purchase of its own shares; and ii) Barclays believed that this was the actual reason why Linklaters had resigned.”

Barclays is fighting the claim, but it has not yet filed its defense to the specific allegation around Linklaters. Barclays has maintained that its loan documentation did include a prohibition on reinvestment.

Both Barclays and Linklaters declined to comment to the Financial Times.

Part 6 of this series will discuss the ongoing whistleblower claim filed by a former Barclays employee now charged with conspiracy to commit fraud.