Two senior Barclays bankers dishonestly hid from the United Arab Emirates a series of multi-million-pound secret payments to Qatar in return for a bailout during the 2008 financial crisis, a court heard on Wednesday.
Alongside investors from China, Singapore and Japan, Abu Dhabi emerged as a second major investor during 2008 for the ailing British bank but was kept in the dark about bumper commission fees that had ensured Doha’s participation in a £11 billion fund-raising operation, a jury was told.
Details of the operation were revealed at the trial of three former Barclays executives who are accused of fraud over claims that they lied on official documents about secret commission payments.
The prosecution claims that the payments were made to ensure that Qatar’s sovereign wealth fund handed over about £4 billion that would ensure the future of the bank and their own high-profile jobs.
Roger Jenkins, 64, Tom Kalaris, 63, and Richard Boath, 60, all deny wrongdoing.
Barclays was forced to seek outside investors to shore up its position after the lender’s shares plunged from 500p to around 300p in the first half of 2008 amid turmoil within the international banking system.
Qatar provided nearly half of a £4.4 billion injection in June 2008 but only after the “tough negotiators” demanded and received rates of commission that were double those of other investors, the court heard.
The bankers are accused of creating a “smokescreen” by hiding the full scale of the payments in a bogus agreement to supply non-existent services to expand the bank’s Middle East presence and attract new investors, the prosecution claims.
The bogus agreements meant that other investors were not aware that Doha was getting better terms than them, the court heard. If other investors had known about the higher commission rates, the bank’s weak negotiating position would have been revealed and the entire operation could have failed, the jury has heard.
Despite the initial £4.4 billion injection, the bank was forced to return for larger sums from international investors as the crisis deepened during the summer.
“Knowing the strong position they were in and knowing Barclays’ vulnerability, the Qataris drove a very hard bargain which Barclays was driven to accept ultimately,” said Mr Brown.
Qatar pledged to invest a further £2 billion – at the higher rates of commission - and Abu Dhabi ploughed in £3.25 billion, said prosecutor Edward Brown.
He said that Mr Jenkins, the bank’s former investment chief for the Middle East, and ex-financial director Chris Lucas, were “responsible for dishonestly hiding” the second round of additional commission payments to Qatar.
“The other main investor … was falsely led to believe that they were getting the same deal as Qatar and were investing on a level playing field,” said Mr Brown.
He has told the court that it was established banking practice for all investors to be paid the same rates of commission.
The executives had wrestled with the problem of the unequal payments but believed that the bank was doomed if they were unable to persuade Qatar’s sovereign wealth fund, headed by then prime minister Sheikh Hamad bin Jassim bin Jaber Al Thani, to invest.
The bankers were aware that what they were doing was “wrong and criminal” and had spoken of going to jail, the jury was told.
Mr Jenkins, Mr Kalaris, who headed the wealth division and Mr Boath, who was in charge of the European corporate finance business, are all accused of fraud over the first capital raising operation in which Qatar secured £42 million in extra fees.
Mr Jenkins alone is accused over a second agreement – worth £280 million - struck four months later. Mr Lucas would have been charged over the second agreement but is too ill to stand trial, the court has been told.
