The U.K.'s Serious Fraud Office on Tuesday filed criminal charges against Barclays PLC and four former top executives linked to their handling of Middle Eastern investments that rescued the bank at the height of the financial crisis.
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The SFO charged the individuals and the bank with conspiracy to commit fraud. Two individuals, including its former Chief Executive John Varley, were also charged with the provision of unlawful financial assistance.
The allegations center on how Barclays structured two capital injections from Qatari investors as the bank raised GBP11.8 billion ($15 billion) to prop it up during the 2008 financial market meltdown. Barclays said it paid GBP322 million in "advisory services" to Qatari investors, which wasn't initially disclosed after the capital was raised.
The SFO's charges also relate to a $3 billion loan facility Barclays made to the State of Qatar acting through the ministry of economy and finance in November 2008, just after its second capital raise.
Barclays said in a statement it is "considering its position in relation to these developments." If the bank is found guilty it would be subject to a fine determined by a judge. It wouldn't automatically lose its banking license.
Unlike its peers Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC, the Middle Eastern equity injections meant Barclays was able to avoid a bailout by British taxpayers.
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The SFO's case involves a cadre of Barclays top executives who steered the bank at the time. Mr. Varley, who was the bank's chief executive until 2011 and Roger Jenkins, a former top investment bank executive who played a key role in orchestrating the capital raises, were charged with conspiracy to commit fraud and unlawful financial assistance. Thomas Kalaris, who used to run the bank's wealth division, and Richard Boath, who headed the bank's European financial institutions group, were charged with conspiracy to commit fraud.
Under U.K. law, when the men appear at the magistrate's court, they will have the option to enter a plea. Any bail conditions will be set and prosecutors will give a brief synopsis of their case. Magistrates then decide which court will hear it. They will appear before a court in London on July 3.
The Barclays case is a major test for the SFO, which has in recent years failed to successfully prosecute a number of high profile bribery and corruption cases. U.K. Prime Minister Theresa May recently pledged to fold the SFO into another crime fighting agency. The Barclays case will be particularly scrutinized as so far no top bank executives in the U.K. have been charged with crimes linked to their actions during the financial crisis.
Barclays is already facing other legal problems linked to the Qatar capital raisings. In a separate probe, the U.K.'s Financial Conduct Authority imposed a GBP50 million fine over the disclosure failures. The FCA said earlier this year that it was reviewing the case after being handed new evidence. Barclays is contesting the fine.
The U.S. Justice Department and the Securities and Exchange Commission are also investigating the payments made to Middle Eastern officials. Separately PCP Capital Partners, a private-equity group, is suing Barclays for $1 billion alleging it made "sham payments" to the Middle Eastern investors. PCP, which helped organize Abu Dhabi's investment in Barclays in 2008, also alleges that Barclays lent Qatar investors $3 billion to invest back into the bank. Barclays has previously denied this.
The court case is another distraction for Barclays's current chief executive, Jes Staley, as he attempts to clean up the bank. Mr. Staley is himself currently under investigation by U.K. regulators for trying to identify a whistleblower at the bank.
Write to Max Colchester at firstname.lastname@example.org and Margot Patrick at email@example.com
(END) Dow Jones Newswires
June 20, 2017 04:16 ET (08:16 GMT)