Barclays to face SFO investigation into Qatari deal


  By a Newsnet reporter

The Serious Fraud Office (SFO), which investigates and prosecutes white-collar crime and corruption, has commenced a fraud investigation into allegations that Barclays Bank may have acted illegally over its 2008 bailout, which was funded by Middle East financiers. 

In order to survive that year’s financial crash, Barclays raised almost £12 billion from sources in Qatar, Abu Dhabi and Japan.  The bailout enabled the bank to avoid seeking a UK Government bailout.

According to reports yesterday, the SFO has now decided to launch a formal investigation into the fees paid by Barclays in order to raise the capital.  The usual commission rate on such deals is 3%, however eyebrows in the City were raised after it emerged that Barclays apparently paid 4.2%, leading to fees of some £400 million.  The SFO investigation is believed to centre on the fees concerned with the Qatari transaction, although there is no suggestion that the investors themselves were involved in any wrong-doing.   

In a brief statement released yesterday, Barclays confirmed that the SFO had launched an investigation into payments between the bank and Qatar Holding LLC – part of sovereign wealth fund Qatar Investment Authority – which invested £2 billion in the bank.

The terms offered to the Middle East investors were far more generous than those the bank would have received if it had accepted a bailout package from the UK Government.  However by avoiding a UK Government bailout, Barclays was able to present itself as a successful bank at a time their rivals were facing the possibility of being taken over by the UK Government, ensuring that the bank’s share price remained high.

At the time of the fundraising, the bank claimed that no payments were made to any current or former staff.  However as revealed in Newsnet Scotland earlier this month, the bank was recently forced to admit that four former employees, including former finance chief Chris Lucas, are being investigated by the Financial Services Authority (FSA) in relation to the fees.

Another former high ranking Barclays executive who is under FSA investigation is Roger Jenkins, who is reported to be one of those playing a key role in putting the Qatari deal together.  Mr Jenkins was once said to be the bank’s highest paid member of staff, running Barclays controversial tax advisory business.

It is understood that the FSA has now turned its files on the matter over to the Serious Fraud Office, and it is on this basis that the SFO has launched its investigation.   The SFO has greater powers than the FSA to launch criminal prosecutions.

News of the latest investigation is a fresh blow to the bank’s reputation, which has taken a severe battering after a series of scandals. 

Earlier this year Barclays admitted that its staff members had been involved in rigging the inter-bank lending rate, LIBOR.  The incident led to the resignation of Bob Diamond, the bank’s chief executive.  The bank was also forced to pay £290 million in fines by UK and US regulators.   The SFO announced in July this year that it had launched an investigation into the rate-rigging scandal.

In 2010, Barclays was forced to pay US $298 million (£188 million) in fines to American regulators for helping clients avoid sanctions.  And in a further investigation, Barclays faces a potential £450 million bill for mis-selling complex insurance products to unwary small businesses.

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