By Martin Kelly
British bank Barclays is facing the possibility of a fraud investigation resulting from its 2008 bailout which was funded by Middle East financiers.
According to the Independent newspaper, the UK bank’s 2008 bailout is being scrutinised by the Serious Fraud Office and City of London watchdogs.
In 2008, Barclays raised almost £12 billion from sources that included Qatar, Japan and Abu Dhabi. The funds enabled the bank to avoid the need for a bailout from the UK taxpayer. The first £4.5 billion was raised in June 2008, the second £7.1 billion in November that same year.
However, according to the Independent, the SFO is now deciding whether to launch its own formal investigation into fees paid by Barclays when raising the capital – the commission rates are believed to have been around 4.2% instead of the usual 3%, which led to fees totalling £400 million.
The new investigations are thought to centre around the Qatari end of the deal, although there is no suggestion that the investors themselves were involved.
The terms offered to the Middle East investors were believed to be far more generous than had the bank accepted a bailout package from the UK Government, something that angered shareholders at the time.
Prior to the deal, corporate governance advisory body RREV recommended investors not to vote in favour.
In 2008, RREV said in its note: “We consider that the terms of the proposed capital raising by Barclays may not compare favourably with the proposed Government funding chosen by Lloyds.”
At the time of the fundraising, the bank claimed that no payments were made to any current or former staff.
However, the bank recently admitted that four former employees, including former finance chief Chris Lucas, are being investigated by the Financial Services Authority in relation to the fees.
The news comes at a difficult time for British banks, with allegations that Standard Chartered was involved in $250 billion of illegal deals with Iran. New York State Department of Financial Services accused Standard Chartered of laundering money over a 10-year period, a claim the bank denies.
It also follows the scandal over manipulation of LIBOR rates which saw Barclay’s bank fined almost £300 million.
Yesterday, Barclays appointed Sir David Walker as its new chairman. He replaces Marcus Agius who resigned along with Chief Executive Bob Diamond in the wake of the LIBOR scandal.