Regulatory Lawyers Dissect Barclays Fraud Case

Josh O'Neill Assistant Editor 26 June 2017

Regulatory Lawyers Dissect Barclays Fraud Case

A legal case may shed light on the issues around how banks across the world chose to raise money amidst the 2008 financial crisis.

A regulatory lawyer who worked for the UK's Serious Fraud Office, the independent watchdog that filed a case against Barclays and four former executives last week, has questioned why prosecutors chose to press fraud charges instead of bribery and corruption.

On Tuesday last week, the former head of Barclays Wealth, Tom Kalaris, three of his former colleagues and Barclays were slapped with a fraud lawsuit over the way they and the bank raised billions of pounds from Qatar at the peak of the financial crisis to save it from a taxpayer bailout.

The four and the bank were charged with conspiracy to defraud, false representation and unlawful representation following a five-year investigation conducted by the SFO into the events surrounding the £11.8 billion ($14.89 billion) emergency fundraising carried out by Barclays in 2008.

But a regulatory lawyer with more than 25 years' experience advising on white collar crime, nine of which were spent with the SFO, has questioned the reasoning behind the fraud charges.

“The real takeaway point on this case is why the SFO has framed it as conspiracy to commit fraud,” the lawyer told this publication. The person declined to be named due to the sensitivity of the matter.

The person continued: “Why haven't they gone for the bribery angle? There must be something that the SFO is missing, which has prevented them from alleging bribery.”

Missing evidence
The person explained that in order to obtain evidence from another country that is admittable in a UK court, the SFO would have filed Letter of Requests to the relevant governments to get their assistance on the investigation.

They suggested, however, that close ties between royal families and governments could have obscured this process, and that a lack of evidence from overseas could have forced the SFO's hand to press fraud charges instead of bribery and corruption.

“I suspect difficulties obtaining international evidence might be why the SFO is charging conspiracy to commit fraud rather than anything to do with corruption,” the person said. “Typically, if you want to charge a bribery case, you will be reliant on evidence from other countries. If you need evidence from Qatar and Abu Dhabi, and you're alleging there is jiggery-pokery going on with their royal families, you're not going to get that assistance.”

The person added: “That has been a big problem for the SFO for many years, particularly in corruption and bribery cases and when high-profile public officials are involved, because governments often want to sweep it under the carpet.”

Named alongside Kalaris in the SFO's suit were John Varley, former chief executive; Roger Jenkins, who was executive chairman of investment banking and investment management EMEA; and Richard Boath, former co-head of global finance in Europe and the Middle East.

The SFO's case against them and the bank marks the first time the head of a global bank has faced criminal charges for activities during the crisis era, a time when large lenders across the UK, US and Europe were being bailed out by taxpayers.

Why fraud charges?
The person stressed that in all fraud cases, there must be a “victim” if it is to stand up in court.

But in this case, it is not clear who or what has been harmed as a result of the alleged wrongdoing, the person said.

“If it is a fraud, then who is the victim? There are a lot of unanswered questions,” the person said.

The defendants and Barclays are due to appear at London's Westminster Magistrates' Court on 3 July, where they will be presented with the charges against them and a brief summary of the case.

Then, the case will be transferred to Crown Court and prosecutors will be assigned a date by which they must present all of their evidence to the defence.

This process typically takes around six to eight weeks.

If convicted, the offences carry a maximum prison sentence of ten years and likely a hefty fine for the bank.

Prior to last week, the SFO delayed its decision to charge twice.

“This shows the SFO was determined to get [all of the evidence] in ship-shape before they charged because they know the eyes of the world are on them,” the person said.

The trial
According to the lawyer, the trial will be drawn out due to the complex nature of the case and the length of the SFO's investigation.

One regulatory lawyer, Rachel Adamson from Stephensons law firm, claimed the trial could last “as much as three to six months, perhaps even longer”.

She said: “It's a very serious step for the SFO to take given the potential for repercussions. It's going to be a very, very complex trial and it's going to be reliant, I would anticipate, on evidence showing what went on during the run-up to Barclays obtaining the funding from Qatar. I'm fairly sure the defence will be concentrated on [proving] lack of dishonesty.”

The source echoed this notion.

“As with any fraud case, this is going to hinge on the evidence of knowledge, complicity and dishonesty,” the person said. “In a case as big as this, it is quite unusual [for prosecutors] to have documentary evidence proving knowledge or complicity.

“There is no question that Barclays carried out the fundraising – this is public knowledge. The conviction will depend on whether it was dishonest or done with any particular intent.

“I'm guessing the SFO has some powerful documentary evidence.”

Adamson said that due to the sensitive nature of the case and the parties involved, there could be calls for certain evidence and information to be excluded or not brought into the public, which will “make it a really difficult trial to run from all aspects”.

Sarah Wallace, a regulatory lawyer from Irwin Mitchell, concurred.

“It does not look a straightforward case, particularly when some of the individuals have suggested that they received legal advice at the time,” she said in an emailed statement to this publication.

Wallace was not prepared to speculate on the prospect of conviction or potential sentence lengths, but Adamson anticipated they would be towards the “top end”.

“If convicted, they're looking at hefty sentences,” she said. “There are very strict sentencing guidelines and this would hit the top brackets of every one of them because of the amount of money involved. I would say eight or nine years, at least.”

Wallace commented: “It's a high-stakes case on both sides. On one hand, this is a clear message to businesses that no organisation or individual is immune to the SFO. However, if the case collapses then the SFO risks even more criticism.”

According to the source, one of the SFO's main challenges will be to “inject life” into the case when in court to keep the jury's attention.

“The challenge for the SFO will be to keep it interesting, keep it moving at a decent speed, and to keep it alive,” the person said. “It's advantageous because it's 'high profile, bad bankers' with the public looking to place blame. But the SFO must make sure when descending into the details of evidence, they don't lose the story and the human side of it.”


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