In 2008, the biggest banks in the Western world were being bailed out by their governments. Barclays, however, raised billions of dollars on its own to fortify its balance sheet and sidestep the inconvenience of having its executives' compensation and bankers' bonus pools subject to regulatory dictates.
Now it turns out that not everything was what it seemed.
Barclays Plc. (NYSE: BCS), the holding company that controls Barclays Bank Plc. (NYSE: BCS-PD), and four former top Barclays executives have been charged with fraud relating to how they raised the money that saved the bank and their paychecks from government oversight.
Whether they were just trying to save taxpayers money or their compensation packages will now be determined in criminal court.
But in the court of public opinion, the verdict's already being tallied.
Get caught up on what they did and how, and then cast your vote here...
Guilty or innocent?
A Law Unto Themselves
Here are the facts of the case.
The United Kingdom's Serious Fraud Office has charged the following with conspiracy to commit fraud by false representation in the bank's June 2008 fundraising campaign...
- Barclays Plc.
- John Varley (Barclays' former CEO)
- Roger Jenkins (Barclays' former chairman of investment banking for the Middle East)
- Thomas Kalaris (the former chief of the bank's wealth division)
- Richard Boath (the former head of the bank's European financial institutions group)
In addition, Barclays, Mr. Varley, and Mr. Jenkins face the same charges over an October fundraising campaign, as well as charges of unlawful financial assistance.
While Varley and Jenkins face three counts of conspiracy to commit fraud by false representation and unlawful assistance, Boath and Kalaris each face one count of fraud.
A London court hearing is scheduled for July 3, 2017.
The case relates to the Bank and four former executives paying 322 million British pounds ($408 million USD) in fees for a 4.5-billion-pound loan facility. That loan facility was part of a 12 billion pound raise from Qatar Holding, part of the Qatar sovereign wealth fund, Challenger Universal, the vehicle of the former Qatari prime minister Sheikh Hamad bin Jassim bin Jabr al-Thani, and other investors.
The bank paid lenders fees as part of a so-called "advisory services agreement" (ASA), which in 2013 drew the attention of Britain's Financial Conduct Authority, who warned Barclays it could face a fine over improper disclosure of the fees paid.
The FCA believed the fees were designed "not to obtain advisory services but to make additional payments, which would not be disclosed, for the Qatari participation in the capital raisings."
Barclay's claimed the fees were paid for advice...
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You Be the Judge
Besides not disclosing payments to get the money from lenders, the SFO's allegation of unlawful financial assistance stems from the fact that Barclays loaned Qatar the money it subsequently invested back into Barclays.
So, while the rest of the Western world's biggest banks were getting bailed out by their governments (read: taxpayers), it appears Barclays separated itself from the herd by raising more than enough money to keep it from the clutches of government regulators who would impose strict conditions on bailed out banks. That would include compensation arrangements and their ability to pay dividends and buy back their shares to influence the price of their publicly traded stock, which of course impacts the value of options grants and options bonuses executives salivate over.
I say "appears" on account of believing that charged individuals are presumed innocent until proven guilty. At least, that's our approach here in the United States.
But public opinion isn't constrained by presumptions.
Not only do I personally tend to presume when I know the facts, I tend to call a spade a spade.
And as far as fraud in this case, all I'll say is that if it walks like a duck and quacks like a duck, it's a duck.
There's no way these criminals should be able to duck these charges.
We'll see what happens.
What's your verdict?
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The post Are These Big Bank Bigwigs Guilty of Fraud? You Decide appeared first on Wall Street Insights & Indictments.
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.