Tuesday10 March 2020 ★ FINANCIAL TIMES 7

John Varley:the chief executive

Mr Varley, 63, with his distinctive

red braces and tailored suits, was

the archetypal City banker as

Barclays chief executive tweenbe

2004 and 2010. He came to the

bankthrough family connections,

marrying into the Pease family who

sold their lender to Barclays in

1902. After rising up throughthe
      ranks, he becamefinance director
      and then chief executive. And
      remainsthe only chief executive of
      a major UK bankto face a juryover
      events related to the financial crisis.
      Roger Jenkins:the ‘gatekeeper’
      At one stage, Mr Jenkins, 64, was
      amongthe best paid bankers in
      Britain— receiving a £25m bonus
      in 2008 as the “gatekeeper” of the
      relationship with Qatar.He had
      worked his way up from a graduate
      trainee to lead the bank’s
      structured wealth division.
      Tom Kalaris: the ‘quarterback’
      Barclays colleagues dubbed the
      American head of its wealth
      division the “quarterback” because
      of his role inhelping to get capital
      raisings over the line. During the
      trial, the father-of-five rolled out
      the big guns as character
      witnesses: the former chairman of
      the old markets regulator, the
      Financial Services Authority, Callum
      McCarthy, and the ex-Barclays
      chairman,David Walker, in place
      when authorities started circling
      the bank. Both vouched for him.
      Richard Boath:the ‘worrier’
      The most junior defendant, Mr
      Boath’s telephone was routinely
      recorded by Barclays because he
      dealt directly with clients and
      provided most of the SFO’s
      evidence. A self-described
      “worrier”, Mr Boath told the SFO —
      during eight days of questioning in
      2014 and 2015 — that the bank
      paid Qatar outsize fees to secure its
      participation in the fundraisings. He
      was cleared by the FCA in its
      parallel regulatory case, and still
      has an employment claim
      outstanding against the bank.
      Sheikh Hamad bin Jassim bin Jabr
      al-Thani:the money man
      Once the powerful prime minister
      of Qatar. Often known simply as
      HBJ,he also chaired theQatar
      Investment Authoritywhich
      invested in Barclays. He first met
      Roger Jenkins on a yacht in
      Sardinia in 2007, and a year later
      invested over £800min Barclays.
      He was one of the Qatari investors
      who received a share of the £322m
      in fees paid by Barclays that were
      at the core of the Old Bailey trial.

The players

Key characters in the

Old Bailey drama

F T B I G R E A D. UK LAW

The acquittal of three former Barclays employees brought an end to an investigation into the bank’s actions during

the financial crisis. But it has renewed calls for reform of laws to prosecute corporations over white-collar crime.

By Caroline Binham and Jane Croft

For the bank, the spectre of a years

long investigation —one of several mis-

conduct issues it has faced— has

weighed on its reputation. It still faces

an outstanding 1bn lawsuit£ ver claimso

of deceit by the firm founded by

Amanda Staveley, the financier who

orchestrated Abu Dhabi’s investment

into the October fundraising.

Barclays, and indeed Mr Varley and

Mr Jenkins, now face delayed regulatory

scrutiny from the Financial Conduct

Authority,over theQatari affair. It was

the FCA’s predecessor body, theFSA,

that first opened a file on the bank after

finding suspect emails during a routine

visit in 2011.

But for the SFO, the case has become

bigger than the sum of its parts. The

acquittal of Mr Varley and the scrubbing

of the corporate charges in particular

strike at its very purpose of being a

“specialist prosecuting authority tack-

ling the top level of serious or complex

fraud” as the agency describes itself.

The UK is not uniquein failing to

secure any convictions of bankers since

2008 despite banks paying eye-water-

ing fines and costs in related litigation.

The UShas imprisoned just one banker

over the crisis: a junior Credit Suisse

trader, for inflating the price of sub-

prime mortgages. He received a 30-

month sentence.

Elizabeth Warren, who until last week

was vying to become the Democratic

presidential candidate, tweeted that

giant banks “will only clean up their act

when their executives know they’ll face

handcuffs when they preside over mas-

sive fraud”.

In the UK Ms Osofsky has said the

agency is “hamstrung” by the directing-

mind principle. She told parliamentari-

ans last year that without reform “I can

go after Main Street, but I can’t go after

Wall Street”— small companies but not

corporates with layers of control.

Yet Brexitmay hinder any legal

reform.

“You’ve got to ask how attractive this

will be to Boris [Johnson] and his post-

Brexit Britain,” says a former senior

prosecutor. “The prime minister is not

going to want to be seen to be adding red

tape to business right now.

“If they want to hold corporates

accountable, hey need to make thist

change, but will probablykick it into the

long grass and give it to the Law Com-

mission to consider,” he says referring to

the body that recommends changes to

the law. “That’ll probably take five to

seven years.. longer than [any] SFO.

investigation.”

The legal fight over a company’s

‘controlling mind’

R

oger Jenkins as once one ofw

Britain’s most powerful

bankers,earning as much as

£75m in 2005. But sitting in

the dock at London’s Old Bai-

ley ressed down in a dark jumper andd

trousers, it was sometimes difficult to

remember that he was once the “gate-

keeper” of Barclays Bank’s multibillion-

pound relationship with Qatar’s then

prime ministerSheikh Hamad bin Jabr

al-Thani, who he had first met on board

a yacht in Sardinia.

He was facingcharges that — along

with two other formerBarclays Bank

employees — he lied to the market over

fees paid to Qatar, s the Gulf statea

invested £4bn to help save the bank at

the height of the financial crisis.

Calm throughout the five-month

trial,Mr Jenkins arely raised his voicer

under cross-examination even as he

described being orderedback to work,

just weeks after a heart attack, in August

2008, to help the bank avoida humiliat-

ing UK taxpayer bailout.

But when asked about his responsibil-

ity for£322m infees paid to the Qataris,

he becameanimated. Mr Jenkins

insisted that the two side deals were

struck as part of afundraising,were

genuine and not a “smokescreen” for

illegal payments, as the Serious Fraud

Office had alleged. Adding thatfar from

being “misleading”, the October 2008

capital-raising prospectus had been

approved byBarclays’ board.

“To imply... that I’m in some way

guilty for this document, I’m sorry I find

[it] very difficult to continue that con-

versation,” he told the SFO’s prosecutor

Edward Brown QC in one charged

exchange. “We have a board for that rea-

son and I am not on that board. Sorry to

be emotional about it.”

His comment lies at the heart of the

failed landmark UK prosecution. One

that began nine years ago when the

financial regulator’s investigation first

started, tooktwo jury trials and ended

with Mr Jenkins, along with co-defend-

antsRichard Boath, a senior banker,

andTom Kalaris, former head of Bar-

clays’ wealth division, beingacquitted at

the end of February.

The lack of prosecutions of senior

bankers — arising out of events during

the financial crisis —unleashed public

anger on both sides of the Atlantic. But

the clean sweep of acquittals — which

mean that no UK bank boss has been

convicted or jailedover actions taken in

the crisis — throws up wider questions

about the UK’s ability to prosecute alle-

gations of white-collar crime at the

highest levels.

Unlike in the US, prosecutors in Eng-

land and Wales must demonstrate that

the “directing mind” of a company was

involved in alleged criminalityto prove

a companyliable.

“It is almost impossible to find a con-

trolling mind and prove that controlling

mind is complicit in any criminality,”

says David Green,director of the SFO

emergency fundraisings in June and

October 2008. The investmentsaved

the lender from a state bailout.

When the SFOfiled chargesin 2017, it

was the first time major bank and itsa

chief executive had faced the prospect

of a jury trial over events during the cri-

sis. Unusually,the SFO decided to

charge Barclays as a corporate defend-

ant, accusing it of fraud and illegal

financial assistance.

ButJohn Varley, chief executivein

2008, was acquitted by the first trial

judge last year and the corporate

charges — built arounda $3bn loan the

bankextended to Qatar’s finance minis-

try just as the second fundraising was

closing — were scrubbed even before

trial.The SFO had accused Barclays of

lending Qatar the moneysimply to rein-

vest in the bank, essentially propping up

its share price.

The court found no case of any crimi-

nal wrongdoing against Barclays, or Mr

Varley, and the jury in the retrial made it

clear they did not believe any allega-

tions of criminality against the three

defendants taking just over five hours to

clear them.

But in the wake of the failure of both

jury trials,lawyerssayprosecutingbig

companies in the UK looks to have

become even harder. rosecutors haveP

struggled to meet the “controlling

mind”test in the past. In 2015, the UK

Crown Prosecution Service announced

it would not chargeNews Group News-

papers over the phone hacking scandal,

which saw several of its journalists con-

victed for voicemail interception.

At the time the CPS said: “The present

state of the law means it is especially dif-

ficult to establish criminal liability

against companies with complex or dif-

fuse management structures.”

There is nodefinition of what consti-

tutes a directing mind, but up until the

Barclays case it was thought, by prose-

cutors, that a group chief executive, sa

Mr Varley was, would make the grade.

The first trial judge, Mr Justice Jay,

obliterated that assumption: in essence,

he ruled that Mr Varley was not the

directing mind of Barclays — and, there-

fore, Barclays could not be prosecuted

on the SFO’s evidence. Mr Varley was

answerable to the board, whichin the

judge’s view meant he was not working

as the company but for the company.

Mr Justice Jay acquitted Mr Varley

halfway through the first jury trial in

2019 on the basis that the SFO had

brought insufficient evidence to show

he had acted dishonestly; he could not

be held accountable for alleged

misrepresentations made to the market

in Barclays’ name.

Essentially the bank ould not be heldc

accountable for the actions of the chief

executive, but neither could the chief

executive be accountable for the actions

of Barclays. In an unsuccessful appeal

against Mr Justice Jay’s decision the SFO

argued that the dual rulings would allow

directors to “insulate themselves from

liability” and make such alleged

offences “impossible to prosecute”.

In a bid to clarify the law,Ms Osofsky

could nowask the attorney-general to

make a special reference to the Court of

Appeal — this involves granting permis-

sion for a special case to be brought to

decide a point of law.She haslong called

on parliament to overhaul “antiquated”

fraud laws andallow prosecutions ifa

company fails to take adequate steps to

prevent fraud by employees.

“Although it’s easy from the sidelines

to ask why haven’t people been held to

account, and why haven’t there been

criminal convictions a lot of the things

that went on are difficult to prove to a

criminal standard,” says Mark Button,

director of the Centre for Counter Fraud

Studies at Portsmouth University. “And

that is why not a lot has happened.”

The identification principle governs

almost all areas of corporate crime

except bribery, where, since 2011, it has

been possibletoprosecute orporationsc

under the UK Bribery Act for failure to

preventgraft in their organisation.

Since 2017 failure to preventcovers tax

evasion charges. Mr Green,and others,

wantparliament to extend that “failure

to prevent” to cover economic crime,

which would make it easier to prosecute

large companies.

The SFO has also beenstriking US-

style deferred prosecution agreements

wherea company agrees to pay a hefty

fine and overhaul compliance in

exchange for a suspension rather than a

prosecution. Since 2014 it has struck

DPAs with seven companies, including

Rolls-Royce, Tesco and, most recently,

Airbus. But in none of those cases have

any individuals been convicted.

But the SFO’s approach to DPAs has

raised questions over whether the proc-

ess is fair because individuals can be

named publicly as the wrongdoers and

directing minds in a DPA yet be acquit-

ted by a jury in a criminal court. In the

Tesco example, the judge threw out the

SFO’s case against three former execu-

tives on trial because it was “so weak”,

even though they had been named as

the supermarket’s directing mind in the

corporate DPA.

“We now have a system where it’s all

about the money,” says Jonathan Pick-

worth, a lawyer at White & Case. “It’s

almost like a new system of taxation,

with little concern from the SFO about

whether it can successfully prosecute

the individuals whom the company and

the SFO conveniently agree are respon-

sible for the alleged offences.”

A changed world

More than a decadeon from the emer-

gency cash calls in question,the world

has changed.Qatar is not quite the

global powerhouse it was in 2008 after

being isolated by its neighbours over

regional divisions. Yet Qatar Investment

Authority, the state-owned holding

company, remains the second-largest

shareholder in Barclays.

when it launched its investigation ntoi

Barclays, who argues that prosecutions

are being hampered by this legal

requirement. “The email chain tends to

dry up at middle management level.

“[These acquittals] will turbo-charge

arguments in favour of reform of the law

on corporate criminal liability,” says Mr

Green, now a partner at law firm Slaugh-

ter and May. “The current law was

developed in the industrial revolution

when companies were beginning to be

formed and consisted of one person or

two or three people so it was very easy to

identify who was a controlling mind.”

His successor at the SFO,Lisa Osof-

sky, was even blunter duringthe trial,

telling the BBC that the law was a

“standard from the 1800s when ‘mom

and pop’ ran companies — that is not at

all reflective of today’s world.”

Desperate measures

The court case recalled thedesperate

measuresBarclays took to stay out of

UK government hands. And with the

SFO evidence hinging on extracts from

MrBoath’s taped phone conversations

in 2008 — including lurid conversations

in which he discussed with Mr Kalaris

fears of going to jail —it was a vivid

reminder of a different era.

The juryheard that after Barclays

agreed the Qatari fundraising, Mr

Jenkins, who was paid £39.5m in 2007,

pushed for an additional £25mfor his

role in helping to raise the capital, say-

ing he had helped “save our arses and

jobs”.

The SFO allegedthe £322m side deal

or advisory services agreement — sealed

with a six-paragraph handwritten letter

— was a dishonest way of funnellingout-

size fees to Qatariinvestors, including

Sheikh Hamad. The case alleged that

the payments were to help securea

£4bn investment into Barclays via

‘[The acquittals] will

turbocharge arguments

in favour of reform of the

law on corporate

criminal liability’

‘[Post-Brexit] the prime

minister not going tois

want to be seen

adding red tape to

business right now’

Lisa Osofsky, of the SFO, wants an

overhaul of ‘antiquated’ fraud laws

From left: Tom

Kalaris, Roger

Jenkins and

Richard Boath,

were found not

guilty of lying to

the market over

£322m in

payments to

investors in Qatar

Getty Images; Reuters

MARCH 10 2020 Section:Features Time: 9/3/2020- 18:36 User:alistair.hayes Page Name:BIG PAGE, Part,Page,Edition:USA, 7, 1