Barclays accused of making 346 million pounds in ‘sham’ payments to Qataris

Barclays Bank
Adam Jeffery | CNBC

Barclays paid Qatari investors a total of £346 million ($498.45 million) in secret and dishonestly characterized payments to secure their participation in the bank's 2008 emergency fundraising, a £1 billion lawsuit brought by another key investor on the deal has alleged.

PCP, Amanda Staveley's investment vehicle which invested on behalf of a senior Abu Dhabi royal during Barclays' £7.3 billion cash call, has alleged in court documents that Barclays made the payments after the Qataris saw the value of an earlier investment in the bank plummet as the financial crisis took hold.

PCP's London lawsuit, which seeks £720 million in damages plus interest and costs, lifts the lid on frenetic last-minute arrangements in the run-up to the October 2008 deal, which enabled the bank to stay out of the control of the U.K. government but has now come back to haunt Barclays.

Ms. Staveley, a one-time girlfriend of Prince Andrew and now financial fixer to sheikhs, has endorsed the claim on behalf of PCP, which accuses Barclays of making a £280 million secret payment to Qatar Holding that was never made public. That was in addition to a £66 million special payment that was disclosed.

Also from the Financial Times:
Barclays Qatari deal turns into tale of two battles
Tom King to quit Barclays investment bank
Amanda Staveley sues Barclays for almost £1bn

These payments, described in the lawsuit as a "sham," are on top of the £300 million in fees that Barclays disclosed at the time of announcing the deal.

PCP accuses Barclays of deceit and argues that Ms Staveley was promised the same deal offered to Qatar, relying chiefly on representations made by Roger Jenkins, then the bank's executive chairman of investment banking. He led the capital-raising for Barclays and she alleges that he acted dishonestly.

The bank said: "We believe the claim against Barclays is misconceived and without merit and Barclays will be vigorously defending it."

A lawyer for the Qatari investors declined to comment, as did Ms. Staveley. A lawyer for Mr. Jenkins did not immediately respond to requests for comment.

The lawsuit maintains that had Ms. Stavely known about the extra payments, she would not have ceded half of PCP's £3 billion in warrants — options to buy shares at a certain price — to the Qataris, as requested by Mr. Jenkins.

Qatar Holding and an investment vehicle of Sheikh Hamad bin Jassim bin Jabr al Thani, then the country's prime minister as well as chairman of Qatar Holding, ploughed £3.8 billion into the bank. Sheikh Mansour bin Zayed al Nahyan of Abu Dhabi, meanwhile, invested £3.5 billion through PCP; Ms. Staveley was eventually paid £30 million for her work on the deal.

It was the second time that the bank turned to outside investors in 2008 — the Qataris, along with other investors, had already invested £4.5 billion that year — and was controversial from the start, irking existing shareholders because they did not have a chance to participate.

The deal arrangements have already landed the bank with a £50 million fine from the U.K.'s financial watchdog, now stayed pending a parallel criminal investigation by the Serious Fraud Office.

The investigation has reached a key moment after the bank ceded a longstanding battle with the agency over important evidence.

But the lawsuit airs publicly some of the details that the SFO is believed to have examined in private over the past three years. At the heart of both the lawsuit and the SFO's probe is what exactly Barclays paid to the Qatari investors for their participation in the October deal.

According to the court claim, an email trail between Barclays and Qatar Holding, copied to Mr. Jenkins, shows that Sheikh Hamad was expecting an arrangement fee of £65 million and an additional sum of £192 million "intended to bring the average subscription price down to 130 pence a share" just one day before the October 2008 fundraising was announced.