Barclays Plc faces a criminal probe into fees it paid in 2008 to Qatar’s sovereign wealth fund as the bank sought to raise money to avoid a government bailout.
The Serious Fraud Office, which prosecutes bribery and white-collar crime, told the London-based bank it has “commenced an investigation into payments under certain commercial agreements between Barclays and Qatar Holding LLC,” the lender said yesterday in a statement.
The investigation is another legal pitfall for Britain’s second-biggest lender by assets after it paid U.S. and U.K. authorities a record 290 million pounds ($459 million) in June for manipulating the London interbank offered rate, or Libor, and related interest benchmarks. The case led to the resignations of three top Barclays executives, including Chief Executive Officer Robert Diamond.
“It’s an uncomfortable regulatory environment right now,” Sara George, a financial regulation lawyer at Stephenson Harwood LLP in London, said yesterday in a phone interview. “The public appetite for these kind of actions has never been stronger.”
Prosecutors are working with the U.K. Financial Services Authority, Britain’s finance regulator, which is conducting a civil investigation into whether the bank adequately disclosed fees it agreed to pay the Qatar Investment Authority, according to a person familiar with the matter who asked not to be identified because the discussions between the agencies are confidential.
David Jones, an SFO spokesman, and a spokesman for the QIA declined to comment. Shares of the bank fell 1.4 percent to 186.35 pence in London trading yesterday.
Barclays disclosed the FSA probe into the payments last month and said that four current and former senior employees, including Finance Director Chris Lucas, were being investigated by the regulator.
Barclays raised 7 billion pounds of capital from investors including the Abu Dhabi and Qatar sovereign wealth funds after the financial crisis began in 2007. The move allowed the bank to avoid a government bailout, unlike Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.
“The FSA is investigating the sufficiency of disclosure in relation to fees payable under certain commercial agreements and whether these may have related to Barclays capital raisings in June and November 2008,” the lender said in a statement on July 27.
On the same day, Barclays Chairman Marcus Agius said on a call with journalists that Lucas’s name was deliberately disclosed by the bank as the information was potentially market-moving, and that investigations such as this occur “routinely.” He said the board retained “full confidence” in Lucas.
“It’s perfectly normal to pay fees to internal bankers, lawyers and external bankers to look at fairness. This was a difficult time in the market,” said Christopher Wheeler, a London-based analyst at Mediobanca SpA. “The concern is if some third party was paid a fee for an introduction which was not adding genuine value.”
The FSA is reviewing whether disclosure statements made in June 2008 about the capital raising was adequate.
The Qatar payments probe follows a series of global investigations into wrongdoing at some of the U.K.’s largest banks.
Standard Chartered agreed on Aug. 14 to pay $340 million to settle allegations by New York’s banking superintendent that it laundered $250 billion for Iran. HSBC Holdings Plc, which is under investigation by U.S. regulators for laundering funds of sanctioned nations including Iran and Sudan, is in talks to settle the matter, people familiar with the case have said. The bank made a $700 million provision in July for any U.S. fines.
At least seven banks are under civil investigation by the FSA for attempts to manipulate Libor and the SFO opened a criminal probe into the matter in July. Barclays admitted to attempting to rig rates to benefit its own derivatives trades and to appear healthier during the financial crisis.
Regulators, including the FSA, and prosecutors are still investigating former Barclays employees in the Libor case.
At least seven authorities, including the U.S. Department of Justice, European Commission and Canadian Competition Bureau, are investigating whether banks manipulated interest rates after the U.S. Commodity Futures Trading Commission first opened the probe in late 2008.
The U.S. has a separate investigation into whether financial firms used improper payments to sovereign wealth funds to win investments during the financial crisis.
The U.S. Securities and Exchange Commission opened a broad investigation in January 2011 involving several financial firms to determine whether they made improper payments to secure investments from sovereign wealth funds, four people familiar with the matter said at the time. That probe focuses in part on whether banks, hedge funds and private-equity firms paid placement agents to win access to the state-owned money.