Exclusive: Fraud inquiry threat to Barclays over Arab bailout

Serious Fraud Office collaborating with City watchdog's investigation into controversial deal

Click to follow
The Independent Online

City watchdogs are collaborating with the Serious Fraud Office (SFO) as part of an investigation into Barclays' bailout by the Middle East, The Independent has learnt. This could lead to an investigation being launched by the fraud policing agency.

Barclays announced, when it released its interim results at the end of last month, that its finance director Chris Lucas was one of four "current and former" employees under investigation by the Financial Services Authority (FSA).

The inquiry is focused on the disclosures of commission payments made by Barclays to secure the bail-out funds which were raised in two tranches in 2008.

The FSA is understood to be liaising with a number of other regulators as part of the inquiry, including the SFO. However, the SFO has yet to decide whether it will launch a formal investigation of its own.

The news came as a rival bank, Standard Chartered, launched a fightback after being dubbed a "rogue institution" by the New York State Department of Financial Services. On Monday it alleged the bank broke sanctions against Iran. Shares in Standard Chartered, which has vowed to contest the charges, finished up 87.27p at 1315.5p amid supportive comments by analysts and the Bank of England Governor Sir Mervyn King.

Barclays first raised £4.5bn from investors including Qatar and Sumitomo, a Japanese bank, in June 2008 followed by a further £7.1bn from Qatar, Abu Dhabi and its own shareholders in November. The funds meant that it was able to shore up its balance sheet during the financial crisis. But the cash calls annoyed shareholders who were cut out of what were seen as very favourable terms. And the commissions paid also caused controversy.

Last night John Mann, the Labour member of the Treasury Select Committee who is conducting an investigation into the banking industry, welcomed the news of the SFO's interest but criticised the agency for playing "catch-up". Mr Mann said: "The SFO needs to work flat out to catch up on lost time. This should have happened a long time ago, so I worry that it is too little too late."

Neither the FSA nor the SFO was prepared to comment yesterday. Barclays said it was not in a position to comment. It is not believed to have been informed of the SFO's interest.

No suggestion of impropriety has been levelled at the investors who provided the funds to Barclays. The focus of the FSA's probe is, however, thought to be on the Qatari end of the deals.

It is understood to be looking at documents from the June 2008 fundraising citing "an agreement for provision of advisory services" by Qatar Investment Authority to Barclays, and "a co-operative business relationship" with Sumitomo Mitsui Banking Corporation. The November cash call, which included Qatar and Abu Dhabi, is also being scrutinised. It included declared commissions of 4.2 per cent of the total amount raised. That is significantly above the 3 per cent that is more customarily found in fundraisings.

The Barclays rescue was co-ordinated by Roger Jenkins, a Middle Eastern expert. John Varley, the former chief executive, also worked on the deal. However, neither the regulator nor Barclays has said whether they are part of the FSA investigation. Bob Diamond, the former Barclays chief executive, is known not to be among the four.

Anglo-American probe tension

George Osborne has questioned the approach of American regulators to allegations of sanctions busting by one of Britain's biggest banks, in a call to the US Treasury Secretary, Tim Geithner. The New York Department of Financial Services published a damning indictment accusing Standard Chartered of hiding more than $250bn of transactions linked to Iran. Last night when approached about the call the Treasury refused to provide details of what was discussed.