Former Barclays Executive Said He Couldn’t Sleep After Secret Qatari Deal

(Bloomberg) -- A former Barclays Plc executive told a bank attorney that he couldn’t sleep because of worries that reporters might discover the lender’s secret payment to Qatar, which helped prop up the bank during the 2008 financial crisis.

In June 2008, Qatari companies agreed to invest 2 billion pounds ($2.6 billion) in Barclays, while the bank paid a subscription fee and, separately, a 42-million pound advisory agreement. Four top Barclays bosses, including former Chief Executive Officer John Varley, are charged with fraud, because the agreement was allegedly a "sham," used as a disguise so other investors wouldn’t find out about the fees the bank was paying the Qataris.

After the deal was signed, Richard Boath, who was the European head of the bank’s financial institutions group, called in-house Barclays lawyer Judith Shepherd, saying he was a "fretter" and didn’t think the advisory agreement was "very elegant," according to a recording of a July 2008 phone call played Monday to the London jury by prosecutor Ed Brown.

"My worry is every journalist just gets it and says, ‘This is,’ you know, well I hate to use the phrase, so I’m not going to use it," Boath said. "It begins with B."

"We don’t even think that phrase," Shepherd said. "It’s just words that never come across our lips. I think we do want a paper trail about what we got for it. We don’t want to be sitting there thinking, ‘Oh God, we’ve got to create one now.”’

Varley, Boath, former Middle East head Roger Jenkins, and Tom Kalaris, who then managed Barclays’s wealth division, all pleaded not guilty in the U.K.’s first criminal trial against top bankers related to the financial crisis.

Two capital injections from Qatar in 2008 helped Barclays avoid a government bailout, which would have cost the bank its independence and, according to the Serious Fraud Office prosecutors, jeopardized the executives’s jobs and bonuses. The SFO alleges that the officials kept the side-agreement fees secret, because it was paying Qatar more than twice as high a rate as those received by other investors.

Qatar’s chief negotiator was Prime Minister Sheikh Hamad bin Khalifa Al Thani, who wanted a similar commission for his personal 600-million pound investment, according to the SFO. Realizing that paying advisory fees to a prime minister was unseemly, Barclays included his cut in the overall agreement, the SFO said.

Boath said he wanted to ensure there was documentation that services were actually being provided by the Qataris, according to the recording. He said he wanted to discuss this in person, because he didn’t like the idea of putting it in an email.

"When I put that on my screen and I read it, I sort of start to tremble," Boath said. "I’d really like to go and do something about it, so I can sleep."

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