By Kirstin Ridley and Lawrence White
LONDON (Reuters) – When Roger Jenkins was asked to help Barclays avoid a state bailout at the height of the financial crisis in 2008, he was expecting a bonus not a prosecution for his efforts.
More than a decade later, Jenkins and former Barclays colleagues Richard Boath and Tom Kalaris, were unanimously acquitted by a jury on Friday in a case that revealed how the British banking giant secured a 4 billion pound ($5.2 billion) investment from Qatar.
With its survival at risk, Barclays was relying on Jenkins’ persuasiveness and personal relationship with Qatar’s then prime minister Sheikh Hamad bin Jassim bin Jabr al-Thani.
But the tiny emirate, which has punched above its weight for years after the discovery of oil and gas, was playing hardball. Barclays’ <BARC.L> response was to pursue a deal which Jenkins conceded during his trial was optically “close to the line”.
The four month trial at London’s Old Bailey criminal court shone a light on the punishing globe-trotting schedules, meetings in luxury hotels and often surreal negotiations which pulled Barclays back from the brink.
Jenkins, known as “Big Dog” to colleagues, sat in the witness box for weeks, shedding some light on how one of the world’s biggest banks pulled out the stops to court a man referred to during proceedings as “the omnipotent sheikh”.
The Gulf state had a reputation as a tough negotiator and in June 2008, Qatar Holding, part of the $300 billion Qatar Investment Authority (QIA) sovereign wealth fund, demanded more than twice the fees Barclays had promised other investors.
The Qatari investment was key. It helped pave the way for other financial backers, such as Sheikh Mansour of Abu Dhabi, Singapore’s state investor Temasek and Japan’s Sumitomo Mitsui Banking Corp, allowing Barclays to raise around 11 billion pounds that year across two capital raisings.
But the deals struck by the bank — an extra 322 million pounds paid to Qatar under two Advisory Services Agreements (ASAs) — landed the former bankers in court with fraud charges.
Prosecutors had alleged the side deals were shams, designed only to pay Qatar extra fees.
Jenkins, Boath and Kalaris maintained they were intended as genuine, commercial agreements and had been approved by directors and lawyers as mechanisms to secure lucrative advisory and banking business generated by Qatar.
Sheikh Hamad and Qatar, still a leading investor in Barclays and Britain after a 35-billion-pound acquisition spree of trophy assets, were not accused of wrongdoing.
A statement released on behalf of Sheikh Hamad said the ASAs proposed by Barclays had been genuine.
“Out of respect for the due processes of English law, Sheikh Hamad and the other Qatari parties did not seek to intervene during the course of the trial to correct those errors of fact and misleading interpretations that appeared to be given currency in some quarters,” Friday’s statement said.
BRIDGING THE GULF
In the Gulf, personal relationships and trust are paramount and banks pay millions to those who can gain and sustain it.
Jenkins had forged a relationship with billionaire Sheikh Hamad, who caused a stir in early 2008 when he told world leaders in Davos that he wanted to pump $15 billion into banks.
The pair were first introduced in 2007 through a friend of Jenkins’ former wife Diana while on holiday on the Italian island of Sardinia, he told the court.
Bonding over dinner and discussions about supermarket investments on the sheikh’s yacht, Jenkins and his wife were later invited to Sheikh Hamad’s French house in Cannes.
As the relationship blossomed, Jenkins flew to Doha and helped arrange meetings with Barclays directors and the sheikh and his officials at luxury London hotels as well as at Jenkins’ mansion in London’s Mayfair district, in Doha and New York.
Without such introductions, things were bleak.
Bob Diamond, the charismatic American executive who would become Barclays chief executive in 2010, was left sitting in a lobby in Abu Dhabi “for days on end” when he first tried to forge a relationship with UAE sheikhs, the court was told.
Diamond was not accused of any wrongdoing. His spokesman was not immediately available for comment.
GAME OF BLUFF
With Barclays under pressure in roiling markets, Jenkins knew he had a poor negotiating hand in June 2008.
In a culture in which meetings were unscheduled, could be at any time within a two-day period and might be over in 15 minutes, he was asked to wait overnight for a meeting with Sheikh Hamad. But he did not want to betray weakness.
His tactic, he told the jury, was to fly to Dubai, fabricating a meeting there to give the impression he was in high demand in the Middle East, before returning to Doha.
“I did not want to sit in Doha and wait for His Excellency for 48 hours … That would be a sign of weakness in the negotiation,” he said during cross-examination.
Four months later, Barclays extended the ASA with Qatar for another 280 million pounds as the Gulf state again invested in the British bank alongside Abu Dhabi investors.
(This story was refiled to include editing credit.)
(Editing by Alexander Smith)