Barclays Bank accused of fraud over undisclosed loan to Qatar
London - Barclays Bank has been accused of committing fraud in giving Qatar an undisclosed loan of $3 billion in 2008.
The loan was used to buy shares in the bank, which needed the cash during the financial crisis eight years ago, the investment firm PCP Capital Partners alleged in a lawsuit filed September 1st against Barclays 1st at the High Court in London.
“Barclays’ October 2008 Capital Raising was a fraud on its shareholders perpetrated through a series of unlawful transactions and dishonest conduct towards existing shareholders and prospective investors,” PCP stated in the lawsuit.
“Contrary to the manner in which Barclays presented the Qatari participation in the October 2008 capital-raising to the market, in fact the Qatari investors’ entire investment was funded by Barclays.”
PCP Capital Partners is an investment firm founded by financier Amanda Staveley.
Staveley argued that Barclays did not award her Abu Dhabi investors the same terms for the raising of funds as the bank offered the Qataris. She is seeking more than $925 million in damages from Barclays for “failing to pay the same fees to her and her Abu Dhabi-based investors that it agreed to [pay] to Qatar”, Sky News reported.
Staveley reportedly received about $53 million in commissions for her role in raising funds for Barclays.
PCP helped Barclays secure an investment of $4.6 billion from Sheikh Mansour bin Zayed al-Nahyan, a member of Abu Dhabi’s royal family.
In addition to failing to disclose the loan, PCP alleged, Barclays also did not make public a $370 million payment to Qatar as fees for advisory services. PCP argued that the fees Barclays paid to Qatar were not for advisory services but intended to recompense the Gulf state after the bank’s share price slumped.
Barclays denied the allegations, arguing that the fees paid to Qatar were unrelated to the investment.
The bank added that the services provided by the Qataris could not have been provided by PCP and its Abu Dhabi investors.
“We believe the claim against Barclays is misconceived and without merit and Barclays will be vigorously defending it,” the bank said in January.
If Barclays and PCP do not agree on a settlement, the case could go to trial next year.
Britain’s Financial Conduct Authority (FCA) had sought in 2013 to impose a $66 million fine on Barclays for allegedly breaching the rules related to the fees to Qatar but the bank disputed the penalty.
The bank is also under an investigation by Britain’s Serious Fraud Office (SFO) over its emergency fundraising from Qatar. The FCA case is on hold, pending the outcome of the SFO investigation, which is expected to conclude by the end of the year.
The Qatari and Emirati investments in Barclays in 2008 kept the bank from resorting to UK government aid, which would have been at the expense of British taxpayers.
It also would have meant that the British government would have influence in the bank’s policies.
The British government had offered a $660 billion rescue package in response to the global financial crisis to restore confidence in banks and the financial market.