Why are the former Barclays executives being prosecuted?

So some former Barclays executives are being prosecuted for their actions during the financial crisis…

Why? They took money from Qatari investors to bail out Barclays during the financial crisis, but compensated the Qatari investors above standard rate for it. As a result of their actions, they protected their bonuses, and prevented Barclays from being bought out by the government.

I’m not sure why these former Barclays executives are being prosecuted.

Had these executives not acted as they did, one of two things would happen:
1) the government bails out Barclays at great cost to taxpayers.
2) Barclays goes bust.
Would the government and taxpaying public genuinely prefer either of these outcomes?

Instead of relying on the government to bail them out at a loss to the taxpayer, they sought funding from private equity, and compensated their funders generously for it. Too generous maybe? If so, who are the ones losing out? Barclays shareholders and investors. Not the taxpaying general public. So any problems of unfair compensation is a matter of internal governance. Why should the government get involved in an internal governance issue?

Yes, they managed to award themselves eye-wateringly hefty bonuses through their actions. And prevented the government from being involved in Barclays governance. But neither of those is a crime, nor are they immoral.

Of course, to those of us on mortal salaries and lifestyles, the outcome of such actions *feel* unsconscionable. Not because they saved Barclays from being taken into public ownership via foreign funding. But because it feels unfair that *anyone* should be awarded such ludicrous sums of money.

What are they actually being prosecuted for? Fraud. By the Serious Fraud Office (SFO). The accusation is that the Qatari investors were being compensated for their investment illegally: “prosecutors from the Serious Fraud Office said top officials, including then Chief Executive Officer John Varley, went too far, agreeing to pay secret commissions that amounted to fraud.”

As Barclays executives, it is entirely in their right what they choose to pay their investors. Barclays was in a time of need. Other investors did not bail them out. The Qatari investors came to their rescue. Why are they being prosecuted for compensating these investors more than others, those who invested when Barclays was not in a time of need?

What does the government and the Serious Fraud Office hope to achieve here…
…are they being prosecuted because of public hostility to banking executives?
…or are they being prosecuted because they thwarted the government from taking control of private equity?
…or is the SFO trying to justify their existence?

Absent any other evidence or lines of reasoning, I don’t know what other inference we can draw.

Author: Hoong-Wai

I am a sinner. I care about people, and truth, and justice. I have an interest in dancing, economics, engineering, philosophy, and science.

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