John Varley is about to be dragged into yet another a British courtroom, where the former Barclays chief executive will feature as the main witness in the bank’s challenge against a £50mn fine over an emergency fundraising with Qatari investors at the height of the financial crisis.
The case at the upper tribunal in London, which starts on Monday, is the latest episode in a legal saga that has swung back and forth for more than a decade, leaving the reputations of one of Britain’s biggest banks and the country’s main financial watchdogs in the balance.
Varley, an archetypal City banker known for his distinctive red braces and tailored suits, told the court in a pre-trial hearing that “it never for a moment crossed my mind” that he could once again be called to give evidence over events that happened 16 years ago.
The case centres on the desperate measures Barclays took to avoid being bailed out by the British government — as several of its UK rivals were — when the financial system went into meltdown with the collapse of Lehman Brothers in 2008.
The events in question prompted both criminal and regulatory investigations and two failed prosecutions. Varley faced the ignominious status of being the first CEO of a major bank to face a jury over events during the financial crisis but was ultimately acquitted, and charges against Barclays itself were dropped before trial. The case helped prompt an overhaul of corporate criminal liability in the UK.
The FCA alleges the bank breached the UK’s listing rules by failing to disclose it was paying higher fees to Qatari investors than to those from other countries including China, Singapore and Abu Dhabi when it raised £11.8bn through two share sales in 2008.
The main controversy stems from £322mn of undisclosed fees that Barclays paid to a Qatari sovereign wealth fund in exchange for it investing over £4bn. The FCA said the fees would have had “a material impact on the terms of the capital raisings” if they had been revealed.
When the FCA announced in 2022 that it would fine Barclays £50mn, the watchdog said Barclays and one of its senior managers — which Varley presumed to refer to himself, according to an earlier court decision — had “acted recklessly” in misleading investors. Barclays has denied all allegations and challenged the FCA’s decision.
The stakes are high for Barclays, Varley and the FCA. If the bank’s challenge succeeds, the bank and its former boss will be able to declare victory in their decade-long fight to defend their reputations against allegations they broke the rules to escape a UK taxpayer bailout.
For the FCA, the court battle represents a final chance to successfully punish a major bank for wrongdoing in the chaotic months that followed the 2008 financial crisis.
Many think the case has already dragged on far too long. “It is time to impose strict deadlines and timetables on the regulators themselves to ensure regulatory outcomes are reached before everybody has forgotten what the original fuss was all about,” said Harvey Knight, a partner at City law firm Withers.
In an unusual twist, it was Barclays itself that summoned Varley as a witness as part of its ultimately unsuccessful Catch-22 legal argument to try to get the case dismissed.
The bank said the court should refuse its application to summon Varley because it was unfair to require its former CEO, who is now 68, to give evidence when the FCA already said he should have “finality” after being acquitted in the earlier criminal case, which had caused him significant stress.
Barclays proposed that because it could not receive a fair hearing without Varley’s testimony, whole case against the bank should be thrown out.
However, this was rejected by the court. The judges conceded that summoning Varley, who was Barclays CEO from 2004 until he quit in late 2010, would “give rise to a further period of media exposure and mental strain” and acknowledged “there may be limits to what Varley is likely to be able to recall” about events that happened 16 years ago.
But they said that he “would be an important witness and has evidence of significant value to give in support of Barclays’ case”, adding that the argument against him appearing “does not rely on any physical or mental ill-health caused by these events or likely to be caused by having to give evidence”.
For those trying to pin wrongdoing on Barclays for its actions in the financial crisis, however, the past decade is littered with setbacks — most notably the two failed prosecutions by the Serious Fraud Office of the bank and four of its executives, including Varley.
The bank was also cleared in a separate civil trial brought by Amanda Staveley’s PCP, which was involved in the contested capital raising and claimed deceit by the bank had left it out of pocket. In that case, the judge found Barclays “guilty of serious deceit” but ruled that PCP had failed to show that it would have found the necessary debt funding to do a deal. Staveley and Barclays are currently in arbitration in a parallel case.
Once the criminal trials ended, the FCA was able to resume its enforcement action against the bank. It had planned to also impose a £1mn fine on Varley and to ban him from working in a regulated financial services role.
However, while maintaining the substance of its accusations against him, the watchdog decided to drop the action on the basis of “overall fairness”, taking into account the personal cost and disruption already endured by the former Barclays boss.
The judges said earlier this year they had “no reason to doubt that the proceedings over the past 12 years have been all-consuming for Varley, placing a heavy burden on himself and his family,” adding that this had already led “to an extended period of stress”.
The court case is due to last three weeks and the ruling could be appealed. Lawyers for Barclays, Varley and the FCA all declined to comment.
Additional reporting by Alistair Gray in London
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