By Kirstin Ridley
LONDON, Jan 14 (Reuters) - Former Barclays chief
executive John Varley first suggested the bank could use a side
deal to satisfy Qatar's demands for extra cash in return for
rescue funding for the bank during the 2008 credit crisis, a
London court heard on Tuesday.
Thomas Kalaris, one of three former top Barclays bankers who
deny fraud linked to the capital raising, on Tuesday described a
meeting with a senior Qatari official on June 3, 2008, and how
he subsequently took the service lift to Varley's office on the
31st floor of the bank to discuss the Gulf state's fee demands.
The case revolves around how Barclays avoided the fate of
Lloyds and Royal Bank of Scotland and averted a
state bailout with an 11 billion pound ($14.3 billion)
fundraising in June and October 2008.
But the Gulf state, which became the largest single investor
in Barclays, first asked for a fee of 3.75% in return for its
investment -- substantially above the 1.5% the bank was offering
other investors, the jury has heard.
"His (Varley's) immediate reaction was that he would be
prepared to offer value of 3.5%...," Kalaris told the jury at
the Old Bailey criminal court, as he began his testimony.
"He said it should be done via a side agreement", he said,
adding this was "quite common" in banking and "absolutely not"
dishonest.
Varley was acquitted of fraud charges last year and is not
accused of any wrongdoing.
Prosecutors for the UK Serious Fraud Office allege the three
former executives lied to the market and other investors by not
properly disclosing 322 million pounds paid to Qatar, disguising
them as "bogus" advisory services agreements (ASAs) in return
for around four billion pounds in investments over 2008.
Kalaris, who ran the bank's wealth division, Roger Jenkins,
the former head of the bank's Middle East business and Richard
Boath, a former head of European financial institutions, deny
conspiring to commit fraud and fraud by false representation.
The men have said the ASAs were designed to be genuine side
deals to secure lucrative business for Barclays in the Middle
East -- a region the bank was eager to exploit -- and were
approved by lawyers and cleared by the board.
Kalaris, 64, agreed his role in the June 2008 capital
raising could be described as a "quarterback" and involved, in
part, ensuring decision makers "understood what was going on".
"Did you think for a moment that Mr Varley was instructing
that there should be some form of dishonest or hidden nature to
the balancing payment, whatever that amount would need to be?"
Kalaris's lawyer, Ian Winter, asked.
"Never," Kalaris responded.
The trial continues.
($1 = 0.7698 pounds)
(Reporting by Kirstin Ridley. Editing by Jane Merriman)