Magic circle firm Linklaters pulled out of advising Barclays on a controversial loan to Qatar at the height of the financial crisis, it has been claimed.
Documents filed at the High Court in a civil suit allege that Linklaters quit advising the bank because it was concerned that a £3 billion loan made to Qatar through the gulf state’s Ministry of Economy and Finance in 2008 was not lawful. The documents were filed by investment firm PCP Capital Partners, which is suing Barclays over claims that the bank paid undisclosed fees to secure funding.
During the 2008 financial crisis Barclays raised billions of pounds from Qatari investors to stay afloat. However, it is alleged that part of this funding came from money Barclays had already given to the state.
PCP, in a case filed last year, alleged that Barclays lent Qatar £3bn, which was then pumped back into the bank as part of the rescue deal.
According to the Financial Times, documents filed this month show that Linklaters stopped advising the bank a day after urging the bank that the loan documents included a caveat stressing that the money would not be reinvested in the bank. The firm, the paper reports, was concerned that the loan would involve 'unlawful financial assistance by Barclays for the purchase of its own shares'.
The documents cite an email between two Barclays executives who said Linklaters had 'resigned' on conflict grounds and on concerns about 'where cash ends up'. The email continues: 'It should be inferred from this that i) Linklaters resigned (at least in part) because it was concerned that the Qatar loan would be illegal.'
In June this year Barclays was charged by the Serious Fraud Office over both the £3bn loan and capital-raising arrangements with sovereign wealth fund Qatar Holding LLC and Challenger Universal Ltd.
Former Barclays chief executive John Varley is among the charged, along with former senior executives Roger Jenkins, Thomas Kalaris and Richard Boath.
Barclays plc, Varley, Jenkins, Kalaris and Boath have been charged with conspiracy to commit fraud by false representation. In addition, Barclays, Varley and Jenkins have been charged with conspiracy to commit fraud by false representation in relation to capital raising as well as with unlawful financial assistance.
The defendants in the criminal action, including the bank, have not formally entered a plea. Varley and Jenkins have indicated they will plead not guilty.
Linklaters and Barclays declined to comment.