Barclays CEO Is Probed Over Bid to Unmask Whistleblower -- 5th Update
10 Abril 2017 - 9:46PM
Dow Jones News
By Max Colchester and Emily Glazer
LONDON -- Barclays PLC Chief Executive Jes Staley is under
investigation by U.K. and U.S. regulators after he tried to unmask
a whistleblower who criticized his hiring of a longtime associate
for a top job.
The London bank said Monday it had also launched its own
investigation into the matter.
Authorities are probing Mr. Staley's actions in trying to
identify the source of an anonymous letter that criticized the
hiring of Tim Main, who was named in 2016 as head of the financial
institutions group at Barclays, according to people with knowledge
of the events. The letter also raised questions about Mr. Staley's
dealings with him when they worked together at J.P. Morgan Chase
& Co.
The U.K.'s Prudential Regulation Authority and Financial Conduct
Authority are probing both Mr. Staley and the bank over its
treatment of whistleblowers Barclays said in a statement. The bank
added that it had issued a formal reprimand to Mr. Staley and would
make a "significant" cut to his bonus. It is also conducting its
own review into Barclays's controls.
The New York State Department of Financial Services, which
regulates Barclays in the U.S., is also investigating the matter,
according to people familiar with the probe.
"I have apologized to the Barclays board, and accepted its
conclusion that my personal actions in this matter were errors on
my part," Mr. Staley said in a statement.
Mr. Main was brought in from Evercore Partners to run Barclays's
financial institutions group. Mr. Main, who is based in New York,
had previously worked with Mr. Staley at J.P. Morgan Chase &
Co. He declined to comment through a Barclays spokesman.
In June 2016, Barclays's board and a senior executive received
anonymous letters raising "concerns of a personal nature" about Mr.
Main, as well as Mr. Staley's "knowledge of and role in dealing
with those issues at a previous employer," the bank said. Mr.
Staley initially asked Barclays's internal security team to try to
identify the authors of the letters, believing them to be an
"unfair personal attack," the bank said. He was told that it wasn't
appropriate to do so, the bank said. But in July he followed up on
the request, and the security team asked a U.S. law-enforcement
agency to try to help, the bank said. The whistleblower's identity
was never revealed, the bank said.
Messrs. Main and Staley rose through the ranks in J.P. Morgan's
investment-banking division together. They both spent time in the
bank's equity capital-markets division, and Mr. Main went on to be
global co-head of the bank's financial-institutions group,
reporting to Mr. Staley. He then joined Evercore in 2011. People
familiar with the matter said the whistleblower's complaint related
to concerns that Mr. Main had a substance-abuse problem while at
J.P. Morgan. Mr. Staley thought the complaint was unfair and sought
to defend Mr. Main, these people added. Mr. Main declined to
comment through a Barclays spokeswoman.
The issue is another stumble for Barclays as it tries to
overhaul its image after years of scandals. Mr. Staley has
trumpeted the bank's values and brought in executives to upgrade
its controls. "This latest revelation represents a very significant
embarrassment for the board as it tries to rebuild the group's
reputation," said Gary Greenwood, an analyst at Shore Capital.
Mr. Staley's actions came amid an upgrade of U.K. regulations
meant to protect whistleblowers. The rules had been approved in
October 2015 and came into effect the following March and
September. They require big U.K. banks to appoint a "whistleblowing
champion" among their senior managers and for a report on
whistleblowing to be presented to the board every year. The
regulations also say banks must permit employees to raise issues in
confidence, and that actions "to the detriment of a whistleblower"
could threaten a bank or executive's regulatory fitness. U.K. law
also prohibits employers from retaliating against
whistleblowers.
Proper handling of internal complaints is a widespread issue in
banking. Wells Fargo & Co., for instance, has been contending
with its own allegations of whistleblower retaliations, which the
bank has said it is investigating but hasn't yet spotted a
pattern.
A Barclays employee flagged the attempted unmasking to the
bank's board in early 2017, the bank said. The board then
commissioned its own probe and shared its findings with the U.K.
regulators. Barclays said an internal investigation into Mr.
Staley's actions concluded that he honestly, but mistakenly,
believed that it was permissible to identify the author of the
letter.
The probe is expected to take several months, according to
people familiar with the matter. Punishments could range from a
verbal warning to Mr. Staley's being barred from undertaking
regulated activity, a step that would prevent him from remaining
CEO. Barclays's board will await the regulators' findings before
docking a chunk of his 2017 bonus. Last year, Mr. Staley was paid
GBP4.2 million ($5.2 million).
Since his arrival in late 2015, Mr. Staley has refreshed the
bank's management team, bringing in a series of new executives.
Many of them were from his alma mater, J.P. Morgan. He has replaced
Barclays's chief risk officer, chief operating officer and the head
of its investment bank. Some within Barclays have grumbled that Mr.
Staley wasn't giving insiders a fair chance and was leaning too
heavily on J.P. Morgan, where he spent more than three decades,
holding a portfolio of roles including running its investment
bank.
Mr. Staley left J.P. Morgan in 2013 after a management
reshuffle. He joined BlueMountain Capital, a hedge fund that had
profited a year earlier from the "London whale" debacle, which left
J.P. Morgan with more than $6 billion in losses.
Barclays investors have warmed to Mr. Staley's plan to reinforce
Barclays's investment-banking franchise and refocus the lender on
its U.S. and U.K. operations. The bank's share price has risen 43%
this year.
Barclays Chairman John McFarlane said in a statement that he is
"personally very disappointed" in Mr. Staley, but the board
nonetheless said it supports his reappointment at the bank's annual
shareholder meeting next month.
Write to Max Colchester at max.colchester@wsj.com and Emily
Glazer at emily.glazer@wsj.com
(END) Dow Jones Newswires
April 10, 2017 20:31 ET (00:31 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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