Barclays could be forgiven for thinking it was out of the woods after parting ways with its chief executive, Jes Staley, in 2021, amid regulators’ concerns over his relationship with convicted sex offender Jeffrey Epstein.
At the time, the board – which had already backed the boss over a separate whistleblower scandal in 2018 – seemed assured by Staley’s account of events. The bank even expressed disappointment over his departure as he prepared to challenge a (yet-to-be-released) UK investigation into the way he had characterised his ties to the disgraced financier.
But two years later, bosses as Barclays have been forced to backpedal, amid what they say are “new and serious allegations” laid out in lawsuits aimed at Staley and his former employer, JP Morgan. And as shareholders gear up for the Barclays AGM in London this week, bosses are steeling themselves for a grilling over whether they placed undue trust in the former chief executive.
The American banking boss first developed a relationship with Epstein in 2000 when he was hired to lead the private bank at JP Morgan, where Epstein was already a client. And while it is common for bankers to work closely with lucrative clients, Staley controversially stayed in touch with Epstein for seven years after the financier was convicted of soliciting prostitution from a minor in 2008. He visited Epstein in Florida while he was out on work release from his sentence in 2009.
The ex-Barclays boss said the relationship started to “taper off” after he left the US bank, with contact becoming “much less frequent” before ceasing altogether in 2015 – the year he joined Barclays. But the pair remained close enough that Staley’s final visit involved sailing his own yacht, the Bequia, to Epstein’s private Caribbean island that final year.
The “new and serious” allegations have been laid out in two separate lawsuits aimed at JP Morgan. They claim that Staley, a former JP Morgan employee, “observed victims personally”, including “visiting young girls at Epstein’s apartments”, and also exchanged 1,200 emails with the late financier which included photos of young women in seductive poses and referred to women by the names of Disney princesses.
One of the cases has been lodged by the US Virgin Islands, where Epstein had a home on the private island of Little St James, while the other has been filed by a woman known only as Jane Doe 1.
JP Morgan has said the lawsuits are “misplaced and without merit”. But it is suing Staley in turn, in an attempt to make him liable for penalties it may face as a result of them. It is also trying to claw back millions of dollars that he was paid while working for the US bank.
Staley denies the allegations, which his lawyer has said are “baseless but serious”. The lawsuits will go to trial in October.
While Barclays itself is not party to any of the proceedings, the leading proxy adviser Institutional Shareholder Services (ISS) – which helps shareholders, including large pension funds and asset managers, decide how to vote at AGMs – has told investors that they are well within their rights to question Barclays “as to its judgment in supporting Mr Staley between 2019 and 2021”.
Glass Lewis, another proxy adviser, said that while it welcomed the bank’s decision to suspend any of Staley’s remaining bonus payouts, it would “continue to monitor this issue going forward”.
The scandal has also brought an old agitator, Edward Bramson, out of the woodwork. The former activist investor – who previously held a stake in Barclays via his investment vehicle Sherborne Investors – said Barclays should investigate how individual board members handled the matter and communicated developments to shareholders.
Bramson also said the bank should establish whether any board members were pushed to back Staley, despite having reservations about the potential risks to the bank’s reputation. If necessary, any offending board members should be banned from serving as directors at any regulated firm, he said.
Individual shareholders, who tend to be more outspoken than the pension funds and asset managers that hold Barclays shares, are likely to raise the most fuss this week.
Large institutional shareholders appear to be wary of being involved in any stories linked to Epstein and his trafficking operations. None of the 18 institutional investors contacted by the Observer – including BlackRock, Legal & General and Fidelity – would comment on whether they were engaging with Barclays on the matter.
Barclays’s current chief executive – CS Venkatakrishnan, Staley’s successor – acknowledged during the bank’s first-quarter results call last Thursday that the allegations against Staley were “serious”. But given that Barclays was not party to the court cases, he said, he was in “no position to comment”.
Barclays pointed to statements released last month as part of its AGM notice. That notice explained that Barclays’s actions at the time were “based on the information it had at the time and representations made by Mr Staley”.