Barclays CEO's Penalties Over Whistleblower Saga Top $1.5 Million -- 2nd Update

By Max Colchester 

LONDON -- Barclays PLC Chief Executive Jes Staley has been hit with penalties equal to roughly a quarter of his 2016 pay over his efforts to unmask a whistleblower.

After a yearlong probe, U.K. regulators Friday fined the American executive GBP642,430 ($868,501) for a "serious error of judgment" in trying to identify the author of a letter that made criticisms of a hire Barclays made, but ultimately said Mr. Staley could keep his job.

The British bank's board also Friday docked pay worth GBP500,000 from Mr. Staley's 2016 bonus. In total that year, he earned GBP4.23 million.

"I have consistently acknowledged that my personal involvement in this matter was inappropriate, and I have apologized for mistakes which I made," Mr. Staley said in a statement.

The episode, which has proved an embarrassing distraction for Mr. Staley, shows how British regulators looked to balance the risk of destabilizing Barclays by forcing a CEO change with the need to show they take protecting the identity of whistleblowers seriously. Complicating matters was the fact that Mr. Staley's actions occurred just before new U.K. rules came into force to protect not just whistleblowers within a company but anyone who privately flags concerns of bad behavior.

According to the account filed by the Financial Conduct Authority, in June 2016 a member of the Barclays board received a letter from a person identifying themselves as "John Q. Public," a long-term shareholder in Barclays. The letter addressed issues around Barclays's hiring of Mr. Staley's former JPMorgan Chase & Co. colleague Tim Main, according to people familiar with the matter. The letter made personal allegations about Mr. Main. It also questioned the process for hiring him at Barclays, the FCA said.

Mr. Staley told regulators he considered that the letter's sender didn't count as a whistleblower because, among other things, the person was from outside Barclays. Mr. Staley emailed a copy of the letter to a friend and former colleague of Mr. Main and discussed creating a support network for him if the letter became public.

Later that month, Barclays's office in New York received a second letter expressing similar concerns. The letter was anonymous but was purported to have been drafted by Barclays employees, according to the FCA. "This raised in Mr. Staley's mind the need to find a way to stop this campaign by finding out who was sending the Letters, proving that they weren't whistleblows and that their contents were false," the regulator said. The FCA said Mr. Staley failed to recognize that both the letters could have been written by insiders at Barclays and so whistleblowing rules needed to apply.

In late June, Mr. Staley asked security to identify the author of the first letter. The security team at Barclays told colleagues in the U.S. they would need to examine the letter and envelope to identify the author. A day later, Mr. Staley met with Barclays's general counsel and head of compliance and was told "it was generally not a good idea to try to identify the author of an anonymous letter" and that they could be considered whistleblowers. The executive took this advice and the process to identify the author was called off.

A month later, Mr. Staley asked his office for an update on the matter and was again told the letters were being treated as whistleblows. Mr. Staley and his office said they didn't recall whether he was told this.

The day after, Mr. Staley spoke to compliance and again was told the author of the letter couldn't be identified. Mr. Staley said he couldn't remember the contents of the call and mistakenly understood that compliance told him that the letter was no longer being treated as a whistleblow, in part because the allegations around the hiring process were unfounded. Without informing compliance, the board or executive committee members, Mr. Staley told the security team that he had been given clearance to find the author of the first letter.

Mr. Staley later sent a text message to the security team asking for an update on the attempt to identify the author of the letter. He received a response saying the security team wanted to get video footage of the purchase of the postage for the letter from U.S. contacts. This proved impossible and Mr. Staley then asked if he could contact the author of the letter another way. He was told no.

In early 2017, Barclays's board was told of Mr. Staley's attempt to identify the author of the letter. The board began its own probe and told regulators.

"Given his conflict Mr. Staley should have maintained an appropriate distance; he should not have taken steps to identify the author," the regulators wrote in a joint statement.

Write to Max Colchester at [e-mail]

(END) Dow Jones Newswires

May 11, 2018 08:40 ET (12:40 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.