Barclays Probe Signals 'Governance Weakness,' Activist Investor Says

By Simon Clark 

LONDON -- The investigation by U.K. regulators of the professional relationship between Barclays PLC Chief Executive Jes Staley and Jeffrey Epstein, the late financier and convicted sex offender, shows there is "governance weakness" at the British bank, according to an activist investor.

Mr. Staley's interactions with Mr. Epstein date to at least 2000, when Mr. Staley led JPMorgan Chase & Co.'s private bank and Mr. Epstein was a client. They remained in contact after Mr. Epstein pleaded guilty in 2008 in a Florida state court to soliciting prostitution from an underage girl. Mr. Staley has said they last met in 2015. Mr. Epstein died in jail last year.

Edward Bramson, whose firm Sherborne Investors has a 5.5% stake in Barclays, launched an activist campaign last year criticizing Mr. Staley's strategy and unsuccessfully demanding a seat on the board. Mr. Bramson renewed his criticism in a recent letter to his investors after Barclays said Feb. 13 that the U.K. Financial Conduct Authority is investigating the bank and its American chief executive.

The regulatory probe is the second in two years for Mr. Staley. He was fined in 2018 for attempting to unmask a whistleblower, which U.K. regulators described as a "serious error of judgment." U.S. authorities also fined him over the episode.

"Several months ago we raised our concerns with you about the regulatory issues and the consequences for Barclays of the Epstein imbroglio," Mr. Bramson wrote in the letter to investors in a Sherborne fund holding Barclays shares, which was reviewed by The Wall Street Journal. "This is another example of governance weakness that has led, inevitably, to the recurrent public disappointments and embarrassments which have plagued Barclays for so long."

Barclays Chairman Nigel Higgins and the rest of the board unanimously back Mr. Staley, the bank has said.

"We are hopeful that the board will treat these matters seriously and that Mr. Higgins will be able to indicate what long-term governance changes the board will make to end this cycle of disruption," Mr. Bramson wrote.

A spokesman for Barclays declined to comment on the letter.

Mr. Bramson wants Barclays to scale back its investment banking activities. Mr. Staley has defended Barclays's mix of businesses, saying the bank is more resilient to market conditions by having a large U.K. retail and business bank as well as a corporate and investment bank in London and New York and a U.S. credit-card business.

Mr. Staley said earlier this month that the model was working, as net profit increased 54% to GBP2.46 billion ($3.18 billion) in 2019 from the previous year.

Mr. Bramson said in the letter that he has requested a meeting with the Barclays chairman.

"We have the necessary resources to engage constructively with the company for as long as necessary," Mr. Bramson wrote.

Write to Simon Clark at [e-mail]

(END) Dow Jones Newswires

February 25, 2020 11:46 ET (16:46 GMT)

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