On February 28, 2020, a jury acquitted three former Barclays executives – Roger Jenkins, Tom Kalaris and Richard Boath – of criminal fraud charges brought by the Serious Fraud Office (SFO). The charges were founded on allegations that the three had conspired to make secret payments to Qatar in exchange for the state’s provision of financial assistance to Barclays during 2008. The acquittal concludes the SFO’s investigation in the matter which began in 2012 but also, however, allowed the release of previous judgments that, among other things, shed light on the difficulties in imposing corporate criminal liability.
On July 3, 2017, the SFO charged Barclays PLC with both conspiracy to commit fraud by false representation for failing fully to disclose to the stock market deals it had reached with Qatari investors and unlawful financial assistance by providing a $3 billion loan to the Qatari state’s sovereign wealth fund. On February 12, 2018 Barclays Bank PLC also was charged with providing unlawful financial assistance. On May 21, 2018 the charges against both Barclays entities were dismissed by the Crown Court, prompting a subsequent application by the SFO to reinstate all of the charges. On October 26, 2018, the High Court dismissed the SFO’s application. Any greater understanding regarding the reasons as to why the charges were dismissed and the Court’s approach to the imposition of corporate criminal liability, however, was put on hold as both Crown Court and High Court judgments remained subject to reporting restrictions until the conclusion of the trial of the individual Barclays executives. These restrictions were lifted by Lord Justice Popplewell following the acquittal of the three executives in February 2020.
Unlike the strict liability offenses of bribery and the facilitation of tax evasion under the UK Bribery Act 2010 and Criminal Finances Act 2017, respectively, in order to establish corporate criminal liability in the UK, it is necessary to successfully invoke the “identification principle.” Specifically, a prosecutor must prove that the individuals suspected of being involved in the commission of a crime represent the “directing mind and will” of that company – or, in other words, the executives’ actions need to be considered to be those of the company.
In dismissing the charges against both Barclays entities in May 2018, Mr. Justice Jay concluded that while various individuals (including those facing individual prosecution) were authorized to conduct negotiations, they did not have authority to commit Barclays to capital raising or, if one was agreed, to agree a secret commission. He found that only Barclays’ board, or the board finance committee or group credit committee, could make that final commitment and, accordingly, those involved in negotiating the package were not the directing mind and will of Barclays.
Lord Justice Davis, providing the verdict of the High Court on November 12, 2018, considered whether the alleged dishonest acts taken in conjunction with the alleged dishonest state of mind of the relevant individuals could be attributed to Barclays so as to make the bank criminally liable – were they to be treated as Barclays’ own dishonest acts and intentions?
Among the authorities considered by Davis LJ was Tesco v. Nattrass, a 1972 case in which the House of Lords concluded that a company’s board of directors, managing director and perhaps other superior officers speak and act as the company but, unless specific functions have been delegated to them, their subordinates do not speak and act as the company. In that particular case, a chain of command was set up from the board to shop managers, but the board’s functions were not delegated to such managers and the acts and omissions of the latter did not constitute those of the company. Davis LJ considered that such a decision may result in larger companies being more readily absolved from criminal responsibility than smaller companies, since larger companies often have a more convoluted decision-making process with various layers of management. He concluded, however, that boards of large international corporations cannot be expected to know all transactions and operations and that devolved structures are put in place as a practical necessity and not to avoid corporate responsibility.
In disposing of the SFO’s application to reinstate the charges against the bank, Davis LJ viewed the various individuals as not having full discretion to act independently with regards the transactions; they were instead responsible to another person for the manner in which they discharged their duties. What autonomy they may have had was insufficient; in short, attribution of criminal culpability to Barclays would require that they had entire autonomy to do the deals in question, which they did not.
Successive directors of the SFO have long argued that the identification doctrine has set too high a threshold for the establishment of corporate criminal liability and does not take into account the reality of increasingly complex and often global corporate structures. During her tenure as SFO director, for example, Lisa Osofsky has not been shy with regards to her views on the UK legal position. In the wake of the recently announced £3 billion Airbus Deferred Prosecution Agreement, Ms. Osofsky stated that the UK has a very antiquated position with regards to fraud and has on previous occasions described herself as being hamstrung by the identification principle and the resulting gulf between SMEs and large corporations as to the conduct each might be held accountable for.
The full details of the Barclays judgments will do nothing to silence critics of the identification principle and the chilling effect it apparently has on successfully prosecuting companies for certain crimes. Since the UK government published in 2017 a call for evidence on reforming criminal liability, some have argued for the creation of a new corporate criminal offence of failure to prevent economic crime. Their ranks may only grow further following a multi-year investigation into Barclays that ultimately resulted in liability for neither individuals nor the corporate itself. In the meantime, the search must continue for those individuals who represent the directing mind and will of a company.