Three years after it began, the findings of a City watchdog investigation into whether the former Barclays chief executive Jes Staley gave a full account of his relationship with the convicted sex offender Jeffrey Epstein to the bank’s board are still pending.
There is a risk that justice delayed may prove justice denied for the British public. Our system relies on the Financial Conduct Authority (FCA) and other regulators to uphold the integrity and honesty of those who manage our money.
The issue came to the fore again this week after the publication of allegations made in a court case brought by the US Virgin Islands, where Epstein had a home, against Staley’s former employer, JPMorgan Chase bank.
It is alleged by Virgin Islands prosecutors that Staley held discussions with Epstein in which they referred to women by the names of Disney princesses, that Epstein procured women for Staley, and that Epstein emailed his friend photos of young women in seductive poses. Staley is not a party to the lawsuit and denies the allegations. JP Morgan declined to comment on the latest allegations. It previously called for the lawsuit to be dismissed, claiming it did not participate in or benefit from sex trafficking by its former client.
As allegations about Staley’s ties to Epstein have mounted, so too has the pressure on the Barclays board to justify why they backed him to stay on as chief executive in 2020.
The implications of this case are broad, says Simon Learmount, professor in corporate governance at Cambridge Judge Business School: “This is a really, really important case, not just because of what it may reveal about the Staley-Epstein relationship, but the questions it raises about the Barclays board and boards in general.”
Establishing who knew what, and when, and how they responded, is the task that faces the FCA.
Its probe not only looked at Staley’s disclosures to the Barclays board, but those the board subsequently made to the FCA. The preliminary findings – which have still not been made public and are subject to legal challenge – therefore speak not only to Staley’s integrity but also the board’s. That includes Nigel Higgins, who received Staley’s disclosures and who is still chair of Barclays.
Yet despite the clear public interest in good governance at the top of a British bank of systemic importance, the public may never know the final conclusions of the FCA inquiry. If its preliminary findings are successfully challenged, they will not be disclosed. Such findings, during a challenge – a process the Guardian understands is still ongoing – are often kept secret at the request of lawyers. Only if and when the legal process ends and the FCA is successful in defending its conclusions might key details emerge.
While this process rumbles on behind closed doors, the issue has resulted in years of negative coverage for Barclays.
Epstein’s luxurious celebrity lifestyle and royal friendships, his death in prison after a previous conviction for soliciting sex from a minor, have all served to keep his name in the headlines. As Epstein’s one-time banker at Wall Street investment bank JPMorgan Chase, Staley has been the focus of attention too.
The pair exchanged thousands of messages, many of which were handed over to the UK authorities by US counterparts. A spokesperson for Staley admitted, following an investigation by the Wall Street Journal, that he had made multiple trips to Epstein’s private island, Little St James, in 2020.
It was in February that year that the Barclays board decided, following an internal investigation commissioned from the law firm Clifford Chance, which reviewed the emails, that it would stand full square behind Staley. The banker, who had arrived from the US in 2015 with a £10m pay package, had their “full confidence”.
Then the FCA presented its preliminary findings to Barclays, and everything changed. In November 2021, the bank announced: “In view of those [FCA] conclusions, and Mr Staley’s intention to contest them, the board and Mr Staley have agreed that he will step down from his role as group chief executive and as a director of Barclays.”
Staley told staff in an internal memo at that time: “I do not want my personal response to those matters to be a distraction from the fantastic work you do every day to support our customers and clients.”
The bank also said the investigation did not conclude Staley “saw, or was aware of, any of Mr Epstein’s alleged crimes, which was the central question underpinning Barclays’ support for Mr Staley following the arrest of Mr Epstein in the summer of 2019”.
The drip-drip of reports since then means some on the Barclays board, which previously said it was “disappointed” by initial FCA findings, are keen to take a harder, clearer, stance, according to a person familiar with their deliberations. But the outcome of the FCA’s investigation is out of their hands, and indeed, out of the FCA’s.
The Guardian understands the regulator’s initial findings included that Staley had provided an incomplete picture of his ties with Epstein, and that it is this initial conclusion, which casts doubt on his personal honesty, that Staley is challenging. A legal representative for Staley declined to comment on this and other details presented by the Guardian.
Financial services regulations require that managers meet “fit and proper” tests which require honesty and integrity as core principles.
“Questions need to be asked of the [Barclays] board over whether or not those tests were made and requirements met clearly enough,” says Learmount.
Barclays declined to comment.
In such challenges, the FCA and the subject of their investigation have to present their cases in what is termed the Upper Tribunal. It involves a specialist judge and experts. If the Upper Tribunal decides to uphold the FCA’s conclusions, the case can also be taken to the court of appeal. These hearings can also be kept secret, if lawyers convince the judge this is necessary.
An FCA spokesperson told the Guardian: “We have concluded our investigative work and the case is now working its way through due process.”
They added: “We understand and appreciate the interest in this case however, we are constrained by legislation in what we can make public at this stage.”
Proving non-financial misconduct is tough. But it is a challenge the FCA expects to see more often. There is a “striking trend” of reports about non-financial misconduct in recent years, the former FCA chief Christopher Woolard said in a speech in 2018, adding: “Non-financial misconduct is misconduct, plain and simple.”
Yet any misconduct might not be found out or lead to people being swiftly barred from holding senior positions if the processes that regulators depend on grind too slowly to be effective. Critics say secret hearings and obscure judicial proceedings risk failing to get to the facts of who is “fit and proper” to run a UK bank.
“The question of public trust is a really important issue that this case makes plain and which has not been properly addressed yet. There is, for a number of reasons – social media, good investigative journalism – proper public interest in these issues,” says Learmount.
“It feels like there is increasing public pressure for more transparency about governance. About what happens in boardrooms and between companies and regulators.”
