Yahoo Finance Barclays faces challenge over Jeffrey Epstein crisis
Barclays must be challenged for standing by its former chief executive Jes Staley over his relationship with the paedophile Jeffrey Epstein, an influential shareholder group has said.
Institutional Shareholder Services (ISS) - which offers advice to hundreds of large investors such as pension funds - said there are “questions that can be posed now” in the wake of lawsuits accusing Mr Staley of personally observing the sexual abuse of young women by Epstein.
ISS's unusual intervention will turn the spotlight back onto the FTSE 100 lender, which has largely avoided criticism over the scandal despite a flurry of lawsuits directed at Mr Staley's other former employer, JP Morgan.
It threatens to dominate discussions at Barclays' annual general meeting on May 3, when the bank will face shareholders for the first time since new allegations about Mr Staley's links to Epstein were aired.
In a note to investors, ISS said: “The decision to support Staley in the period between the death of Epstein and Staley's resignation will draw scrutiny.
“While it is accepted that the board could only act on the information available to it at the time, there are questions over the judgement exercised during this period, given the particularly disturbing nature of the charges against Epstein, and their potential for reputational damage to the company.
“These are questions that can be posed now. While definitive answers on matters of judgement may not present themselves, it is likely that investors will be better positioned to arrive at a better-supported position once further news has emerged from the investigations.”
Epstein was a key client of Mr Staley when the banker worked at JP Morgan, before he joined Barclays in 2015.
Epstein was arrested and committed suicide in 2019. A year later, Barclays said it had “full confidence” in Mr Staley despite an investigation into his Epstein links by the Financial Conduct Authority (FCA).
It was only when the preliminary findings of the investigation were shared with Barclays that Mr Staley quit. He is contesting the FCA's conclusions, which have not been published.
Mr Staley has repeatedly denied knowledge of Epstein’s sexual abuse and lawyers have called the claims "baseless".
A lawsuit filed this year by Epstein’s victims against JP Morgan, where Mr Staley worked before joining Barclays in 2015, alleged that Mr Staley “personally observed” Epstein's abuse.
Another, filed by the US Virgin Islands, claims he drank white wine in Mr Epstein’s hot tub in 2009 when Epstein was under house arrest for child sex offences.
JP Morgan has separately sued Mr Staley, demanding that he hand back $80m (£65m) he earned while working for the Wall Street bank.
Nigel Higgins, Barclays’s chairman, has said the allegations are “serious and new” and that its original review into the matter in 2020 “was based on the information it had at the time and representations made by Mr Staley”.
It has suspended millions of pounds in payments to Mr Staley pending the final outcome of the FCA's investigation.
ISS said the fact that Barclays had stood by Mr Staley after he was fined in 2018 for attempting to unmask a whistleblower was "potentially not irrelevant".
It said: “The question could be asked: 'Was the board correct in supporting [Mr] Staley (ie not dismissing him) for a second time?'”
Barclays did not comment on the ISS note. The group recommended that shareholders support the bank on all shareholder votes at next month’s annual meeting.
Separately, HSBC’s largest shareholder has reportedly demanded that it regularly review its structure amid calls to break up the banking giant.
Ping An, which has an 8pc stake in HSBC and has agitated for it to split its Western and Asian banking divisions, is planning to support a shareholder proposal demanding quarterly reports on efforts to spin off its Asian business, according to the Financial Times.
It is also pushing for the bank to boost its dividend to levels last seen before the pandemic. HSBC has rejected calls to break up the bank.
