Barclays: The Intern Slot in the Bond Pitch

In the Barclays FCPA case, the bank agreed to pay $6,308,726 to resolve allegations by the Securities and Exchange Commission involving jobs for banking business, false hiring records and inadequate accounting controls. The agency described bankers pursuing client deals through employment favors while approval forms concealed who wanted the hire and why. For someone in recruiting, client coverage or compliance, the revealing detail is the gap between the applicant’s file and the bankers’ emails.

Barclays PLC is a London-headquartered bank holding company whose services include investment banking and wealth management. Its September 27, 2019 settlement concerned the bank’s records and the checks meant to keep them accurate under the Foreign Corrupt Practices Act. The agency’s account shows how an employment decision could become part of a pitch for a client’s business.

Referral Hiring in Asia

The order described approximately 117 candidates whom Barclays hired between April 2009 and August 2013 after referrals from, or connections to, foreign government officials or private clients. Most entered an unofficial internship arrangement called the work experience program. Others entered the formal internship program, the graduate program or permanent jobs.

According to the order, the practice began in Korea and spread within the Asia Pacific region. The order’s examples include bankers in Hong Kong and a referral involving a Chinese state-owned enterprise. It attributed a business purpose to at least some offers: providing a personal benefit to officials or client executives with the expectation of obtaining or retaining investment banking work.

The order described policies already prohibiting employment in exchange for business, but bankers and compliance personnel lacked training and familiarity with them. A senior regional compliance executive said he had never read the bank’s anti-bribery policy, which required compliance approval before offering internships to public officials or their close family members.

The order also described a June 2012 presentation circulated widely within the region’s investment banking division that treated strategic hiring as part of an action plan to satisfy clients. It listed other banks’ hires of officials’ children, and nobody objected or reported the proposed initiative as a potential policy breach. Hiring favors had a place in the sales plan, according to the agency’s account.

The Hiring Request Came With a Bond Deal

The order described hiring tied to banking business in the emails surrounding specific bond offerings. In April 2009, a Seoul banker proposed an internship for the son of a decisionmaker at a Korean state-owned entity while Barclays sought a role managing that entity’s bond issue. The banker wrote:

According to the order, a senior executive approved the hire despite the bank’s policy. Shortly afterward, Barclays won a joint lead-manager role on a $1 billion bond issuance and earned approximately $971,000 in fees.

The agency said a state-owned entity’s treasurer sought an internship for a relative of a director and party official. A banker passed the request to senior bankers, human resources and the regional chief operating officer’s office, pointing to a large bond opportunity.

According to the order, one senior banker replied to the group that the candidate would be evaluated on his merits. Three minutes later, that banker sent a separate email:

The agency said interviewers did not support the candidate, but Barclays ultimately offered him a place. When the bank later slipped in the competition for the bond work, a senior banker instructed a colleague to remind the treasurer about the intern slot and press for a place in the deal. Barclays eventually became lead arranger on a $3 billion bond issue, booking approximately $332,700 in revenue.

We see the absurdity in that second email: the assurance of merit was something the banker had to say to the wider group. The later demand for business invoked the internship as a favor already delivered.

The cost to other applicants was concrete. In another Korean hiring request, the order described a banker acknowledging that a competing candidate performed better in interviews, then pressing for the referred applicant to protect the client’s business.

A Client’s Daughter Became a Banker’s Acquaintance

The agency alleged that Barclays employees changed hiring records to conceal the source and purpose of referrals. In one example, a banker sought a job for the daughter of an executive at a private Korean bank after a colleague described a promise of future business. The approval application instead identified her as an acquaintance of a Barclays banker.

The altered relationship mattered because the work experience application required the business to identify client referrals and explain the business reason for the hire. According to the order, the daughter entered the program and Barclays subsequently handled a bond transaction for the client. A recruiter reading the application would see a different relationship from the one the bankers discussed.

Adding a certification did not settle the problem. The order said that in March 2012, Barclays began requiring an attestation that the hire was not intended to obtain or retain business. The agency said bankers sometimes signed inaccurate attestations, and compliance sometimes approved accurately disclosed requests despite pending or potential business.

The SEC’s Accounting Findings Reached the Hiring Forms

The Barclays order’s books-and-records findings centered on inaccurate candidate questionnaires and attestation forms. The agency said employees submitted, reviewed and approved documents that failed to disclose the real source of candidates and the intended purpose of certain hires. The records at issue included the paperwork used to authorize employment.

The internal-controls finding addressed how those decisions passed through the bank. The agency said Barclays recognized the corruption risk and wrote policies against using employment to win business, but failed to implement an adequate system to enforce them. One compliance officer acknowledged that he never reviewed pending client business when considering referrals, even though he could access that information.

That missing comparison runs through the case. In a referral involving the daughter of a Chinese state-owned enterprise executive, the order described a poor interview result and a recommendation against hiring her. The relationship banker nevertheless emphasized the business her connections could bring, and compliance approved an offer conditioned on a confirmation that she would be hired for her qualifications. The agency said it found no evidence that the business provided that confirmation, yet Barclays offered her a graduate position.

What an Insider Can Connect

The useful evidence connects the hiring decision to the client decision. An application, an approval and a fee entry each show part of what happened. In Barclays’s case, the agency connected them with emails stating why a banker wanted the candidate hired and what the client could deliver.

For a recruiter, banker, compliance employee or auditor, the connections are concrete:

• The request and the applicant. Who asked for the placement, the candidate’s relationship to that person, and the interview assessment before an exception.
• The approval and what it left out. The referral form, the attestation, the information sent to compliance and any separate messages about the client’s business.
• The employment benefit and the banking return. The offer or program placement, the live pitch, the client’s selection of the bank and the fees booked afterward.

A state-owned enterprise can be both a banking customer and the workplace of a foreign official. In the Korean bond example, the order identified the father as both a foreign official and a key decisionmaker. Connecting his role to the mandate explains what the requested internship was supposed to buy.

Whistleblower research gives another reason to take the employee’s view seriously. The March 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, studied firms exposed to state False Claims Acts through state pension-fund investment. It estimated a 5% to 9% reduction in accounting-fraud likelihood, using measures of accounting manipulation. Here, an insider’s value lies in understanding the business purpose that an approved form concealed.

The Settlement Terms and the Business Incentive

The order described a private-client referral that global compliance had already identified as a hiring decision made by business contacts before human resources processed it. In the agency’s account, the candidate had been rejected in the formal competition but nevertheless received a formal summer internship offer. Barclays then booked over $2.6 million in revenue from that client’s business in May 2013.

The Securities and Exchange Commission imposed a $1,500,000 civil penalty for the entire matter. We see the problem in that comparison: the penalty was smaller than one client’s booked revenue.

JPMorgan Tracked the Hires Against Revenue

JPMorgan supplies a close comparison because its Securities and Exchange Commission order described bankers tracking referrals against investment banking revenue. In that separate matter, the agency also found that staff edited questionnaires to make them pass scrutiny and supplied forms with prefilled answers denying an expected benefit. One internal message made the business expectation explicit:

The comparison is the gap between the approval record and the business expectation. The agency’s JPMorgan account included spreadsheets matching hires to client revenue; its Barclays account included messages invoking an intern slot to demand a place in a bond deal. Someone who understands the recruiting file and the client account can explain why those records belong together.

Whistleblower Rewards Follow the Program

The SEC whistleblower program can pay eligible whistleblowers awards totaling 10% to 30% of the money collected in qualifying cases. Separately, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. Barclays’s settlement was an SEC action. We help you build a case around what you know and identify the whistleblower program that fits.

You Know Why the Hire Was Pushed Through

If you saw a hiring exception tied to a client pitch, speak with our whistleblower experts about why that hire went through. We build your strongest case around the requests, approvals and banking business, bring in Foreign Corrupt Practices Act whistleblower lawyers who understand those records, and stay beside you through the process.