When the news broke early this week that Barclays chief executive Jes Staley was leaving the bank following an investigation into his links with Jeffrey Epstein, the question was not about how his appointment had been made untenable, but why it had taken so long.
Epstein took his own life in August 2019 while awaiting trial on charges of sex trafficking, having been given a sweetheart, non-prosecution deal in Florida in 2008 for similar offences. Despite that conviction, allegations going back to at least 1994, and rumours spreading like dark mist for decades, a lot of people seemed to have found it difficult to give up their friendship or connection with him.
This seems to be what has tripped Staley up.
Too close for comfort?
Epstein and Staley are understood to have first come into contact during 2000, while the latter was working at JP Morgan, which was a private banker for the financier.
The BBC reports that Staley described the relationship as ‘professional, with contact starting to “taper off” from about 2013‘. But regulators started investigating the former Barclays chief executive in 2019 after receiving a cache of emails between him and Epstein.
According to CNN Business, “The investigation by the Financial Conduct Authority (FCA) and the Bank of England’s Prudential Regulation Authority (PRA) was disclosed by Barclays in early 2020 and focused on how Staley had characterised the relationship to his employer. Barclays and Staley were made aware on Friday evening by the FCA and the PRA of the preliminary conclusions of their investigation.”
Staley is reportedly going to challenge those conclusions by the FCA and, so the story goes, he and Barclays have agreed to part ways.
That is not to say that he will be struggling financially. Barclays has confirmed that “Staley is entitled to 12 months’ notice […] and will therefore continue to receive his current fixed pay (£2.4m per annum delivered in cash and Barclays shares), pension allowance (£120,000 per annum), and other benefits until 31 October 2022″.
He is also eligible to receive repatriation costs to the US, the bank added in its directorship change notification.
I was supposed to tackle this story from a governance point of view, so here goes: Despite all the honorifics and ethic values that major financial firms, banks, investment houses, politicians, film stars, singers, and seemingly everyone on social media seem to virtue signal nowadays – it still took an investigation two years after Epstein’s death, over a decade after it became known about his crimes, before Barclays decided to part ways with a chief executive known to have had a relationship with him going back decades.
Barclays says that its five Values (they capitalise the ‘v’ to make sure we know they are important) are ‘Respect, Integrity, Service, Excellence, and Stewardship’. They are, the bank says, “[…] our moral compass; the fundamentals of who we are and what we believe is right.”
You have to question how that tallies with your chief executive having close ties with a someone like Epstein. At least it did, until the share price in London dropped 3.7% this week after going up 35% since the beginning of the year.
The problem that Barclays seems to have had is not that Staley knew Epstein, but that a regulator got suspicious about how long they were in touch. And let us not forget, Staley is not the only one. The New York Times found that Bill Gates and Epstein were friends between 2011 and 2013.
Epstein also had links with former US president Bill Clinton, of which the latter has admitted taking a ‘total of four trips’ with Epstein nearly 20 years ago (a number that has been questioned by Gawker and Fox).
This is a story that seems to spread its tentacles everywhere, including the British Royal Family. Last month, the Metropolitan Police announced that it would take no further action against Prince Andrew following allegations by Virginia Giuffre that she had been forced to have sex with the prince when she was 17.
He is, however, still facing a civil case in the US.
Back to Staley, who does not seem to have been a particularly ethical chief executive. He will take his severance, his money, and probably go back to the US. But he leaves behind some tough questions for companies to ask – both of themselves and the candidates they are considering for high-profile roles.
Governance constitutes one third of the ubiquitous ESG acronym but tends to be overlooked in favour of its more easily quantifiable siblings – environmental and social.
The Staley/Epstein saga offers a jarring reminder that friendships, contacts, decisions, memos, emails, conversations and everything else in between can come back to haunt people – especially those in positions of authority or power.
Staley’s connection to Epstein was known at the time he became Barclays group chief executive in December 2015. The disgraced financier was arrested in July 2019 – taking his own life a month later while awaiting trial. Surely an opportune moment to revisit your chief executive’s ties to the man.
In the directorship change announcement, the bank stated: “It should be noted that the investigation [by the FCA and PRA] makes no findings that Mr Staley saw, or was aware of, any of Mr Epsteins’ alleged crimes, which was the central question underpinning Barclays’ support for Mr Staley following the arrest of Mr Epstein in the summer of 2019.”
So, it appears that Barclays did ask some questions – just perhaps not the right ones.
It is not known what the cache of emails, which lies at the heart of the investigation, contain. But reading between the lines, it appears that Staley’s contact with Epstein did not ‘taper off’ in 2013 as was suggested.
Whatever the outcome, whatever the truth – every major news organisation around the world has covered the story in one way or another. The words ‘Barclays’ and ‘Epstein’ are inexorably linked. As much as Barclays would undoubtedly want to move on from the incident, having swiftly named C.S. Venkatakrishnan to replace Staley, it simply doesn’t work like that.
While governance may have taken a backseat to environmental and social priorities – moments like this serve to remind us that the people in charge of a company are as important to its ESG credentials as the levels of CO2 it emits.