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Barclays C.E.O. Faces U.K. Inquiry on Jeffrey Epstein Ties

British banking regulators want to know if the chief executive of Barclays has been honest about his relationship with Jeffrey Epstein.

Barclays said on Thursday that regulators were investigating how its chief executive, James E. Staley, had described to bank officials his ties with Mr. Epstein, the financier who killed himself in August after facing new allegations of sex trafficking of underage girls.

Mr. Staley, one of a handful of prominent Wall Street financiers who have been linked to Mr. Epstein, said he had been fully forthcoming about their relationship, which he said had ended before he arrived at the bank five years ago.

“I feel very comfortable, going back to 2015, I have been transparent and open with the bank,” he said on a conference call with analysts on Thursday. Mr. Staley did not respond to messages seeking comment.

The bank’s announcement of an investigation by regulators including the Financial Conduct Authority, the main overseer of banks in Britain, was another black eye for Mr. Staley, who is the latest Barclays chief to have regulatory troubles. John S. Varley faced regulatory and legal charges over capital infusions from the Persian Gulf nation of Qatar, and Robert E. Diamond Jr. was caught up in the LIBOR-rigging scandal.

Even as Mr. Staley has cut costs and bolstered the company’s commitment to investment banking, his tenure has been marked by a series of questions over his judgment. The bank and Mr. Staley were both fined by regulators over a whistle-blower scandal, and other stumbles have prompted some shareholders to demand his resignation.

In a statement, Barclays said it believed that “Mr. Staley has been sufficiently transparent with the company as regards the nature and extent of his relationship with Mr. Epstein.” Mr. Staley, the bank said, retained the full confidence of its board.

The inquiry began sometime last year when the Financial Conduct Authority contacted Barclays with questions about Mr. Staley’s relationship with Mr. Epstein, according to the bank’s annual report, which was published Thursday.

Barclays responded to the regulator’s questions, but some element of that response raised questions within the agency, according to a bank official who spoke on the condition of anonymity. A more formal investigation then began in December.

Thursday’s announcement undercut a positive earnings report from the bank. Total income for 2019 rose 2 percent, and profit after taxes rose 30 percent for the year. Barclay’s shares ended the day down 1.7 percent.

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Credit…New York State Sex Offender Registry, via Associated Press

Mr. Epstein portrayed himself as indispensable to corporate executives and built up a small but powerful finance network, which Mr. Staley remained a part of even after Mr. Epstein’s 2008 guilty plea to a charge of soliciting prostitution from a teenage girl. The men had known each other since at least 1999, when the future Barclays chief was running the private banking business of JPMorgan and using Mr. Epstein to connect with potential clients.

The relationship was close enough that Mr. Staley visited Mr. Epstein about 10 years ago, while he was serving time in Florida for soliciting prostitution from a minor. The visit occurred at Mr. Epstein’s Palm Beach office, where he was allowed to serve part of his 13-month sentence. They were still close enough in April 2015 for Mr. Staley and his wife, Debora, to sail their boat to Little St. James, Mr. Epstein’s private island. Mr. Staley was named chief executive of Barclays that December.

Among others, Mr. Epstein connected Mr. Staley with Glenn Dubin, who ran Highbridge Capital Management, a hedge fund in which JPMorgan bought a majority stake in 2004. The deal elevated the asset management division that Mr. Staley ran at JPMorgan into a major player in the hedge-fund world. (Mr. Dubin, who married a former girlfriend of Mr. Epstein’s, Eva Andersson, left JPMorgan in 2013. He left his most recent venture, the hedge fund Engineers Gate, last month, saying he wanted to focus on his family office.)

Mr. Epstein invoked his relationship with Mr. Staley as part of his own business maneuvers. He listed Mr. Staley and JPMorgan as references when he applied for a license to set up a bank, Southern Country International, in the Virgin Islands in 2013. Mr. Staley’s spokesman said he was unaware of this at the time.

Until Thursday, Mr. Staley’s history with Mr. Epstein had not appeared to pose a serious threat to his leadership. (Indeed, their ties were known as of the middle of 2015, when Mr. Staley was merely a contender for the Barclays position.)

But Mr. Staley’s tenure has faced other bouts of turmoil.

In 2016, he tried to unmask a whistle-blower who had criticized one of his senior hires. That led to a fine of $15 million for Barclays from New York’s banking regulator, which said that it had uncovered “shortcomings in governance, controls and corporate culture” at the bank. British bank regulators also fined Mr. Staley about $1.5 million and required the bank to submit reports on parts of its whistle-blowing program.

Mr. Staley also upset a big client, Kohlberg Kravis Roberts, in 2016 after trying to help his brother-in-law’s business interests.

His conduct is now under scrutiny by the Financial Conduct Authority, whose responsibilities include assessing the “fitness and propriety” of senior executives at financial institutions. Among the qualities the regulator looks at, according to its website, is honesty, “including openness with self-disclosures, integrity and reputation.”

In August, Mr. Epstein killed himself while in a Manhattan jail, where he was being held awaiting trial on federal sex trafficking and conspiracy charges. He had been charged by Manhattan prosecutors in July with sexually exploiting dozens of women and girls in New York and Florida.

Those accusations involved actions up to 2005. A lawsuit filed last month by Denise N. George, the attorney general of the Virgin Islands, cited further evidence that Mr. Epstein had sexually abused and trafficked hundreds of young women and girls on his private Caribbean island, some as recently as 2018.

A judge in the Virgin Islands who is overseeing the administration of Mr. Epstein’s $635 million estate is considering a proposal to establish a compensation fund for his accusers. Ms. George is seeking to block that effort, contending the executors of the estate are conflicted because they were longtime business advisers to Mr. Epstein.

Michael de la Merced, Kate Kelly and Matthew Goldstein contributed reporting.

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James Staley, Barclays C.E.O., Faces U.K. Probe on Jeffrey Epstein Ties

Barclays said on Thursday that British financial regulators were investigating the relationship between James E. Staley, its chief executive, and Jeffrey Epstein, the financier who killed himself last August after facing new allegations of sex trafficking of underage girls.

In a statement filed with the London Stock Exchange, the British bank said the Financial Conduct Authority and the Prudential Regulation Authority had begun an investigation into the relationship, which is ongoing.

“As has been widely reported, earlier in his career, Mr. Staley developed a professional relationship with Mr. Epstein,” the statement said. Barclays added that Mr. Staley, who is known as Jes, had told the bank that he had had no contact with Mr. Epstein after taking the top position at the lender in December 2015.

In its filing, Barclays said regulators were examining how Mr. Staley characterized the relationship with Mr. Epstein to the company, as well as what the company subsequently told the Financial Conduct Authority about it.

Barclays, the statement said, “believes that Mr. Staley has been sufficiently transparent with the company as regards the nature and extent of his relationship with Mr. Epstein.” It added that Mr. Staley retained the full confidence of the bank’s board.

The bank’s shares were trading about 2.6 percent lower on Thursday.

Mr. Staley had known Mr. Epstein since at least 1999, when the future Barclays chief was running the private banking business of the Wall Street bank JPMorgan. He was one of a handful of prominent Wall Street financiers linked to Mr. Epstein, who portrayed himself as indispensable to corporate executives and built up a small but powerful finance network.

Image
Credit…New York State Sex Offender Registry, via Associated Press

The relationship was good enough that Mr. Staley visited Mr. Epstein about 10 years ago, while he was serving time in Florida for soliciting prostitution from a minor. The visit occurred at Mr. Epstein’s Palm Beach office, where he was allowed to serve part of his 13-month sentence. Over the years, Mr. Epstein referred dozens of wealthy clients to Mr. Staley and JPMorgan.

Among others, Mr. Epstein connected Mr. Staley with Glenn Dubin, who ran Highbridge Capital Management, a hedge fund in which JPMorgan bought a majority stake in 2004. The deal elevated the asset management division that Mr. Staley ran at JPMorgan into a major player in the hedge-fund world.

Mr. Epstein also listed Mr. Staley and JPMorgan as a references when he applied for a license to set up a bank. Mr. Staley’s spokesman said he was unaware of this at the time.

Mr. Staley was named C.E.O. of Barclays in 2015, becoming the fifth chief executive in about seven years at a bank that had suffered from regulatory troubles and involvement in the Libor-rigging scandal.

He has reshaped the bank, cutting costs and bolstering the company’s commitment to investment banking. But his tenure has also been marked by a series of questions over his judgment.

In 2016, he tried to unmask a whistle-blower who had criticized one of his senior hires. That led to a fine of $15 million from New York’s banking regulator, which said that it had uncovered “shortcomings in governance, controls and corporate culture” at the bank. British bank regulators also fined Mr. Staley about $1.5 million and required the bank to submit reports on parts of its whistle-blowing program.

Mr. Staley has also fallen for an email from a prankster who posed as the chairman of Barclays, and he upset a big client, Kohlberg Kravis Roberts, after trying to help his brother-in-law’s business interests. Those stumbles have spurred some shareholders to demand his resignation along the way.

In August, Mr. Epstein killed himself while in a Manhattan jail, where he was being held awaiting trial on federal sex trafficking and conspiracy charges. He had been charged by Manhattan prosecutors in July with sexually exploiting dozens of women and girls in New York and Florida.

Those accusations involved actions up to 2005. A lawsuit filed last month by Denise N. George, the attorney general of the Virgin Islands, cited further evidence that Mr. Epstein had sexually abused and trafficked hundreds of young women and girls on his private Caribbean island, some as recently as 2018.