More accusations for Barclays to answer

This document, WhistleBlowing Statement (short form), from which I have removed all supporting emails, was sent to me by Anonymous. It is a copy of an email sent to the FSA on 28 June 2012 – the day after, it is worth remembering, Barclays was fined £290m for manipulating Libor (the interbank lending rate on which the cost of all of our own loan repayments is based).

Barclay’s share value has plunged 17% on this news, and Bob Diamond’s position as CEO is considered precarious. The document I have, however, suggests that Barclay’s has not been reluctant to manipulate its share price in the other direction.

This document accuses Barclays of misrepresenting the state of the integration of Lehman’s systems (acquired less than 5 months earlier) with its own systems. Lehman’s was acquired on 16 September 2008, the day after it entered bankruptcy protection. On 22 January 2009, Barclays stated, “Barclays Capital, the investment banking division of Barclays PLC, today announces that it has completed the integration of the North American businesses of Lehman Brothers acquired in September 2008. As the final step in the integration, it has…”

Successful integration of the two worldwide financial organizations would lead to an efficient and effective company – but 5 months is an unbelievably short time to integrate such systems; and according to this document it should not have been believed.

Nevertheless, Barclays made the announcement and its share value immediately rose from a low of 51.20 on the 23 January 2009 to 88.70 on the 26 January 2009. “It was one of the speediest merger integrations in Wall Street history,” commented the New York Times at the time. And that’s because, according to the whistleblower, it never happened.

The author of the document was working for Barclay’s Capital at the time. He was involved in the integration.

I witnessed extreme pressure to complete the integration deliveries in any shape or fashion before February. Project governance and any professional integrity were sacrificed at every stage to demonstrate unrealistic/ inaccessible levels of success…

It is my belief that a meaningful completion was never fully achieved during the time boxed period up to the profit announcements made in February and that work pieces of it were moved to Day 3 because they could not be achieved within the required time frame. In other words integration work was being conveniently represented in this non industry standard format so that integration of the Banks systems could exist in different stages of completeness but still be represented as completed to interested parties external to BC.

Strangely, a report in Computerworld dated more than a year after Barclays’ own announcement, starts “Barclays has completed the integration of collapsed bank Lehman Brothers’ North American operations,” something that Barclays says it achieved more than 12 months earlier.

It is worth reading the Computerworld report together with the earlier Barclays announcement – and the whistleblower statement.

The whistleblower document has been sent to the FSA, complete with dozens of supporting emails. It is a serious accusation; and one that both Barclays and the FSA will need to address. Particularly, I repeat, because this comes to light just one day after Barclays is fined £290m for falsely manipulating the Libor rate for its own benefit.