Welcome!
2017-08-26 10:13:02
James Staley’s Series of Unfortunate Events

Days into a two-week sail across the Atlantic Ocean, Seumas Meharg reeled in a 150-pound yellowfin tuna.

As the immense fish flailed on the deck, he tried to dispatch it with a knife. He stabbed the creature once, then took another shot. This time, his hand slipped, and the knife sliced deeply into his fingers.

“I went down to the galley, washed my hand, made a fist, sat down and was quite white,” Mr. Meharg recalled.

The sailboat’s owner, James E. Staley, pulled out a satellite phone and dialed a doctor. Emergency stitches were a must. But help in Africa was three long days away; the Caribbean, a week and a half.

So Mr. Staley, who is known as Jes, got to work. While another mate did the stitching, Mr. Staley held down his friend and then helped tie the knots and mop up the blood.

That incident, four years ago aboard the Bequia, is typical of Mr. Staley, now the chief executive of the British bank Barclays. Friends and colleagues said he reacts to problems quickly and sometimes impulsively, with dogged loyalty.

Three decades ago, when his brother came out as gay, Mr. Staley began attending Act Up meetings. At the money management division of JPMorgan Chase, he ended a demeaning practice that required people who were fired to leave immediately with their belongings in a box. As a trustee of Bowdoin College, he helped install as president Clayton S. Rose, a longtime friend who was seen as an unconventional candidate because he didn’t have tenure and had spent 20 years in banking before starting a second career in academia.

But if Mr. Staley were a character from classical literature, his fidelity would be his tragic flaw.

Since being named the chief executive of Barclays on Dec. 1, 2015, the 60-year-old American has come under investigation by British bank regulators for trying to unmask a whistle-blower who criticized the competency of one of his senior hires. He has lost the confidence of a major client, the powerful private equity firm Kohlberg Kravis Roberts & Company, which was angered by Mr. Staley’s attempt to help his brother-in-law’s business interests — at what KKR regarded as its expense.

On a more prosaic note, he even fell for an email from a prankster, who, posing as the chairman of Barclays, pledged allegiance after a bruising annual investor meeting.

Mr. Staley declined to be interviewed for this article, citing the whistle-blower investigation. But he agreed to let a reporter shadow him for a day while he worked.

“We are done restructuring Barclays,” he said that day in July at a town-hall meeting at the bank’s office in Leeds in northern England. “We are going to make or break it based on what we’re doing today and what we’re doing here, in London, and in New York, and around the world. And I think it’s going to pivot, sort of, the way the bank thinks about itself, because now the only thing that’s going to work is us, if we make it work.”

Mr. Staley’s stumbles have spurred demands from some shareholders for his resignation. During the bank’s second quarter, his asset sales led to a huge loss, which was compounded by disappointing trading results and sizable legal costs. Shares of Barclays are down 13 percent so far this year.

His current quandary is an outgrowth of Barclays’s transformation from a three-century-old British commercial and retail lender, with Quaker roots, into a global banking and trading powerhouse.

In the 1980s, Wall Street banks arrived in London, and the city soon became the hub of global finance. Barclays decided it needed to compete with Goldman Sachs, JPMorgan Chase, Deutsche Bank and the like in trading and deal making. It brought in an American executive named Robert E. Diamond Jr. to build its investment banking business. And in the wake of the financial crisis, it acquired the United States’ operations of the bankrupt Lehman Brothers, giving it a large presence in New York.

While the investment banking business brought growth, it also generated problems with regulators and a heavy legal cost. Mr. Diamond was jettisoned in 2012 after an investigation led to a $450 million fine over allegations that Barclays traders had manipulated an important interest rate benchmark known as Libor, or the London Interbank Offered Rate.

The bank then turned to a retail banker, Antony Jenkins, as a safer steward of its business. But he, too, was ousted after a three-year turnaround effort that was deemed too slow.

How much to emphasize investment banking over Barclays’s traditional banking business in Britain continues to be a source of internal tension.

Running Barclays “is a challenge because of the structure of the bank,” said Richard Portes, an economics professor at the London Business School.

Under Mr. Staley, Mr. Portes said, “it hasn’t changed the strategy in terms of putting weight — a lot of weight — on the investment banking side of the business. Maybe that is a good call. It’s not obvious.”

So far, Mr. Staley has weathered an internal investigation and calls to throw him out at an annual shareholder meeting in May. But his ouster may still come due to an inquiry by a British regulator into his conduct toward the whistle-blower; the results of the inquiry are expected as early as this fall.

In Britain, Barclays still has the cachet of a Goldman Sachs and the reach of a Bank of America. It was a major player in Africa for a century, and introduced the first automated cash machine in 1967. Last year, one of every three pounds spent in Britain was facilitated in some way by a Barclays credit card.

But investigations and management missteps have turned its executive suite into a temporary office. Mr. Staley is the fifth chief executive in seven years.

Despite the trouble, his strategy for reshaping the bank’s operations has won praise from analysts and employees. To cut costs, preserve capital and strengthen Barclays in the eyes of regulators, he sold most of its African operations and cut the quarterly dividend to stockholders. He bolstered the company’s commitment to investment banking, partly by working his own contacts in private equity and at multinational companies.

But these efforts may not be enough.

Mr. Staley was born in Cambridge, Mass., one of the many stops along his father’s career as a plant manager of soap factories for Procter & Gamble. During high school, he was intrigued with politics, staying up late discussing the intricacies of Washington with friends.

It was the 1970s, and the career guide “What Color Is Your Parachute?” had recently been published. “I remember talking to him about the book,” said John Farmer, a high school classmate who remains a close friend, “and he said, ‘I know what color my parachute is. It’s green.’ Meaning money.”

Mr. Staley attended Bowdoin, in Maine, where he majored in economics. To make money, Staley spent two and a half summers mining trona, a mineral used to make baking soda, in Rock Springs, Wyo., where he lived in a tent by the Green River. He spent another summer working for a Pennsylvania congressman on Capitol Hill. But after graduation, he turned to Wall Street.

In 1979, Mr. Staley landed at Morgan Guaranty, a forerunner to JPMorgan that was then primarily a commercial lender and bond dealer with asset-management and back-office services.

He was soon transferred to São Paulo, where he met his future wife, a 19-year-old college student named Debora Nitzan. After graduating from college, Ms. Nitzan worked for her family’s business, an office furniture company called Aceco.

In 1985, Mr. Staley’s younger brother, Peter, was diagnosed as H.I.V. positive. During a painful series of conversations with his family that Thanksgiving, Peter revealed that he was both gay and ill. Jes was one of the last to be told.

“I sheepishly made it clear to him that I was most nervous to tell him, because I regarded him as homophobic,” Peter recalled. “He looked at me quizzically and was baffled by that. He didn’t realize the language he’d been using over the years.”

Jes was determined to make amends. “It was a great opportunity for me to try to make up for the homophobia that he saw in me, to try to embrace what Peter was up against,” said Jes in a Fortune interview last year. He began advising Peter, who had embarked on a new career as an AIDS activist, on strategy.

By 1989, Jes Staley was living in New York again and working to build Morgan into a full-service investment bank. He made a speedy professional ascent. In 2009 he was named to run the entire investment bank, a job reserved for executives with C.E.O. potential.

Managing monster egos and ornery clients was one of his strengths. In 2004, when he engineered JPMorgan’s $1.3 billion investment in the hedge fund Highbridge Capital as a way to increase returns for the bank’s ultrawealthy investors, he preserved the Highbridge team’s generous compensation terms and even prevented members of the bank’s internal real estate division from visiting Highbridge’s luxurious midtown Manhattan offices, fearing that they would alienate the Highbridge staff by insisting on cheaper space.

“Jes understood that he had to run interference between us,” said Glenn Dubin, one of Highbridge’s founders. “And he did that.”

Over a span of several years, the Highbridge deal helped sharply augment the client money JPMorgan Asset Management oversaw.

Heavy hitters weren’t the only ones to win Mr. Staley’s attention. In 2002, after he joined the bank’s operating committee, he halted a decision to force a woman who had been fired from the premises with her belongings in a box, insisting he would fire her manager if such humiliation occurred again. Underperforming employees would be given additional chances to prove themselves in other roles, he promised.

A year or so into Mr. Staley’s tenure at the investment bank, according to associates from that time, a personnel issue arose with another banker that would have ramifications for Mr. Staley years later.

Tim Main, a respected banker who advised financial companies, was under duress from a divorce, according to these associates. Mr. Main was taking prescription medicine, they said, that affected his behavior when mixed with alcohol. During a management meeting with the bank’s chief executive, Jamie Dimon, Mr. Main’s speech was altered as he gave a report, said the associates from that time, and Mr. Dimon was concerned. Mr. Main soon took a sabbatical, they added, then he eventually left JPMorgan altogether.

Mr. Staley, who was two notches above Mr. Main in the bank hierarchy, didn’t know him well but respected the banker’s professional achievements. Months later, when a smaller investment bank, Evercore Partners, called Mr. Staley for a reference, he recommended Mr. Main.

Three years later, Mr. Staley left JPMorgan amid murmurs of discord with Mr. Dimon. He became a partner in the hedge fund BlueMountain Capital. The transition gave him time to pursue outside interests, including sailing the Atlantic with Mr. Meharg and working as a Bowdoin trustee.

In 2014, he was chosen to lead the college’s search committee for a new president. High on the list of candidates from Bowdoin’s recruiting agency, said those involved with the process, was Clayton Rose, an old friend of Mr. Staley’s from JPMorgan who had left banking to pursue academia. He earned a Ph.D., and then a teaching post at Harvard Business School.

Mr. Staley was clearly a fan of Mr. Rose, these people said, but deferred to others through much of the screening process, fearing that a perception of positive bias might work against his old friend. Ultimately, Mr. Rose prevailed, winning the role by a unanimous vote.

“The committee just rallied around Clayton because of his remarkable record of success throughout a varied career,” said Mr. Staley in an announcement of the January 2015 decision.

Soon after joining Barclays, Mr. Staley devised a strategy to cut what he regarded as nonessential businesses, freeze hiring to avoid laying people off, save costs by slashing the bank’s quarterly dividend in half and refocus on both international investment banking and retail finance in Britain.

On Wall Street, the idea of Barclays as a top-tier investment bank had become a stretch. Not only did it rank low among United States-based global advisers on big corporate mergers and stock and bond issuances, it suffered from the perception of a flawed culture, due to its role in the Libor scandal and other regulatory troubles.

At a meeting with executives at the Blackstone Group, the world’s biggest private equity firm, in 2016, Mr. Staley asked what Barclays could do to build up its book of banking businesses, according to people who attended. Providing a $100 million credit facility to one of Blackstone’s energy funds would be a start, replied Bennett Goodman, a co-founder of its credit business.

Though the economics weren’t great, Mr. Staley agreed.

Blackstone soon rewarded Barclays with additional work. At Apollo Global Management, another big private equity firm, the trajectory was similar. The company’s relationship with Barclays has “changed dramatically since he arrived,” said an Apollo founder, Leon Black, referring to Mr. Staley, “which speaks, one, of our relationship, and two, performance begets more business.”

To further bolster the business, Mr. Staley then hired Tim Main to head the financial institutions advisory group within Barclays’s investment bank.

Not everyone welcomed the move. Shortly after it was announced, a letter was sent to Barclays’s independent directors, according to people briefed on its details, complaining about Mr. Main’s behavior during his rough spell at JPMorgan.

When the letter was shared with Mr. Staley, he was troubled. In a note to employees, he said he had believed the intent of its writer was to “maliciously smear” their colleague.

Hoping to defend Mr. Main, Mr. Staley asked fellow executives whether he could investigate the letter writer’s identity, said one of these people. But since the letter was being treated internally as a “whistle blow,” with protections around anonymity and against retaliation, colleagues told Mr. Staley to stand down, this person added.

Yet weeks later, after the internal inquiry into the letter’s allegations had been concluded and Mr. Main’s hiring reaffirmed, Mr. Staley tried again, this time instructing Barclays’s internal security team to track down the writer, Barclays said. The group made some effort, including asking the United States Postal Service for assistance through video footage, said a person with knowledge of its efforts. But ultimately, Barclays said, nothing came of their work.

The following January, Barclays said, another whistle-blower contacted the board. This time, the complainant found fault with the entire whistle-blowing process at Barclays, mentioning Mr. Staley’s handling of the Main letters.

Barclays’s directors hired a London law firm to investigate Mr. Staley’s conduct. According to a statement on April 10, the firm found that Mr. Staley had “honestly but mistakenly” sought to unmask the writer without realizing the impropriety of his actions; the board accepted the explanation.

But some lawyers said the entire chapter constitutes a grave breach of protocol, with broad implications for the bank.

“Seeking to identify the identity of the whistle-blower is a violation of the law,” said Jordan Thomas, chairman of the whistle-blower practice at the New York law firm Labaton Sucharow, “but it also undermines the culture of integrity within Barclays.”

If company executives have a reputation for retaliating against whistle-blowers, he added, “the leadership of Barclays will be disadvantaged because fewer people are going to be telling them about problems. And they’ll learn about problems when they’re at a more advanced stage.”

Nonetheless, the bank’s chairman, John McFarlane, defended Mr. Staley at the annual shareholder meeting in May, even as some Barclays investors attacked the chief executive. “You know me,” said the chairman in a veiled reference to the sacking of Antony Jenkins, Mr. Staley’s predecessor, “if I believe he should go, you know he would go.”

That evening, an entirely different kind of letter — a joke email appearing to be a personal note from Mr. McFarlane, saying “I do feel we’ve ceased the rally for you [sic] head today” — provided a new kind of embarrassment.

Reading emails on his iPad the evening after the annual meeting, Mr. Staley responded enthusiastically to the message. “Thanks for sharing the foxhole with me,” he wrote.

The sender was in fact a disgruntled Barclays customer living near Manchester who was playing a prank. He shared his stunt on Twitter and then with The Financial Times, prompting merrymaking about Mr. Staley’s gullibility.

In recent months, lawyers for Mr. Staley have asserted that the letters objecting to Mr. Main were almost certainly written by someone outside Barclays, according to people with direct knowledge of their strategy — meaning not a whistle-blower in the conventional sense. Their hope, these people said, is that the argument somehow absolves him from the typical company restrictions around whistle-blowing.

Yet as the writer’s identity remains unknown, according to people who were briefed on the efforts to track him or her down, those arguments may fall flat. And with at least four major regulatory reviews now underway, among them probes from the Financial Conduct Authority of Britain and the United States Justice Department, some analysts and lawyers said he’s on the knife’s edge of professional survival.

As if Barclays did not have enough distractions, Mr. Staley has become involved in another embarrassing squabble involving a major client of the bank, KKR.

The dispute centers on KKR’s 2014 investment in Aceco, the company founded by Mr. Staley’s father-in-law decades ago that had gone from office furniture to data storage.

KKR spent $700 million to acquire the company’s debt and buy a majority stake in it from three sellers: Debora Staley, Mr. Staley’s wife; Jorge Nitzan, her brother and the chief executive; and the private equity firm General Atlantic. But Aceco’s fortunes soon turned, and in 2015, facing a cash crunch amid a broader swoon in the Brazilian economy, Aceco stopped paying off its creditors.

By 2016, KKR had written its investment down to zero and was accusing Mr. Nitzan, who had been dismissed as chief executive, of foul play. Mr. Nitzan has denied the accusations, blaming Aceco’s travails on the crashing Brazilian economy. KKR said whistle-blowers had claimed that there was accounting fraud at Aceco. The company has denied the allegations.

Late in 2016, Alex Navab, an executive from KKR, called Mr. Staley to ask that Mr. Nitzan, Mr. Staley’s wife and General Atlantic repay KKR for its investment.

After that call, Mr. Staley felt he was being threatened by Mr. Navab, said someone who was briefed on its details. He asked a friend with his own private equity firm to consider investing in Aceco, which was then bankrupt, with Mr. Nitzan, its potential chief executive once again, said people who were briefed on those conversations. Then Mr. Staley vouched for Mr. Nitzan to two investors he knew who had lost money in KKR’s failed Brazilian endeavor, said people who were briefed on the investors’ conversations.

Mr. Navab was unhappy when they heard of his actions, said someone with knowledge of his thinking at the time. KKR appeared to divert business that might have otherwise gone to Barclays. For Mr. Staley, who has been trying to bolster Barclays’s private equity business, it was a real blow.

On a drizzly Tuesday in July, Mr. Staley was at the Great Yorkshire Show, an annual agricultural fair not far from Leeds. With the whistle-blower investigations hanging over him, he was determined to focus on Barclays’s core business. On that day, it meant visiting a sliding-door manufacturer the bank had helped finance, conducting the town-hall meeting and visiting with farmers for whom Barclays had recently doubled an existing 100 million pound investment pool.

Inside the welcome tent, Simon Theakston, a local beer company scion, poured Mr. Staley a pint of bitter as a plate of hard cheese and Yorkshire pie was offered.

Mr. Staley asked Mr. Theakston whether his company was publicly or privately owned.

“Privately,” the brewer said. “My brothers and I.”

“Now I feel at home,” said Mr. Staley, raising his pint glass. “Cheers.”

After half a drink and a chat with a farming union official, Mr. Staley walked down the muddy grounds of the fair, flanked by managers from Barclays’s agriculture department. They stopped to talk to representatives from a rural charity and a luxury real estate company before strolling through the cattle-judging tents, where the stench of manure was powerful. In one stall, a cow appeared to be giving birth.

“That might be a prolapse,” said one of Mr. Staley’s lieutenants, who walked on, chatting amiably with Mr. Staley about a brown bull’s muscular physique.

Hours later, he was on an express train back to London, sipping a drink with his communications managers and a young aide from his office. During the ride, Mr. Staley held forth on World War II, American politics and recent departures from JPMorgan. The possibility that he might have to leave his new one was not mentioned.

Weeks earlier, he had interviewed Tim Throsby, president of the international unit of Barclays, at a company event in New York, said people who were there. Afterward, one of the employees in the audience asked him what he would have done if he had discovered the author of the letter that criticized Mr. Main.

“I should not have gotten that involved,” Mr. Staley answered, according to a transcript of the remarks. “I’m going to make mistakes. You know, I’m sorry about it, but I’m human.”