Barclays' Jerry del Missier: evil or stupid?

Evil or stupid? Canada’s Jerry del Missier resigned in disgrace just days after becoming Barclays COO. Is he a ‘casino banker’ kingpin—or just collateral damage of his CEO’s ambition?

(Sang Tan/AP)

Those who know Jerry del Missier describe him the same way: quiet, humble, and very smart. His personality made him a rarity in the aggressive, ego-driven world of finance, but it never held him back. After 15 years working in the investment banking division of British financial giant Barclays PLC, del Missier was named chief operating officer on June 22. The appointment expanded his responsibilities across the entire company and hinted he was being groomed to one day take over as CEO.

His success was short-lived. On July 3—less than two weeks after receiving his promotion—del Missier suddenly resigned. The 50-year-old followed his boss and close confidant Robert Diamond out the door, engulfed in a scandal that continues to rock Barclays. The Sudbury, Ont., native has now been branded a “disgraced” executive by the British financial press, and Barclays has paid approximately US$450 million in fines to authorities in the U.S. and U.K. after admitting its traders sought to manipulate a critically important interest rate.

It was an uncharacteristically dramatic end to a career built on quiet competence, and it leaves friends and colleagues alike wondering the same question: what, exactly, happened here?

Behind del Missier’s flameout at Barclays is something called the London Interbank Offered Rate. Though previously obscure outside financial circles, LIBOR is a crucial benchmark, and a barometer of the health of the financial system. Every day, the British Bankers’ Association asks a panel of the world’s biggest financial institutions to submit the rate at which each one thinks it can borrow funds. The top and bottom rates are discarded, and the rest are averaged to arrive at LIBOR. That number influences the rates on trillions of dollars worth of mortgages, loans, derivatives and other financial products.

Starting in late 2008, regulators around the world launched investigations into LIBOR manipulation; Barclays is the first bank to settle. Between 2005 and 2007, investigators found, Barclays derivatives traders worked with the company’s rate submitters—and even outside traders—to put in artificially high or low rates to benefit whatever positions they held in the market. Senior employees later told subordinates to push submissions lower so the market wouldn’t assume the bank was having trouble financing itself. Del Missier, who served as co-president of the investment bank at the time, claimed to be unaware of all of this. The British regulator cleared him of wrongdoing, but his involvement in the LIBOR mess is confounding. During the height of the financial crisis in October 2008, del Missier did in fact order traders to submit false rates. He did so only after his boss, then CEO Bob Diamond, relayed the contents of a conversation he’d had with a senior official from the Bank of England. Del Missier says he mistakenly concluded the central bank wanted Barclays to lowball its rates to fall in line with its peers. A high submission could have signalled Barclays was having funding problems during an incredibly fragile period.

It was a colossal and career-ending error. “I am genuinely surprised to see him caught up in this,” says a former Barclays colleague. Though he spent the bulk of his career at Barclays in London, del Missier seemed to carry with him the hallmarks of Canadian banking: prudence, responsibility and a certain dullness. “Jerry was boringly competent at his job,” recalls another former colleague. How could an intelligent and proficient guy like del Missier have made such a huge mistake? To shift blame to the Bank of England and chalk it up to a miscommunication with Diamond strains credulity for some.

On July 16, del Missier was summoned to testify about Barclays before the Treasury committee of the U.K. Parliament. “Can you understand why people think this is either some monumental incompetence or a very cynical conspiracy?” asked MP Andrea Leadsom. Del Missier didn’t answer the question directly. “I can understand, given the circumstances that we find ourselves in, that there is resentment toward Barclays,” he said. Another MP asked if he was serving as the fall guy for Diamond, taking the blame for an order his boss had actually given. “I’m not the fall guy for anything,” he responded.

What is clear is that del Missier was a trusted member of Diamond’s inner circle, and devoted to Barclays. In 2007, he spent two weeks trekking to the top of the Mera Peak in the Himalayas, 6,476 metres above sea level. At the summit, he planted a giant flag bearing the Barclays logo. It was his idea, not the bank’s. As he told Canadian Business in 2008, “I’m a company man.”

Del Missier originally completed a bachelor’s degree in chemical engineering at Queen’s University in 1985, but found himself drawn to financial markets instead, and decided to pursue an MBA. “He and I were the only two out of 105 classmates that were interested in corporate finance,” recalls Michael Shafron, who graduated alongside del Missier in 1987. He quickly became known as a derivatives trading wunderkind after stints with the Bank of Nova Scotia and Bankers Trust before Bob Diamond, a charismatic American, wooed him away to Barclays in 1997. At the time, Diamond was essentially building the company’s investment bank, then dubbed BarCap, from scratch. Del Missier, as head of global derivatives, built commodities and foreign-exchange trading desks, and expanded into other highly structured, arcane financial products. BarCap was the fastest-growing major investment bank in the world between 2000 and 2007, generating the bulk of the profits within the Barclays group. Inside BarCap itself, del Missier’s operations were the biggest money-makers.

He was known as Diamond’s right-hand man, though the two couldn’t be more different. Del Missier was the unassuming Canadian; Diamond was the brash, swaggering American. Screaming fits were not uncommon for Diamond, but unheard of for del Missier. Bernard Manson, a former colleague, recalls del Missier repeatedly cancelling meetings with him one time for other obligations. Manson stole his suit jacket and held it hostage until del Missier took the meeting. “He saw me that afternoon and treated it as a humorous incident, rather than getting me sacked,” Manson says.

Del Missier avoided the ego-driven power struggles common to investment banks. In 2004, BarCap was growing so quickly that it had to split its trading desks between two floors. Diamond’s office was to be located on the upper floor, and many senior managers fought with one another to sit close to the boss. Del Missier broke the deadlock by offering to sit on the lower floor. “It was an incredibly smart move because Jerry positioned himself as a force of his own who didn’t need to sit outside Bob’s office for legitimacy,” says an individual involved in the reorganization.

Indeed, Diamond appointed del Missier co-president of BarCap in 2005. He shared responsibility with an executive named Grant Kvalheim, and the British financial press speculated a succession race was afoot. The media had its doubts about the low-key Canadian. “Some say his lack of charisma may be a handicap in moving higher,” wrote the Financial Times. The dual-headed structure didn’t last long. Kvalheim oversaw Barclays’ sub-prime mortgage business, and it turned rotten in 2007 as the financial crisis began. Kvalheim resigned a few months later.

The crisis proved advantageous for del Missier in other ways. BarCap was battered by the turmoil, but emerged in better shape than many of its peers. Insiders credit del Missier’s knack for assessing trading risk with helping Barclays avoid the excesses that sank other banks. The company’s relative strength allowed it to scoop up many of the assets of Lehman Bros. in September 2008 for US$1.75 billion. Del Missier served on a four-man brain trust that hammered out the deal over an intense few days.

Even as he took on more senior roles, del Missier found time for other pursuits. After a mountaineering trip to Nepal, where he was struck by the high levels of poverty, he became involved with a literacy organization called Room to Read in 2008. At the time, it was raising money to pay for the education of Nepalese girls who had broken free from indentured servitude. Del Missier paid for all 400 girls in the program, a number that’s grown to 700. “I’m an unabashed fan of Jerry’s,” says founder John Wood. “A lot of it is because he doesn’t overthink things. In this case, he knew it was the right thing to do.” (Wood declines to say how much del Missier has contributed.) Del Missier has been more open with his donations to Queen’s, his alma mater: $500,000 to the chemical engineering program, and $1 million for the expansion of the Queen’s School of Business campus. He also serves on the business school’s advisory board.

With success came scrutiny, particularly over his compensation. Del Missier became one of the highest paid bankers in London. In 2010, he was awarded £47.3 million, including bonus and stock options, pocketing even more than Diamond. The British press lambasted him as a “casino banker.” The following year, he earned nearly £7-million, even though Diamond admitted Barclays’ shareholder returns were “unacceptable.”

For all of his accomplishments, however, his ambitions at Barclays were a bit of a mystery. Diamond’s drive to lead the company was obvious, and he succeeded last year when appointed CEO of the entire bank. Del Missier was swept along in Diamond’s wake, and seemed content to deliver results whether a promotion came his way or not. “I actually wouldn’t be surprised if you sat Jerry down to ask him about his plan and he’d say there was no plan,” says a former colleague. “It almost felt like whatever Bob asked him to do, he was happy to do it.”

At first, during the early days after Barclays’ LIBOR settlement, del Missier’s resignation seemed unlikely. His promotion to COO indicated the board thought he would stick around, but the directors badly misjudged the outrage the scandal would ignite. A report from the Financial Services Authority in the U.K. released with the settlement revealed the casual nature with which a group of 14 derivatives traders sought to manipulate LIBOR for personal gain. One would even shout across the trading floor to make sure there were no conflicting submissions. Starting in 2007, when senior managers pressured employees to push Barclays’ numbers lower to appear in better financial health, the issue was raised with the company’s compliance department. It was not thoroughly pursued. At that time, the financial press speculated that not every bank’s LIBOR submissions were entirely honest. A Barclays economic strategist even told Bloomberg television in May 2008 that the rates banks were posting had become “a little bit divorced from reality.” None of this prompted del Missier or Diamond to review Barclays’ practices.

On July 2, five days after Barclays paid $450 million in fines, chairman Marcus Agius resigned. Diamond stepped down the next day, followed by del Missier a few hours later. His position was untenable. Given the controversy, Barclays couldn’t employ the only person to admit to ordering false LIBOR rates.

Del Missier’s involvement stems from a phone call in October 2008 between Diamond and Paul Tucker, then the executive director for markets at the Bank of England. The only record of that conversation is a vaguely worded e-mail Diamond sent to del Missier the next day. Tucker told Diamond that senior government officials were concerned that Barclays’ LIBOR submissions were consistently higher than its peers’. Diamond responded that other banks were essentially overly optimistic about borrowing rates, and that Barclays was not in any trouble. He concluded his e-mail with an ambiguous line: “Mr. Tucker stated…that while he was certain we did not need advice, it did not always need to be the case that we appeared as high as we have recently.”

Diamond appeared before the Treasury committee of the U.K. Parliament the day after his resignation, and insisted there was no instruction from Tucker to fudge LIBOR rates. He deftly avoided answering questions about what, precisely, the last line in his e-mail was intended to mean. His concern was communicating to Tucker that Barclays was in good shape, even if its LIBOR submissions appeared high. Tucker testified a week later that he didn’t give an instruction either. Both men essentially blamed del Missier.

When it was his turn to appear before the committee, del Missier said he didn’t act based on Diamond’s cryptic e-mail, but on a conversation the two of them had about Tucker’s call the day before—something his boss neglected to mention. Del Missier stuck to his claim that he was under the impression the Bank of England wanted Barclays to drop its LIBOR submissions lower, and said he passed the order to another employee in the bank. “It did not seem an inappropriate action, given that this was coming from the Bank of England,” he told the committee. The parliamentarians were incredulous. Manipulating LIBOR, by del Missier’s own admission, was unprecedented and highly dubious. How could he have given such a direction without clarifying what exactly Diamond wanted, or seeking the advice of a lawyer? Later during the session, the committee chair asked del Missier if he regretted his unquestioning response to the conversation with Diamond. “To do it over, I would have followed up,” he said.

After grilling del Missier for more than an hour, the politicians failed to bring much clarity to what exactly went through del Missier’s head in October 2008. The cynical explanation is that LIBOR manipulation was so common in Barclays by that point that a request to falsify the rate wouldn’t even have been cause for concern. A more charitable interpretation is that in October of 2008, a whole range of unprecedented things were happening. In that context, maybe it wouldn’t have been so strange for del Missier to think the Bank of England wanted Barclays to bring its LIBOR submissions in line with its peers to avoid triggering further panic in the markets. “The financial system’s equivalent of a white lie, I can see Jerry condoning because he would have believed in the greater good,” says a former colleague.

Del Missier is out of the bank, but he isn’t out of the spotlight yet. British media reported he is set to receive £8.75 million as part of an exit package. Diamond forfeited his bonus, worth up to £20 million, shortly after he resigned, but what del Missier will do is unclear. Politicians are shaming him into refusing the payment. “It is totally inappropriate that he should be rewarded with a substantial payoff,” MP Andrew Love told a British newspaper. Del Missier wasn’t available for comment. (An acquaintance says he is on holiday with family.)

Despite his fall from grace, del Missier still enjoys the support of friends and colleagues. “Jerry remains a trusted adviser and stalwart supporter of Queen’s School of Business, and I continue to hold him in the highest regard,” wrote David Saunders, the business school’s dean, via e-mail. The Queen’s alumni association happens to be holding the 25th anniversary for del Missier’s MBA class this September. The reunion coincides with the official opening of a new wing to the business school, a project to which del Missier contributed $1 million a few years ago. Queen’s won’t say if he’s attending. If he does, del Missier can expect to endure a few whispered comments and awkward questions from his peers. It’s a situation the former rising star, who never sought attention, may prefer to avoid.