A Barclays Bank trading managing director who claimed he was ‘scapegoated’ by gross misconduct allegations after a regulatory probe was substantively and procedurally unfairly dismissed, the East London Tribunal has ruled.
David Fotheringhame was employed as managing director of Barclays’ Electronic, Fixed Income, Currencies and Commodities Trading Business from 13 September 2010.
On 15 September 2016, he was dismissed for gross misconduct allegations that followed a financial regulatory investigation into the bank’s ‘Last Look’ (LL) sales system, which allows the bank to momentarily pause trading requests.
According to the tribunal, the New York State Department of Financial Services (DFS) launched an investigation into the LL system in early 2015, on suspicion that the bank was using it as a general filter to reject customer orders that Barclays predicted would be unprofitable to the bank.
Barclays was investigated on allegations that it misused its automated forex trading system to reject those unprofitable orders after a client committed to a trade at a quoted price.
The investigation outcome risked Barclays’ New York State bank licence being revoked, which would have lost its presence in a key global financial centre. The bank settled the investigation around 17 November 2015 with a $150m civil penalty payment and a consent order between the bank and the DFS.
The bank stated: “A Barclays managing director and global head of Electronic, Fixed Income, Currencies and Commodities Automated Flow Trading has been suspended but remains employed by the bank. The DFS orders the bank to take all steps necessary to terminate this individual, who played a role in the misconduct discussed in this consent order.”
The statement also said that if it was not feasible for Barclays to dismiss the managing director, he would not be permitted to hold any duties, responsibilities or activities involving compliance or operations.
Following the DFS investigation, Barclays commenced a disciplinary procedure with Fotheringhame on 30 November 2015, which led to his dismissal for gross misconduct.
The bank made seven misconduct allegations. These included Fotheringhame behaving with a lack of transparency about the LL system, fostering a “distrustful and closed” environment among the team that was “not professional or collaborative”, taking a negative attitude towards the bank’s clients and misusing the system as a “profit opportunity”.
After being invited to a disciplinary hearing by the bank, and informed that this could result in his dismissal, Fotheringhame asked to be given additional documents for the meeting.
He had seen a New York State DFS press release dated 18 November 2015, confirming that the bank had been instructed to take all steps necessary to terminate employment of the managing director and global head of electronic fixing currencies and commodities. He had also seen the DFS consent order dated 17 November, which repeated that requirement, and believed he was the individual it referred to.
“It seemed clear that the outcome of the disciplinary action was a foregone conclusion,” Fotheringhame told the tribunal. “The bank was simply going through the motions, to give the appearance of acting reasonably.”
Among the documents Fotheringhame requested was a database of emails he had sent during his time at the company, a full list of compliance breaches recorded against his name, notes from internal meetings at the bank where his conduct was discussed and the complete subpoena response to the New York attorney general.
However, the bank failed to disclose these documents. HR director Sonya Bonniface told Fotheringhame that his request for the entire email database was too broad for them to comply with, and that the relevant communications had been provided in the existing disciplinary hearing bundle.
Bonniface also refused to supply transcripts of interviews with Barclays staff, describing them as “confidential”.
She failed to release the subpoena files, or communications between the DFS and Barclays regarding the LL investigation. The bank told Fotheringhame he could raise these issues at the disciplinary hearing, if he so wished.
Fotheringhame’s disciplinary hearing was delayed until March 2016, when the bank appointed John Mahon as the independent hearing manager.
Mahon contacted Fotheringhame to say the hearing would be independently determined on the basis of evidence in the file, not the press release by the DFS.
The disciplinary process took place across a series of meetings from March until June 2016. On 18 August 2016, Bonniface said the bank was “upholding all allegations” against Fotheringhame for misconduct over the LL system.
In September 2016, the bank’s legal team disclosed that Mahon had recommended Fotheringhame be dismissed. It added: “The members will recall that the terms of the DFS November 2015 order required Barclays to ‘take all steps necessary to terminate’ DF’s employment.”
Fotheringhame was dismissed on 15 September 2016 for alleged gross misconduct.
Fotheringhame said he would appeal the decision, and lodged a grievance against the disciplinary process, but the bank rejected his grievance in February 2017.
He lodged an unfair dismissal claim against Barclays on 7 March 2017 on the grounds that he was fired because of the DFS consent order, as opposed to any action of gross misconduct.
The tribunal heard his case between 8-12 and 15-16 January 2018. At the hearing, he claimed that he was "sacrificed [by the bank] to appease the New York State DFS”.
While the tribunal judgment, published on 23 March 2018, said it did not believe that Fotheringhame was entirely innocent of gross misconduct, the judge found that Barclays’ decision to dismiss fell outside the “band of reasonable responses” test required to prove a fair dismissal.
“There was substantive unfairness in the respondent’s decision on each one of the allegations,” the judge stated. “Even taking all the allegations together, the respondent’s decision to dismiss the claimant was outside the range of reasonable responses.
“In light of the managers’ attitudes, the claimant, judging the matter for himself according to the ordinarily accepted standard of morality of the time, could not have recognised dismissal as a predictable consequence.”
Barclays was found by the tribunal also to have acted unreasonably in failing to disclose the documents requested by the claimant.
“I decided that the respondent acted unreasonably in failing to disclose the documents the claimant requested,” said the judge. “Conducting a search for emails mentioning symmetry was fundamentally required to establish what action the claimant took. This request covered a discreet topic. It was not an onerous request...”
Evidence given by Mahon was found to be inconsistent with Fotheringhame's letter of dismissal.
The tribunal also noted the broad wording of its policies and disciplinary procedure in contending that Fotheringhame had breached appropriate standards and should have been dismissed.
“I decided that the claimant’s failures were culpable and blameworthy because of the level of risk, in the form of regulatory sanctions, posed by failures to control the business. They clearly did contribute to his dismissal,” the judge said.
“I considered that it was appropriate to reduce the claimant’s basic and compensatory awards by 20 per cent for this less extensive failing, in respect of one allegation only.”
Emma O’Leary, employment law consultant for the ELAS Group, told People Management: “A fundamental and longstanding requirement of the authorities on unfair dismissals is that the dismissal must fall within the band of reasonable responses available to the employer.
“However, [the tribunal] found 20 per cent of the claimant’s conduct did contribute to his dismissal and they will be reducing his monetary award accordingly at the remedy hearing set for May.
“This case shows the importance of the punishment fitting the crime. The test is how a reasonable employer would have acted and treated those reasons as sufficient for dismissal – and Barclays simply fell short.”
A remedy hearing is set for 9-11 May 2018.
Barclays did not respond to People Management’s request for comment.