Key Barclays Officer Left to New Bank

By DAVID ENRICH And MAX COLCHESTER

LONDON—An interest-rate-fixing scandal this summer felled a number of Barclays BARC.LN +0.32%PLC executives. But a top Barclays compliance official, who was notified in 2008 about problems brewing within the bank, is now in a similar senior position at another major bank.

Back then, employees warned Stephen Morse, who was the head of compliance at Barclays Capital, the U.K. lender's investment-banking arm, that Barclays was trying to fudge the London interbank offered rate, or Libor, according to internal bank emails and regulatory documents that have been made public, as well as people familiar with the matter.

 

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A pedestrian passes a Barclays branch in London near Canary Wharf.

 

Barclays in June agreed to pay about $450 million in a settlement with U.S. and British regulators over the Libor matter. The settlement agreement doesn't mention any Barclays employees by name but the regulators criticized the department headed by Mr. Morse for failing to act on employees' concerns about manipulation.

Other bank executives were pushed to resign over the scandal, including former Chief Executive Robert Diamond. But in late 2011 Mr. Morse moved to another, arguably bigger job. He is now head of compliance for Toronto-based TD Bank Group.

With about 806 billion Canadian dollars ($822 billion) in assets, TD is the second-biggest bank in Canada and one of the world's largest. It runs asset-management and banking operations in Canada, the U.K. and the U.S.

Mr. Morse didn't respond to repeated requests for comment. A TD spokesman confirmed that Mr. Morse is the bank's chief compliance officer but declined to comment further.

With a wave of new rules being imposed on the banking industry in response to the financial crisis, demand for experienced compliance executives is intense. But some experts say that, given the troubles at Barclays, it is worrisome that Mr. Morse is now in charge of ensuring that another major international bank adheres to laws and regulations. "It's extremely troubling, but this is sadly how it goes," said Michael Mainelli, a professor of commerce at the U.K.'s Gresham College.
 

Others say Mr. Morse's connection to the Libor saga may actually be a plus—for both his new employer and his own career. "You probably couldn't find anyone with better experience, so just because someone had a bad run, it shouldn't stop the move," said Peter Hahn, a finance lecturer at Cass Business School in London.

Chief compliance officers are responsible for ensuring that banks and their employees adhere to an array of laws and regulations. At TD, Mr. Morse's compliance department is charged with, among other things, "ensuring that key day-to-day business controls comply with applicable legislation," according to the bank's annual report.

Mr. Morse's alleged role in the Libor controversy—and his current job at TD—has remained mostly in the background, in part because the June settlement agreement didn't single out executives by name.

In July, former Barclays chief operating officer Jerry del Missier told a parliamentary committee that Mr. Morse had been informed about Libor-manipulation concerns but never followed up. Mr. Morse didn't appear before the committee or respond publicly to the remarks. Mr. del Missier left the company in July amid fallout from the case.

Mr. Morse joined Barclays Capital's compliance team in London in 2002 after working at Credit Suisse Group AG in New York. Within Barclays Capital, the former rugby player was known affectionately by some colleagues as "Morsey," say people who worked with him.

In September 2008, Barclays agreed to buy the North American operations of Lehman Brothers out of bankruptcy proceedings. Mr. Morse spent much of that autumn stationed in New York, where Lehman was based, overseeing the integration, the people said. A trade publication, Compliance Reporter, later named Mr. Morse its 2008 "Compliance Leader of the Year," crediting him with executing a seamless transition.

But around the same time, trouble was bubbling up within Barclays.

Starting in late 2007 and escalating in 2008, some Barclays employees voiced concerns that Barclays and other banks were submitting false data as part of the Libor calculation process, according to Barclays's settlement with the U.K. Financial Services Authority.

In the settlement agreement, the FSA criticized Mr. Morse's compliance department for not acting sufficiently on those concerns.

In October 2008, as Mr. Morse was busy with the Lehman deal, the Libor concerns flared up again. A Barclays Capital employee emailed a group of superiors, including Mr. Morse, raising concerns about being instructed to lowball Libor but saying that he intended to follow orders, according to a copy of the email that was released by a parliamentary committee.

Mr. Morse responded five days later from New York. "We obviously need to make sure we follow the…rules," he wrote. Mr. Morse said in the email that he would "take that up with senior management this week."

The FSA report said that there was no follow-up beyond the email. "The relevant individual in Compliance thought his email would suffice to 'nip it in the bud,'" the FSA wrote.

As investigations into Libor manipulation were gaining steam in April 2011, TD offered Mr. Morse a job based in Toronto as its head of compliance. Mr. Morse accepted and officially left Barclays last October.

"Stephen Morse has decided that now is the right time to pursue other interests outside the firm," a Barclays executive, Benoit de Vitry, wrote in a memo to staff at the time. "Stephen has been a great colleague and excellent counsel to the firm and will leave Barclays Capital with a robust compliance function and strong links to our regulators."

—Caroline Van Hasselt contributed to this article. Write to David Enrich at david.enrich@wsj.com and Max Colchester at max.colchester@wsj.com

A version of this article appeared September 21, 2012, on page C1 in the U.S. edition of The Wall Street Journal, with the headline: Key Barclays Officer Left To New Bank.