Scandalo Barings: lezione umana...

[FaGal]

The human lesson of Nick Leeson's fraud
news.ft.com - By John Gapper and Madsen Pirie - February 17, 2005


Ten years ago today, Nick Leeson had lost £170m of his employer, Barings', money and was about to launch a trading frenzy on the Singapore futures exchange in a doomed effort to dig himself out of the hole. Ten days later, he had absconded and Barings had collapsed under £860m of losses.

These days, Mr Leeson (having served his time in Changi jail and recovered from cancer) makes a living from after-dinner speaking and sidelines such as playing online poker with anybody who wants to challenge a notoriously bad gambler. Despite the fact that he ruined the charitable foundation that owned Barings, he remains unabashed.

The affair is close to my heart, since I co-wrote a (sadly now out-of-print) book about it. So what are the lessons a decade on? When people talk about lessons from such events, they usually mean ways to stop them recurring. The other day, Barings' collapse was cited when the Bank of England said it would hire more staff to watch out for threats to financial stability.

Would that it were that simple. No matter how good the systems a bank has in place to prevent its traders going off the rails (and Barings' controls, starting from Mr Leeson's dual role as trader and back-office manager, were notably bad), traders will always make losses and try to gamble their way out. And banks, let alone regulators, will always struggle to uncover determined fraud.

No, the lesson I take from Barings is more human - about how to cope when disaster strikes, as it occasionally will. Most people who run banks, even if they acknowledge the theoretical possibility, do not think it will happen to them. They cannot believe they would make such juvenile errors in believing a rogue trader's lies.

Indeed, the general view at the time was that either Barings' executives must have been in league with Mr Leeson or were so incompetent that they were as much to blame as him. Naturally enough, Mr Leeson tried to encourage the view that he was the unwitting victim of a set of blue-blooded bankers who pushed him into making dishonest profits in order to increase their bonuses.

But a decade is long enough for evidence to emerge of malfeasance on the part of others and it has not. Nor was Barings entirely staffed with upper-class fools who fiddled as Mr Leeson burned their bank. There were gaps in controls and some people were not up to their jobs. But there were also talented and bright individuals who simply did not realise what was happening until too late.

They paid a terrible price. One of those involved compared it to being in a car crash and it is a good metaphor (even if they were driving carelessly).

One minute, they were all speeding along in the fast lane, with plenty of prestige, power and money. The next, they were in trauma, with newspapers declaring their certain idiocy and possible criminality.

The first instinct of some of them was to deny they were to blame. Since Mr Leeson was supposed to report to people in London and Singapore for his various responsibilities - one reason he evaded detection for so long - they argued that others were at fault. I recall a heated but ultimately pointless debate over whether Mr Leeson had really been a trader or a broker.

Then there was what has become known in US corporate trials as the "30,000-feet defence" - that those at the top could not have been expected to know what was going on. Bernie Ebbers, WorldCom's former chief executive, is using this gambit, which was deployed successfully in terms of avoiding punishment by Peter Baring, the bank's chairman and Andrew Tuckey, its deputy chairman.

There are two problems with this. The first is hypocrisy. When companies do well, not many executives go around arguing that they have nothing to do with the achievements of people at the bottom of the organisation and do not deserve the prestige and financial reward that come from managing them. Taking responsibility when things go wrong comes with the territory.

The second problem is psychological. When somebody is involved in a public debacle such as Barings, or the corporate scandals in the US and Europe after the 1990s, the public is unlikely to believe he is blameless. It is easier on the psyche to admit to yourself that you messed up. Otherwise, you will be doomed to keep droning on about all the mitigating factors to sceptical listeners.

That was painfully true of the nine Barings executives who were found guilty of misconduct by regulators and one or two who escaped. Those who suffered most seemed to me the ones who denied blame. Appeals dragged on for years, marriages collapsed, people became embittered and dispirited. They never quite removed the albatross from around their necks.

Others were more dispassionate. The exemplar was Peter Norris, Barings' chief executive, who was put under the greatest scrutiny of all. He admitted from the start that it was his responsibility and did not appeal against being banned from working in the City or struck off as a company director. As a result, he was among the quickest to recover.

People say Mr Norris was arrogant before the collapse, but I found him personable afterwards. Perhaps, in the end, it was good for him. Anyway, he proved a wider truth. Disaster is always prone to strike in investment banking, and there will be future examples of executives who suddenly lose power, money and lofty status. It will be up to them whether their lives get ruined as well. john.gapper@ft.com




Ten years after: Leeson looks back
www.sbpost.ie - February 20, 2005 - By Nick Leeson


“In no circumstances enter the derivatives trading market without first agreeing it in writing with me at some time in the future; it could bring the world's financial system to its knees.” - Sir Julian Hodge memo, dated November 1990, to senior executives of the Cardiff-based Julian Hodge Bank, quoted in the Western Mail, February 28, 1995, after the collapse of Barings.

“We view them as time bombs, both for the parties that deal in them and for the economic system. In our view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” - Warren Buffett, ‘the Sage of Omaha' and the world's greatest stock-market investor, in his chairman's letter in the Berkshire Hathaway 2002 annual report.

These warnings represent the soundest advice, but it is not clear how many of the world's financial institutions have really taken note. Evidently not all of them.

I wish someone had given me a similar warning before I set foot in Singapore. Ten years ago this week, Barings Bank collapsed. It was possibly the greatest financial scandal of the 20th century.

My role in the bank's collapse is well chronicled - perhaps more so than many of the warnings that followed.

My own calamitous mistakes were spectacular enough; they were clearly the most illegal that were perpetrated at the time, but the multiple oversights by the bank's managers were equally spectacular.

Amazingly, I never realised quite how bad the situation had become. I blundered on in the forlorn hope that one day I could eventually rectify the situation.

Displaying extreme stupidity, I would glance at the positions in BSS account number 88888 and sneak a quick look at the margins that we had deposited from the London office. But I would always refrain from doing the simple computation that would spell out loud and clear the worsening financial picture.

Anyone could have done the computations. No complex algorithm was needed.

A rudimentary understanding of mathematics was all that was required.

This wasn't the week that I had planned to abscond; nothing was ever planned, I was holding on, one day at a time, hoping for that eureka moment when all the markets would fall into line.

But it wasn't until the morning of February 20, 1995, that people finally started to ask some sensible questions.

Tony Railton, a manager from the London office, had found a massive hole in the balance sheet, a $1.4 billion black hole that ridiculed the balance sheets that were sent to London on a monthly basis. Group treasurer Tony Hawes was on a tour of south-east Asia looking at funding requirements and was due to arrive in Singapore on my birthday, February 25.

Still I managed to fob them off, disappearing from the trading floor as soon as I could and turning off all the phones when I got home. I can only believe that they were all so desperate to believe in my success for personal reasons: their bonuses depended on it, and there were only a number of days before the bonuses were due to be signed off.

Still I could not tell anybody; I had avoided the situation for so long that it was now the only coping strategy at my disposal.

But it all became too much on February 23, a Thursday that will be imprinted on my mind forever. My ex-wife Lisa and I packed a couple of small suitcases and made our way rather sedately to the airport in the eye of a hurricane that was shortly to leave havoc in its wake.

Derivatives markets remain the Achilles' heel of the financial markets: they continually evolve into new hybrid forms and many industry professionals still understand little about how they are structured and work. The consequences of this are immeasurable.

But some financial institutions seem to treat this threat with the same cavalier disregard that they usually treat risk management and compliance.

The beginning of 2005 saw another set of liquidators trying to resolve the fallout from China Aviation Oil's disastrous foray into the derivatives market.

A Chinese state-run newspaper reported that the former head of China Aviation Oil (Singapore) Corp said he was unaware that the company was involved in potentially ruinous speculative trading until nine months after it began.

He blamed an Australian trader for $550 million in losses.

This type of story seems only too familiar. The derivatives markets were set up to take the uncertainty out of the future for traders and financial institutions alike.

But they have grown to such an extent that the total value of the derivatives markets far outstrips the value of most leading economies.

Since the stability of these markets is crucial to the “new global age'‘ referred to by the British chancellor, Gordon Brown, you would imagine that risk management and compliance would have kept pace with these developments. Unfortunately that is not the case.

Unlike Buffett, the Welsh banker Julian Hodge issued his apocalyptic warning three years before the first rash of derivatives disasters involving Metal lgesel lschaft, Orange County, Sears Roebuck and Procter & Gamble broke out in 1994. More was to come in 1995 with Barings.

None of these, taken on their own, threatened to bring the world financial system to its knees. The crisis that has come closest to doing so occurred in September 1998 and involved hedge fund Long-Term Capital Management. But could a new mega-catastrophe lie around the corner?

With the British economy already in a rather fragile state, a pension crisis looming and personal debt at record levels, how much more of a knock to confidence is needed before we start leaving the banks wholesale? The knock-on effect of such a move on the global economy would be calamitous.

Last year started with another rogue-trading scandal at National Australia Bank in Melbourne. This was followed by the overstating of oil and gas reserves at Shell and irregular accounting at the Italian food company Parmalat, which forced it out of business.

It is clear that, regardless of the warnings and implications, the warnings don't strike a chord with everyone.

The banks foolishly believe they are beyond reproach. My own actions in Singapore caused the collapse of Barings, but other institutions that have recently suffered similar rogue-trading episodes just dust themselves off and carry on regardless.

Losses at AIB subsidiary Allfirst and National Australia Bank were quickly absorbed, and the banks swiftly returned to the business of making money. Maybe not all the lessons were learned.

AIB is a case in point. The case of John Rusnak, the rogue currency-trader who lost the bank $691 million in 2002, combined with the eight-year period of overcharging on foreign exchange transactions should have hit the bank's bottom line - but they didn't. Instead, the bank's profits go from strength to strength.

Paying back overcharged customers cost about €34 million, which amounts to roughly four days' profits for the bank. In fact, AIB posted profits of more than €1 billion in its most recent financial year, so it does not need to be too concerned about €34 million.

The fact that AIB continued to make such large profits suggests that these were isolated incidents. But the number of irregularities raises questions about the lack of control at the bank.

Meanwhile, two shareholder lawsuits are being aimed at Allfirst, the Baltimore-based bank that suffered one of the largest bank frauds in history.

The suits, which allege fraud among top executives, will be merged this week into a single complaint in a federal court in New York. Shareholders say bank executives should have known about, and policed, the $691 million trading scandal.

In January 2003, AIB's Rusnak was sentenced to more than seven years in jail after pleading guilty to criminal charges.

But the Allfirst suit marks the first fraud accusations directed at bank executives since Rusnak's sentence. The case, experts say, has the potential to re-examine how much AIB executives knew, or should have known, about Rusnak's activities.

I don't think anyone can have any doubt that, if the Allfirst executives didn't know about the scandal, they should have.

Many of the bank's employees should have been involved on a daily basis in ensuring that the risks being taken in the Baltimore office were within prescribed limits.

A similar number of employees should have been involved in ensuring that all the contracts undertaken by Rusnak were bona fide and that all monies were accounted for. These are commonsense measures.

Imagine running a multinational company with $691 million of your capital risked by one trader in a small remote subsidiary of the bank. Wouldn't you want to know where it was and what it was being used for?

This doesn't diminish what Rusnak or I did. Our custodial sentences were justified. But it is only after a reasonable period of time that the full story starts to unfold.

The Board of Banking Supervision report that swiftly followed my arrest was a work of almost total fiction. Alarmist and sensational stories at the onset of such a scandal are carefully managed by the banks to focus blame on the individual, thus deflecting attention away from their own shortcomings and buying time to put their house in order.

The lawsuits that are to be heard in New York may focus attention on several individuals within the bank's hierarchy but, with the passage of time, the fallout is likely to be minimal.

For the record, I don't bank with AIB.

Leeson, 37, was jailed for six and a half years in Singapore following the collapse of Barings. He was released from prison in 1999 and now lives in Galway.

[FaGal]

Few escaped unscathed from glittering class of 1995
observer.guardian.co.uk - February 20, 2005 - The Observer

The merchant bank's spectacular collapse led to the destruction of many high-flying careers. Conal Walsh catches up with the survivors


None of Nick Leeson's colleagues at Barings met quite so extreme a punishment as Singapore's Changi jail. But the rogue trader's activities led to the destruction of many glittering City careers.

Peter Baring, Barings' chairman and once a leading patriarch of the financial world, will be remembered as the man who presided over the collapse of a firm his ancestors founded two centuries before. Unsurprisingly, he foresook the Square Mile and retreated to his Wiltshire estate, where he lives in quiet retirement.

At least Baring escaped censure from the authorities. Many others were on the sharp end of DTI investigations into their roles in Barings' demise.

Among them was Ron Baker, head of debt financial products and effectively Leeson's immediate superior, who was disqualified as a company director. So were Geoffrey Broadhurst, head of the banking group at Barings Investment Bank, Tony Hawes, its treasurer, and Anthony Gamby, the director of settlements. George Maclean, group head of banking and a Barings employee for 30 years, also received a boardroom ban. Little has been heard about any of them since.

Others are known to have restarted their business careers. James Bax, regional manager of Barings' south-east Asia operations, was disqualified as a company director for four years for 'very serious failures of management', and was accused in a report commissioned by Singapore's finance ministry of 'trying to divert investigations by the external auditors'. Bax eventually moved back to his native Scotland.

After getting a four-year DTI ban, Peter Norris, the former chief executive of Barings Investment Bank, turned up at John Brown Enterprises, publishers of the adult comic Viz . He later worked for private equity firm New Boathouse Capital and got involved in film finance. He also advises Sir Richard Branson and Virgin on corporate matters.

Andrew Tuckey, the former group deputy chairman, has bounced back impressively from his DTI ban. Always a highly rated corporate financier, he has worked as an adviser or consultant to blue-chip institutions like Lloyds, DLJ, Credit Suisse First Boston and Bridgewell Capital. At Bridgewell, he recently advised GWR Group on its £337 million takeover by Capital Radio.

Few emerged completely unscathed from the Barings meltdown, however. Even Ian Hopkins, the group treasurer whose warnings of the danger in Singapore went unheeded, ended up with a five-year DTI ban, and a severe reprimand from the Securities and Futures Authority.

Mary Walz, former global head of equity derivatives in London, did not suffer the full effect of the affair until later. Up to December 1996, when she failed in her attempt to sue ING Barings for a £500,000 bonus she said she had been promised before the collapse, Walz had come through relatively untouched.

Despite being accused in the Bank of England's report on the affair of failing to check on Singapore trading, Walz had evaded a SFA ban on taking senior City jobs. After failing to get her bonus, however, she was given a DTI ban and is believed to have since returned to her native America.

Nor was the Barings experience a happy one for Coopers and Lybrand, its former auditor. Now part of PricewaterhouseCoopers, it was reprimanded by the accountancy watchdog and only escaped a £1billion negligence lawsuit by settling for an undisclosed sum in 2002.

[FaGal]

How I 'broke' Barings Bank
news.scotsman.com - BILL JAMIESON - February 22, 2005


Crazy phone calls: they’re the bane of a business reporter’s life. "Barclays has gone under"; "The Bank of England has run out of gold". Ten-a-penny phooey. The phone call I took late on a Saturday in the City office of the Sunday Telegraph seemed to fit the genre: "Barings has gone bust".

Oh, yeah? Barings: the bluest of the blue-blooded merchant banks; a name synonymous with the City of London and 230 years of British finance capitalism. "Barings" and "bust" was an unthinkable combination of words for anyone who turned a penny in the City. The call source was as impeccable as the name. There was no detail to go on. But this was no "nutcase call".

Less than three hours to deadline, and where to begin? Tick tock, tick tock. The first call was to the home of a member of the Baring family. The main job of this particular Baring was to look after "corporate arrangements" for Henley, Wimbledon, Twickenham and Covent Garden. His daughter answered the phone and said she would fetch Daddy. Tick tock, tick tock. After what seemed an aeon she came back. "Daddy’s at the top of the garden and doesn’t want to talk to you and all that stuff about the bank is rubbish."

How odd, since her Dad and I had long been friends. And especially odd, since I had not mentioned anything about the bank. Next stroke of luck was a call to the home of a contact who worked for the Bank of England. His wife answered. We spent a few moments talking about the family and the weather. Tick tock, tick tock. "Is David there?" I finally asked. "Oh, didn’t you try his office first? He’s at the Bank."

At the Bank? On a Saturday? The only two occasions I could imagine when Bank of England staffers went to work on a Saturday were the days just before the 1992 ERM debacle - and the Barings crisis of 1881.

"David" was indeed at the Bank - and in a highly flustered state. "Can’t say anything... meetings going on... can’t possibly comment... you’ll have to speak to someone else."

Flummery - but no solid denial as a newspaper would expect on a story as major as this. Having established there was indeed a problem, I frantically worked through a list of banking and City contacts, a maniacal assault on the contacts book and finger-and-thumb assault on the phone buttons. No amount of telephony technology can ever disguise the excruciating slowness of dialling out and ringing at times like these.

No reply, or answerphone switched on, or News To Me, Old Chap. Public relations minders were away for the weekend or said they had heard nothing. Tick tock, tick tock.

Then another stroke of luck. The phone rang. I found myself being quizzed by the head of a rival merchant bank and one of the biggest names in City deal-making. The Rolls Royce voice was also on the hunt for information for commercial, atavistic purposes. How ruthless the City can be, beneath that plummy Etonian accent and patrician charm, in smelling the blood of a rival and closing in for the first bite of the corpse.

He was further down the tunnel with the sputtering candle than I was and gave away far more telling detail than ever he would had he been speaking in a banker-to-journalist capacity.

Other calls began to come in from friends on the trading side of Barings. There was a problem with a massive margin call in the Far East that the bank was unable to meet. It had arisen over arbitrage trades on futures contracts on the Osaka and Singapore exchanges.

Arbitrage trades? Straddles? It was difficult enough to find a City trader able to explain these terms in ways a layman could understand, never mind work out how losses could have soared to the point where the entire capital of Barings had gone.

It was to take days before the name of Nick Leeson emerged, together with the details of the huge volumes of option trades carried in his secret account number 88888. Losses had mounted to more than $2 billion. Within weeks "rogue trader" had become a household term.

But there was a final ingredient that was to deliver killer detail that day. This was an anxious call back from a senior source at the Bank of England. The Bank, he insisted, was not involved in any form of rescue. Barings was not being baled out. He was most anxious to make this plain. But in this insistence came ample confirmation of Barings’ plight and the Bank’s involvement in helping to find a buyer: talks were already being held with a major Middle Eastern party (later identified as the Sultan of Brunei after a phone call to a contact in the middle of his weekly shop at Sainsburys). So, by 7pm: the fact of enormous losses big enough to bring Barings down, together with a proximate idea of the source of the problem, and Bank of England involvement - if not a rescue. The ingredients were more than enough to make the paper’s front-page splash that night.

For the City, the collapse of Barings was far more of a culture shock than a financial one. Within a week one of the oldest names on City banking was bought by ING, operators, inter alia, of the Dutch post office, for £1 (together with £860 million of liabilities). For those who couldn’t stick the "old-school-tie" culture at Barings, how slow the shock waves seemed to come. An early move by British American Tobacco subsidiary Threadneedle Asset Management to buy out Barings Asset Management from the rubble foundered on an insistence of BAM directors that they be paid their bonuses running into millions of pounds, as if nothing untoward had happened.

On the corporate finance side the coatings of high-gloss arrogance were equally hard to break. There was an insistence on business-as-usual, with the new Dutch masters regarded as meddling little officials and referred to by the Barings’ old guard as "the Cloggies".

But the debacle marked the end of family or dynastic banking and the dramatic elevation of the hitherto-despised compliance officer in the City.

American-style management methods received an enormous boost but this model, too, had fatal governance weaknesses - as events a few years later were to prove.

The collapse of Long Term Capital Management just three years later was to deliver a far greater financial scare. While there was no fraud or "rogue-trader" element, there was a cultural element in common: the same polyurethane arrogance that protected the management cadre from questioning.

The Barings collapse also marked the end of the Bank of England as the main regulatory agency in the City. This was to pass to the Financial Services Authority.

It was also the final curtain on an age in which City institutions, quick to denounce the doctrine of government rescue of industrial companies, assumed that the Bank of England would come to their rescue if some little squit blew away the funds.

That there was no Barings "rescue" is arguably a more far-reaching legacy than the message in that phone call ten years ago.

What happened to the man who brought down Barings?

Nick Leeson served his time and now lives with his new wife in Galway, says KAREN McVEIGH, but he will talk about what happened for a fee

TEN years ago today, Nick Leeson was a stressed-out wreck desperate to find a way out of explaining how Barings Securities had become hundred of millions of dollars in the red. With the fast-approaching storm threatening to engulf him, he and his wife, Lisa, packed a couple of suitcases and headed to Singapore airport, where they boarded a flight to Germany.

Arrest, extradition, conviction and a six-and-a-half year jail sentence in Singapore’s notorious Changi prison followed. Then divorce and a battle with cancer in prison, which he won, only to be told he might end up sterile.

Today, life for the man who brought down Barings Bank after losing it £860 million could not be more different. He now lives quietly, in Barna, ten miles outside Galway, where his life revolves around "little more than taking the dog for walk along the beach and spending time with my family." Leeson has said one of the attractions of Galway was the greater degree of anonymity it offered him.

"The Irish have a different outlook - everything is more tongue in cheek here," he said.

His luck has changed, significantly in the past few years.

He married again last year, to new wife Leone, an Irish beautician, and is step-father to her two children, Kirsty, ten, and Alex, five. The couple even have a new baby of their own, a son, which Leeson, 37, has described as a "miracle" since doctors said he would be unlikely to be able to father a child after chemotherapy.

Where he once dealt in complex financial contracts in the fast-paced world of derivatives, with millions at stake, his most demanding task now is that of after-dinner oratory, with an organisation that specialises in "celebrity speakers." He talks about the collapse of Barings, his time in prison and his fight against cancer.

At between £5,000 and £10,000 a pop, it earns him the bulk of his income and "keeps me in touch with the industry that officially wants nothing to do with me."

He is also wringing out another book, his second, which is about stress. His first, Rogue Trader, written while in jail, made a reported £50,000 and was made into a film with Ewan McGregor.

He is not averse to publicity. He has had his share of television appearances, and his wedding to Leone, in Dublin, August 2003, was covered by Hello! But Leeson has little incentive to look for a high-earning job given the ongoing demands of the liquidators of Barings, to whom he must pay about half his earnings.

"There’s no point pursuing me because I don’t have anything to give them. The sort of money I am giving them does not really earn their legal fees anyway," he has said.

He hasn’t stopped gambling - although these days the stakes are considerably smaller. Along with actor Gareth Hunt and football manager Harry Redknapp, Leeson is also a "celebrity poker player" sponsored by an internet poker site.

[FaGal]

Leeson's legacy lives on in Singapore
www.news.bbc.co.uk - By Malcolm Borthwick - BBC World Asia Business Report editor in Singapore - February 23, 2005

Ten years ago this week, the rogue trader Nick Leeson fled Singapore after realising he could no longer hide his trading losses of more than $1bn.


Leeson was released in 1999 after four-years in a Singapore prison

Leeson had already been racking up huge losses for over a year, but by the morning of 23 February 1995 the pressure had reached boiling point.

In a final effort to recover the losses, the Barings trader had bet on the Nikkei index of leading Japanese shares to rise.

But his gamble didn't pay off.

The Japanese stock market kept falling, leading to even bigger losses. On that day, he had lost more than $50m by lunchtime and his boss wanted to meet him to discuss the sizeable hole emerging on Barings' balance sheet.

As Leeson writes in his autobiography Rogue Trader, "It was time to run".

Luxury resort

On that Thursday afternoon in 1995, Leeson left the office and took the next available flight to Kuala Lumpur with his wife Lisa, where they checked into the five-star Regent Hotel.

At the same time, on the other side of the world, senior Barings executives in London were starting to discover the extent of the losses.

The story broke in the early editions of the British Sunday papers that the country's oldest merchant bank was on the brink of collapse and the epic search to find the missing trader was on.

Soon, rumours emerged that Leeson had sped across the causeway to Malaysia in his Porsche, or that he had escaped on a private yacht.

In fact, they were holed up in a Malaysian luxury resort.

After seeing news of Barings' collapse on the front page of a newspaper in a local shop a few days later, they plotted their escape back to Britain in an attempt to evade the Singaporean authorities.

But on 2 March, Leeson was arrested at Frankfurt airport and the international manhunt for the missing trader ended.

Leeson was eventually extradited to Singapore where he was sentenced to six years in Changi Prison.

Behind bars

But despite Leeson being convicted of fraud, some of his colleagues felt that he was not the only one at fault.

* Leeson is convicted

"The management trusted him too much," a Barings employee in Singapore at the time says.


Leeson was banned from The Singapore Cricket Club

"Nick was the star trader at Barings because his trades contributed a huge amount of money.

"Because of this, a lot of the checks and balances that should have been noted were ignored."

Still, Leeson's stay in Singapore had not been without controversy.

"Nick didn't talk to his colleagues much," a former colleague recalls.

"He kept himself to himself, but he had a bit of a reputation out on the town."

This included Leeson being banned from one of Singapore's grandest sporting establishments, The Singapore Cricket Club, for a racist slur and for punching another member.

Another incident involved an alcohol-fuelled mooning escapade in a Singapore bar which earned him a night behind bars.

Illusive Lady Luck

Leeson's legacy lives on in Singapore's Harry's Bar, Leeson's old watering hole.


ING has ditched the Barings name

It's a jazz bar on the quayside, just a stones' throw from the financial district, and still a regular haunt for city traders.

"I met Nick here a few times," says Leong Sze Hian, a former currency trader and a contemporary of Leeson.

"He was just a regular guy and you wouldn't guess he was the man who sunk Barings."

But the mid-nineties were heady days for traders in Singapore. They had been operating in a bull market for the past decade and everyone had been raking in a fortune.

And then the house of cards started coming down.

"I remember February 1995 well, because a bit like Leeson, my luck turned," says Mr Leong.

"I was trading dollar yen at the time and lost $60,000 of my own money on a single trade; it nearly wiped me out."

Bank breaker

A few days after Nick Leeson's arrest in Frankfurt, Barings Bank was sold to Dutch banking and insurance giant ING for the paltry sum of £1, bringing to an end more than 230 years of banking history.

The bank was renamed ING Barings, but today no trace of Barings remains in Singapore's financial district.

ING has dropped Barings from its logo and the plaque outside simply reads ING.

Few in Singapore want to be associated with Leeson.

Former acquaintances deny knowing him, booksellers deliberately fail to display his autobiography and none of the major video and DVD stores stock the film Rogue Trader, starring Ewan McGregor and Anna Friel.

Still, Leeson's name lives on down at Harry's bar, where this week they'll be doing a roaring trade in the king of shots, the Bank Breaker, a drink specially created to commemorate the infamous trader.

A mixture of Midori, whisky and a double measure of soda water, it's sweet and goes down smoothly, but aptly has a deceptive kick that takes you by surprise.

For Harry's Bar manager Andrew Koh, the Leeson link has been a boon.

"When Nick was released from Changi Prison in 1999, we held a 'Flight of Freedom' party," Mr Koh recalls.

"We served free beer for two hours and all the staff had T-shirts printed with the words, 'Leeson Learns His Lesson'.

"We half hoped that Nick might drop in for a drink but he didn't of course, he was whisked off by the authorities."

Leeson was released in 1999. He currently lives in Ireland.


Key dates 1995

January: Leeson is already losing serious money

Mid-February: Leeson makes increasingly risky deals to cover mounting losses

23 Feb: Leeson runs away and the bank's senior executives are warned about the extent of the losses

24 Feb: Barings tells the Bank of England that it is in trouble

26 Feb: The High Court in London appoints administrators to run Barings Bank and news of Leeson's rogue trades break in the early editions of the Sunday papers in the UK

2 March: The search for Leeson ends and he is detained at Frankfurt airport after a week on the run

5 March: Dutch banking and insurance group ING buys Barings for £1 and assumes liabilities of over $600m

2 December: Leeson is sentenced

[FaGal]

The collapse that rocked the establishment
www.guardian.co.uk - Jill Treanor - February 26, 2005 -
The Guardian

The rogue trader who broke the Queen's bank is living happily in Ireland, and the City has changed forever


It seemed the stuff of fiction, and, indeed, it was subsequently turned into a film starring Ewan McGregor.
But the collapse of Barings 10 years ago today through the actions of Nick Leeson, a 28-year-old plasterer's son from Watford, was all too real.

The City's oldest merchant bank was brought down after Leeson, a previously anonymous trader in Singapore, ran up unsustainable losses when the markets turned against him. Leeson himself went on the run once he realised the game was up, prompting an international manhunt at the same time as the bank tried to come to terms with the gravity of the situation.

As Leeson fled, Barings held a weekend of crisis meetings with the Bank of England, at the end of which Barings was forced to admit Leeson's losses - later put at over £800m - were too great for it bear, and that no saviour could be found. The Sultan of Brunei turned down the chance to save a merchant bank, founded in 1762, while even the Bank of England refused to step in.

On the Sunday night, exactly a decade ago, administrators were called in. The London management of Barings had seen the writing on the wall three days earlier and just a handful of people knew that the banker to the Queen, still run by members of the Barings family, was on the brink of collapse at the start of that weekend.

One of them was Alan Bloom, the Ernst & Young forensic accountant, who was eventually appointed administrator that Sunday night. Even he, who has since presided over the administration of Railtrack, had not expected to have a job to do. "We never really believed it would go into administration. We thought a rabbit would be pulled out of a hat," Mr Bloom recalls, 10 years later.

The drama that unfolded that frantic weekend has been portrayed in the film Rogue Trader, with Leeson played by Ewan McGregor and Anna Friel as his wife Lisa. The film fails to capture the intrigue that surrounded Leeson in the days, weeks and years that followed the collapse of a bank which had been a key part of the City for more than 200 years.

Mr Bloom admits that his first reaction was "incredulity". Like many at the time, he could not believe it was a one-person job. Many others felt convinced Leeson had stashed the cash somewhere to fund a lavish lifestyle, while experts were shocked to discover that Barings' management structure was so lax it allowed Leeson to hide illicit trades in the now infamous 88888 account. Regulators and auditors also found themselves under an unwelcome spotlight.

Leeson, who fled from Singapore to Kuala Lumpur, the Malaysian resort of Kota Kinabalu, Brunei and eventually Frankfurt, had followed the manhunt on CNN from his hotel rooms.

His aim was to get back to Britain to face the music, but he eventually gave up the chase at Frankfurt airport.

He then spent eight months in a German jail, hoping the Serious Fraud Office would charge him and bring him home to face trail. Instead, he was extradited to Singapore, where he was jailed for six- and-a-half years and served 52 months - despite pleas for leniency after he was diagnosed with cancer.

Leeson's world had started to fall apart at the start of the year - to be precise, on January 17, when the Kobe earthquake took place. The subsequent fall in Japanese shares left him nursing heavy losses, which he then tried to cover by ever more reckless gambling. Because he was in charge of both trading and the back office, which handled the paperwork for his trades, he was able to hide his dealings from his London head office.

While Leeson went to jail for his actions, 10 other Barings executives were disciplined by the authorities for failing to stop him. Some senior Barings staff even argued they were entitled to six-figure bonuses, despite the collapse.

Others have since resurrected their careers. Peter Norris, the head of investment banking, went to Viz publisher John Brown and New Boat House Capital, a corporate finance boutique.

Andrew Tuckey, the former deputy chairman, worked at Credit Suisse First Boston, Donaldson Lufkin & Jenrette and Phoenix Securities before joining finance house Bridgewell. Neither would agree to be interviewed.

Leeson, though, is happy to talk about his new life. In an article in last week's Observer, Leeson wrote: "Life is very different now. After extradition, conviction, jail, cancer and divorce, I've come out the other end and have reforged a new life in Ireland. Remarried and with my first child, a boy, I feel life is on the upward curve again."

His days involve walking his dog, writing a book on stress, which he hopes to publish this year, and preparing for his appearances as an after-dinner speaker.

Leeson's actions had implications far beyond the collapse of Barings. When Labour came to power in 1997, Gordon Brown stripped the Bank of England of its powers to regulate banks and handed them to the Financial Services Authority. Most of the family-run merchant banks like Barings were consumed by international entities, with bigger balance sheets and greater resources.

Barings itself was sold by its administrators to the Dutch bank ING for £1 - although ING also took on millions of pounds of debt. It was not a happy marriage. The Barings name survived in the City until 2002, when the Dutch bank stopped calling its investment banking arm ING Barings.

Last year the Barings name changed hands again. American fund management group MassMutal Financial Group bought the rights to use the 242-year-old brand along with part of Baring Asset Management.

At the time, a spokesman for the US group, based in Springfield, Massachusetts, was astonished to hear the tale of Leeson and his antics in bringing down the bank. "No kidding," he said after hearing a potted history.

A sign, perhaps, that Leeson's legacy is finally fading.