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| Sunday, 9 May 2004 |
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| News Business Features Editorial
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Rogue trader says lessons from Barings unheeded by Stephen Cunningham GALWAY, Ireland - Rogue trader Nick Leeson shakes his head in disbelief that lessons which should have been learnt from the Barings Bank debacle have gone unheeded. Next year marks the 10th anniversary of the collapse of Britain's oldest investment bank due to massive losses on unauthorised trades racked up by Leeson as a futures trader in Singapore. A decade on, a string of financial scandals has given Leeson, who served more than four years in prison for single-handedly bringing down Barings, the impression that little has changed in the intervening years. He cites the trading scandal at National Australia Bank Ltd at the start of this year when four traders lost A$252 million ($184 million) in unauthorised currency trading. Closer to home, there was the example of U.S.-based Allfirst Financial Inc, a former unit of Ireland's Allied Irish Banks. Two years ago, it emerged a foreign exchange trader hid more than $691.2 million of investment losses at the bank before being caught out. But Leeson also includes in this infamous group the embattled oil giant Royal Dutch/Shell, where an independent review recently found that company executives knowingly hid an oil and gas reserves shortfall for years. "There are management and infrastructure flaws in all of these episodes and there must have been in Shell without knowing too much about the story," Leeson told Reuters in an interview. "When one of these episodes has occurred, somebody has messed up and there can't have been the appropriate levels of checking in place." These days, Leeson makes a living giving speeches on the after-dinner circuit and volunteering for a local cancer charity. He has made a fresh life in Ireland with his new bride, an Irish beautician. Lack of checks Disturbingly, Leeson fears the same lack of checks that allowed him to run up and hide 791 million pounds ($1.42 billion) of losses at Barings are still in place. Barings was subsequently sold to Dutch bank ING for one pound. "The main flaw is that the brightest talents go to the head of the organisation - which tends to be pushed towards the trading floor - while compliance, regulatory and settlement areas tend to be ignored," he argued. "There's sort of a chasm that forms in between that people don't cross whereas you sometimes need people from a trading background to go back into the risk management and compliance areas because they know the tricks." Leeson said the Barings debacle would only have been avoided had he never moved to Singapore in the first place. "I'm someone who pushes barriers all the time - the more I'll get away with the more I will push," Leeson said. "This is something that has been driven home to me through the whole episode, but there were never any barriers in place for me. "Step by step I was just pushing myself further into difficulty without quite knowing how far I could go." That doesn't mean he has tried to shift blame away from himself, just that the lack of controls in place only served to accelerate his natural tendencies to stretch the rules. Poacher turned gamekeeper On his release from prison, he had some interesting job offers - including one to work in risk management for an energy trading company which he declined. "If people are in a similar situation - and I hope there aren't many - I think there is some scope for a poacher-turned-gamekeeper type of role," he added. The new health-conscious Leeson has paid a price for his role in breaking the bank. While in prison, he was diagnosed with colon cancer, now receded, and his first wife left him. As such, next year's anniversary hardly represents a milestone he is looking forward to. "Do you think they'll throw a party?" he quipped. Leeson 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 added. Leeson has little incentive in looking 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 said. But he also knows how lucky he is to have been given a second chance. While undergoing chemotherapy in Singapore, he was told by doctors that he would probably be sterile for life. "We're expecting our first child in August. Maybe the air in Galway has something to do with that," he said. Leeson flatly denies any suggestions that he may have stashed away some loot from Barings, an accusation that has been periodically levelled at him over the years. "You get a mixture of people who think you have salted some away and others who wish you had," he said. "That was never my intention. Some of the best legal and analytical minds in the world have been looking at this for 10 years and they know nothing has gone out of the accounts. "But this would have been very easy to have done because Barings was so badly run." (Reuters) |
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