Lessons from killing a 233-year-old investment bank

In a quiet corner of Auckland’s Viaduct Events Centre, an honest trader waits to meet a rogue one.

NBR ONLINE is interviewing Nick Leeson, a man whose name will live long in the world of financial infamy and needs little introduction.

The honest trader, a Kiwi who deals in foreign currency, stands nearby – waiting for the ideal time to pounce.

An hour earlier, bald-headed Mr Leeson addressed the Institute of Internal Auditors’ annual conference, saying the best introduction he ever received was: “The only man to write a cheque and the bank bounced.”

As far as opening lines go, Mr Leeson’s is a cracker: “For those of you who don’t remember me, unfortunately I will always be remembered for running up £862 million of losses 1995 and the collapse of a 233-year-old merchant bank.”

After bringing down Barings Bank – using the now infamous 88888 account to squirrel away his losses – he fled Singapore, where he worked for Baring Securities, sparking an international manhunt, and was caught by authorities in Frankfurt, Germany.

He was eventually sent back to Singapore, where he was sentenced to six and a half years in jail.

But he didn’t serve his entire sentence – he was released early after developing colon cancer. His divorce probably completed his fall from grace.

He has since recovered from the life-threatening illness, remarried and has held various jobs, including as an insolvency practitioner for Dublin-based GDP Partnership, Galway Football Club’s chief executive and columnist for Irish newspaper The Journal.

It’s probably no surprise that a man who killed a British bank now lives in Ireland.

Success driven
“I still find it very, very embarrassing,” he tells the auditors in Auckland, while declaring he didn’t do it for personal gain – just so he and his colleagues could earn their bonuses.

“I was somebody who was very success driven, very motivated, and always wanted more success.

"I wanted to be at the top of the organisation making the important decisions, and I had a very exalted opinion of what success looked like.”

His drive and a huge fear of failure were a toxic cocktail, with bad decisions being compounded by even worse ones.

It’s clear he has come to terms with his place in history. In the question-answer session he promises not to give investment advice and later, jokingly, says he’s happy to “deal to” a bank, if they can suggest one.

After he finishes speaking, NBR ONLINE puts to Mr Leeson that he must be one of the luckiest men alive – having brought down a bank he gets to roam the world, earning money to explain how he did it.

It’s at this point the bright-eyed foreign currency trader cuts in; honest trader meets rogue trader.

The former asks Mr Leeson how much “ego” influenced his behaviour.

Not a great deal, he replies; in fact, he found it quite repulsive.

He kept his trading losses secret from his colleagues, his bosses and wife but he always knew the “proverbial” was going to hit the fan.

How did you manage to hold it in for so long, the Kiwi asks – given he was almost sick whenever he had a losing position overnight, let alone the Brit’s three years of lies and evasion.

Mr Leeson shrugs, having earlier admitted to a huge alcohol intake, and a tactic of postponement and avoidance, saying: “You get comfortable with it.”

Once you last a day, you think you can last a week, he says. Other times you think you might have a month to trade out your losses.

Having secured good fodder for dinner party conversation, the honest trader shakes hands and strides off.

Confronting demons
Mr Leeson tells NBR spending time in a foreign prison helped him confront the things he had done.

“You have to be quite honest with it, and you realise that you don’t like the way that you were in certain relationships and you seek to improve it.

And you have a very idealistic opinion of where you want to be – you’re not starting from a particularly good point; ending up in the middle would be OK.

"But understanding that behaviour exists on a continuum, there’s a healthy end and an unhealthy end. On a lot of them I was at the unhealthy end and I needed to change that.”

Being in prison – where, he admits, "you start looking for the sharpest corner of the room" at times – makes you realise humans have the innate ability to cope, he says.

“There are things in your life you can alter and there are things in your life that you can’t – and what you can’t let worry you is the things you can’t alter.

“So when something is done it’s done – I move on very quickly."

So, who is he now? When he looks at pictures of himself in the yellow-and-black trading jacket, what does he see?

Fundamentally, that person is the same as now, he says – describing himself as loyal, caring, likeable and good fun.

“There’s no epiphany that has changed me. Behaviours have changed and outlook has changed in certain key regards. I don’t think it’s fundamental. When you pull back that veneer I’m pretty much the same – my values are the same.”

'I live well'
He knows some people will see an injustice that he’s travelling the world and living comfortably – trading on his losses, as it were.

Is he a rich man? “No.”

“I live well. I get paid a lot of money for doing after dinner [speaking].

“Is it at the same sort of level that I would have been making in the world of finance? No, it’s nowhere near it.

“But my lifestyle is very different and I have different needs. I’ve got no desire to go back into the world of finance at all.”

Like all of us, Mr Leeson is a complex bag of contradictions. He seems sorry for what he’s done and says he has no empathy with other rogue traders.

He is quick to point the finger at Barings’ lack of oversight but, then again, that’s why he’s speaking to a group of auditors – to help them detect nefarious behaviour.

(For the record, his message boiled down to: to beat rogue traders you need good systems and good controls, and you have to ensure the right people are checking the numbers, and have a voice in the organisation.)

Incompetence and negligence
One part of Mr Leeson’s question and answer session is revealing.

He is asked how he deals with the ex-Barings people, considering the “thousands” of people that must have lost their jobs.

Initially, Mr Leeson says only about 10 people lost their jobs – those who worked with him in Singapore.

Is there a psychological disconnect here? A 2005 article states Barings' collapse “profoundly affected everyone it touched, destroying reputations and wrecking careers.”

Mr Leeson goes on to say that Dutch bank ING bought the bank for £1 and, yes, over five or six years there were redundancies.

Going further, the rogue trader tells his Auckland questioner there was incompetence and negligence at Barings “on a grand scale” and there were people who had no more right to work there than he did.

Hardly the apologetic thoughts of a chastened man.

Mr Leeson admits to being booed at one function by the late trade union leader Sir Gavin Laird, a former Bank of England head, but says he has met many of Barings former management and board members since, and remains on friendly terms with some.

That certainly doesn't include his former colleague Nicholas Edwards, who responded to Mr Leeson's apology two years ago: "I'm sure he's full of remorse, but am I sympathetic? No I'm not. He's lost a lot of people their livelihoods, their pensions and their family fortunes."

Has everyone moved on, as Mr Leeson suggests, or is the lack of face-to-face criticism he has faced down to kindness and good manners?

Journalist Frank Kane was consumed by Barings' collapse for six months in 1995, and met the subject of his stories a decade later.

He had suspicions Mr Leeson might not have worked alone and he might have had a secret bank account, but his cynical instincts soon faded.

Of his meeting at a posh London restaurant, Mr Kane wrote: “I was left with an impression of a decent, quite likeable man, who had been through hell and back, and who had come out of it all with some dignity and self-respect intact.”

Despite all the safeguards, Mr Kane wrote, the keen, embedded rogue trader will always get through.

“We were all lucky it was just Barings. Next time, it could be much worse.”

dwilliams@nbr.co.nz