This story was first published in July 2015 in an e-book titled Guilty As Charged: 25 Crimes That Have Shaken Singapore Since 1965. A collaboration between The Straits Times and the Singapore Police Force, the e-book appeared in The Straits Times Star E-books app. Read the other crime stories here. (Warning: Some content in these stories may be disturbing for some individuals.)
Nick Leeson, Rogue Trader (1995)
While based in Singapore, he brought down Britain’s oldest merchant bank and created a worldwide financial scandal
At the age of 28, Nick Leeson brought down 233-year-old Barings — Britain’s oldest merchant bank. It was where Queen Elizabeth did her banking, and had funded such milestones in history as the Napoleonic wars — but even that was not enough to save it from the $2.2 billion in losses racked up by the rogue trader.
In 1995, it was revealed that Barings’ Singapore-based trader Leeson falsified accounts and trading records, and brought the bank to its demise – catching market watchers and his colleagues by surprise.
Leeson joined Barings Bank in London in 1989 as a 22-year-old, and a year later was sent to Jakarta to sort through £100 million of back contracts which were in a complete mess. He did the job, and his reputation increased. It was in Jakarta where he met colleague Lisa Sims, whom he married in 1992.
That same year in March, he was posted to Singapore where he earned the label of being a “whiz-kid” trader, even if he did fail his A-level maths.
According to The Business Times (BT), within a year of his arrival, after-tax profits at Baring Futures (Singapore) jumped from $2.7 million in 1992, when he was rewarded with a £150,000 bonus on top of his £50,000 salary, to over $20.3 million in 1993.
By early that year, he was allowed to do proprietary trading for the entire Barings group.
Leeson started dealing in Japanese government bonds, then dabbling in Nikkei 225 futures and options. And he was supposedly making the firm millions, accounting for a large chunk of its profits.
One auditors’ report urged that he be “retained as long as possible”.
“He was like a God and everyone was in awe of him. You felt that he could make or break the market,” a trader told BT.
But Leeson held both the positions of chief trader and head of settlements, which meant that he pretty much had free reign. And he used this to his advantage, concealing losses and unauthorised trades in a secret account called “error account 88888”.
This account, which was meant to track bona fide trading mistakes and minor accounting discrepancies, was found to have been used since 1992 to hide Leeson’s losses and show artificial profits in other Barings trading accounts.
While Leeson looked to his peers to be a high-flying daredevil trader, nothing was further from the truth.
By December 1994 and unknown to his bosses, he had racked up losses amounting to $373.9 million.
On the official books, he was making handsome profits.
In an attempt to claw back some money, Leeson bet heavily against the Nikkei index falling below the 19,000 mark.
He believed that share prices, which plunged after the Great Hanshin Earthquake hit the city of Kobe on Jan 17, 1995, would rise.
But prices kept falling, and Leeson, whose gamble costs Barings $932 million, found himself in a deep hole of his own making.
That same month, alarm bells started ringing after auditors found a £50 million discrepancy.
Barings investigated, but by the time the deficit was discovered in mid-February 1995, the losses had increased to $2.2 billion, twice-exceeding the bank’s capital and reserves.
As the worst was about to hit the bank, he and his wife left their $5,000-a-month rented condominium in Anguilla View off Orchard Road on Feb 23.
In a rental white Mercedes, he drove across the Causeway and checked into the Regent Hotel in Kuala Lumpur alone, picking a $296-a-night deluxe room.
A few days later, he was in Sabah, where he stayed in the Shangri-la Tanjung Aru Beach Resort with his wife. They stayed in Room 428, which was registered under his wife’s name.
On March 1, the couple boarded a Royal Brunei flight to Frankfurt. When they arrived the next day, German police, tipped off that Leeson was on the flight, boarded the plane. They carried photos of the Leesons and spotted the couple.
Leeson fought extradition, and while in jail in Germany, was allowed to be interviewed by noted BBC journalist David Frost, who also bought the movie rights to his story.
But he was back on Singapore’s shores on Nov 23, 1995 – 272 days after he fled. The trial saw the world’s media trying to catch every glimpse of Leeson.
The trial lasted just three days, even if it took more than an hour for the three charges of forgery and eight charges of cheating to be read out to Leeson.
He pleaded guilty to two charges and was sentenced to 6½ years in prison.
He was released in July 1999 for good behaviour.
While in prison, Leeson wrote his book Rogue Trader detailing his time as a broker in Singapore and how he racked up those fantastic losses.
The film, based on the book and starring Ewan McGregor as Leeson, was released in 1999.
His wife Lisa divorced him while he was still in prison. In 1995, Barings was sold for a single pound to Dutch bank ING.