Nick Leeson

Last updated

Nick Leeson
Born
Nicholas William Leeson

(1967-02-25) 25 February 1967 (age 57)
Watford, Hertfordshire, England, UK
Education Parmiter's School
Occupations
  • CEO of Irish football club Galway United (former)
  • Derivatives broker (former)
  • Head Educator at Bizintra (former)
  • CEO of Bull and Bear Capital (current)
Spouses
  • Lisa Sims
    ​
    ​
    (m. 1992;div. 1997)​
    [1]
  • Leona Tormay
    ​
    (m. 2003)​
Website nickleeson.com

Nicholas William Leeson [2] (born 25 February 1967) is an English former derivatives trader whose fraudulent, unauthorised and speculative trades resulted in the 1995 collapse of Barings Bank, the United Kingdom's oldest merchant bank. Leeson was convicted of financial crime in a Singapore court and served over four years in Changi Prison.

Contents

Between 2005 and 2011, Leeson had senior management roles at League of Ireland club Galway United. After it suffered financial difficulties, he resigned from his position as chief executive officer. He is also active on the keynote and after-dinner speaking circuit, where he advises companies about risk and corporate responsibility. Leeson is currently a corporate firm private investigator in charge of dealing with cases of financial misconduct. He resides in Galway as of 2023. [3]

Early life

Nick Leeson was born in Watford, Hertfordshire, and attended Parmiter's School in nearby Garston. Born to working-class parents on a council estate, his father was a self-employed plasterer, his mother a nurse. After finishing sixth form in 1985 with six O Levels and two A level passes in English Literature and History with C and D grades respectively, failing his third subject, Mathematics, [4] [5] he was hired as a clerk with the Lombard Street branch of the Coutts private bank, [6] where he settled paper cheques, crediting and debiting client accounts. [7]

In 1987, Leeson moved to Morgan Stanley's Futures and Options back office, clearing and settling listed derivatives transactions. With few prospects for a front office role, he joined Barings Bank two years later, at £12,000 (equivalent to £35,909in 2021) a year. With four other settlement specialists, he was briefly seconded to Hong Kong to troubleshoot Barings' back office in the Indonesian capital of Jakarta.

Leeson was then transferred to Baring's Jakarta office in 1990 where he handled some of Barings unpaid share certificates which amounted to £100 million. [8] He returned to London in September 1991 to investigate a case of fraud in which a Barings employee had used a client's account to trade on a proprietary basis until margin calls from the clearinghouses unraveled the scheme. [9]

Career

Barings Bank

In April 1992, Barings decided to open a Futures and Options office in Singapore, executing and clearing transactions on the Singapore International Monetary Exchange (SIMEX). [10] Barings had held a seat on SIMEX for some time, but did not activate it until Leeson, appointed general manager, was sent to head both front office and back office operations. Prior to leaving, Leeson was denied a broker's licence in the UK because of committing fraud on his application. [11] He had failed to report a judgment against him entered by the National Westminster Bank. Neither Leeson nor Barings disclosed this denial when he applied for his licence in Singapore. [12]

From 1992, Leeson made unauthorised speculative trades that at first made large profits for Barings: £10 million, which accounted for 10% of Barings' annual profit. [13] He earned a bonus of £130,000 on his salary of £50,000 for that year. Leeson used one of Barings' error accounts (accounts used to correct mistakes made in trading) to hide his losses. [14] [15] He says that this account was first used to hide an error made by one of his subordinates. She had been assigned to buy 20 futures contracts for Fuji Bank, but had sold them instead, costing Barings £20,000. [16] [17] [8]

Leeson used this error account to cover further bad trades by himself and others. For example, he used it to cover mistakes made by one of his traders who frequently came to work after long nights of partying. Leeson believes that he first crossed into out-and-out criminal conduct when he forgot to reconcile a discrepancy of 500 contracts, costing Barings US$1.7 million. He concluded that the only way to hide such a massive error and keep his job was to hide it in the error account. [8] Leeson insists that he never used the account for his own gain, but in 1996 investigators had located approximately $35 million in various bank accounts tied to him. [10]

Downfall and imprisonment

By the end of 1992, the error account's losses exceeded £2 million, increasing to £23 million in late 1993. This amount ballooned to £208 million by the end of 1994. [18] Leeson had followed a "doubling" strategy: every time he lost money, he would bet double the amount that was lost to recoup the amount. This had been successful for him in the past, including once in 1993 where he was able to cover a £6 million negative balance in the error account and after which he vowed not to use the account again. Leeson had to maintain his reputation as a trading genius and soon found himself hiding his losses there again. As the losses grew higher, Leeson fabricated cover stories to explain why he needed more cash from London; his sterling reputation protected him from close scrutiny. [19]

The beginning of the end occurred on 16 January 1995, when Leeson placed a short straddle in the Singapore and Tokyo stock exchanges, essentially betting that the Japanese stock market would not move significantly overnight. The Great Hanshin earthquake hit early in the morning on 17 January, sending Asian markets, and Leeson's trading positions, downward. Leeson attempted to recoup his losses by making a series of increasingly risky new trades (using a long-long future arbitrage), this time betting that the Nikkei Stock Average would make a rapid recovery. The recovery failed to materialise. [18]

Leeson left a note reading, "I'm sorry" and fled Singapore on 23 February. Losses eventually reached £827 million (US$1.4 billion), twice Barings' available trading capital. After a failed bailout attempt, Barings, which had been the UK's oldest merchant bank, was declared insolvent on 26 February. [20] After fleeing to Malaysia, Thailand and finally Germany, Leeson was arrested in Frankfurt and extradited to Singapore on 20 November 1995. [21]

Leeson pleaded guilty to two counts of "deceiving the bank's auditors and of cheating the Singapore exchange", [2] including forging documents. [22] District judge Richard Magnus, who convicted Leeson, decided to sentence Leeson to six and a half years in Changi Prison in Singapore. [23] Leeson was released in July 1999 after serving at least two-thirds of his sentence (4 years and 4 months) for good behaviour, and having been diagnosed with colon cancer, which he survived despite grim forecasts. In 1996, Leeson published an autobiography, Rogue Trader , detailing his acts. A review in the financial columns of The New York Times stated, "This is a dreary book, written by a young man very taken with himself, but it ought to be read by banking managers and auditors everywhere." [10] In 1999, the book was made into a film of the same name starring Ewan McGregor and Anna Friel. The events also form the subject matter of a 1996 television documentary made by Adam Curtis, titled Inside Story Special: £830,000,000 – Nick Leeson and the Fall of the House of Barings . [24]

Post-release career

In 2003, as a mature student, Leeson completed a BSc in Psychology at Middlesex University. He is a guest on the after-dinner and keynote speaking circuits, [25] [26] stating in 2019 that "two events a month is enough to keep me in the manner to which I'm accustomed". [27] Leeson still deals in stock markets, but only with his own money. [28]

Galway United F.C.

Leeson was appointed commercial manager of Galway United F.C. in April 2005, rising to the position of general manager in November 2005. [28] By July 2007 he had become the club's chief executive officer. In February 2011, after the club encountered financial problems, he resigned his position. [29]

Investigator of financial misconduct

In March 2023, Leeson joined Red Mist Market Enforcement Unit, a corporate intelligence firm run by former Black Cube operative Seth Freedman, and turned into an investigator of financial misconduct cases. [30]

Media appearances

In June 2005, Leeson released a new book, Back from the Brink: Coping with Stress. It picks up his story where Rogue Trader left off, including in-depth conversations with psychologist Ivan Tyrrell. In 2013 he appeared in Celebrity Apprentice Ireland on TV3. [31]

In July 2015, Singapore's national daily newspaper The Straits Times published an e-book titled Guilty As Charged: 25 Crimes That Have Shaken Singapore Since 1965, which included the Nick Leeson case as one of the top 25 crimes that shocked the nation since its independence in 1965. The book was borne out of collaboration between the Singapore Police Force and the newspaper itself. The paperback edition of the book was published and first appeared on the bookshelves in late June 2017. The paperback edition first entered the ST bestseller list on 8 August 2017, a month after its publication. [32] [33] [34]

On 5 April 2007, The Guardian reported that KPMG, the liquidators of Barings, had sold a trading jacket thought to have been worn by Leeson while trading on SIMEX in Singapore. The jacket was offered for sale on eBay but it failed to reach its reserve price despite a highest bid of £16,100. It was subsequently sold for £21,000. [35] In October 2007 a similar jacket used by Leeson's team but not thought to have been worn by Leeson himself sold at auction for £4,000. [36]

His name is mentioned in the credits of Rogue Trader together with Barings Bank losses of US$1,400,000,000.

Personal life

Leeson married Lisa Sims, later also known as Lisa Leeson, on March 21 1992. The couple met in Jakarta, where both were working on Barings Jakarta's office in 1990. [8] Sims resigned from Barings bank following her marriage to Leeson.

The couple divorced in 1997, a year after Leeson's arrest. Sims later worked as a flight attendant for Virgin Atlantic. [8]

In 2003, four years after his release from Changi Prison, Leeson married Leona Tormay, an Irish beautician. [37]

Works

See also

Related Research Articles

<span class="mw-page-title-main">Barings Bank</span> Defunct English merchant bank

Barings Bank was a British merchant bank based in London, and one of England's oldest merchant banks after Berenberg Bank, Barings' close collaborator and German representative. It was founded in 1762 by Francis Baring, a British-born member of the German–British Baring family of merchants and bankers.

Bank fraud is the use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution. In many instances, bank fraud is a criminal offence.

<i>Rogue Trader</i> (book) 1996 book

Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World is a book by Nick Leeson, who served four years in prison for fraud after bankrupting the London-based Barings Bank in 1995 by hiding $1.4 billion in debt he accumulated as a derivatives trader in Singapore. The book was released on February 19, 1996, by Little, Brown & Company.

Proprietary trading occurs when a trader trades stocks, bonds, currencies, commodities, their derivatives, or other financial instruments with the firm's own money to make a profit for itself. Proprietary trading can create potential conflicts of interest such as insider trading and front running.

A rogue trader is person who makes financial trades in an unauthorised manner.

<i>Rogue Trader</i> (film) 1999 British film by James Dearden

Rogue Trader is a 1999 British biographical drama film written and directed by James Dearden and starring Ewan McGregor and Anna Friel. The film centers on the life of former derivatives broker Nick Leeson and the 1995 collapse of Barings Bank.

Lawrence Ang Boon Kong is a Singaporean lawyer who specialises in corporate offences and criminal law.

<span class="mw-page-title-main">Jérôme Kerviel</span> French rogue trader (born 1977)

Jérôme Kerviel is a French rogue trader who was convicted and imprisoned in the 2008 Société Générale trading loss for breach of trust, forgery and unauthorized use of the bank's computers, resulting in losses valued at €4.9 billion.

In financial trading, a rogue trader is an employee authorized to make trades on behalf of their employer who makes unauthorized trades. It can also involve mismarking of securities. The perpetrator is a legitimate employee of a company, but enters into transactions on behalf of their employer, or mismarks securities held by their employer, without their employer's permission.

In January 2008, the bank Société Générale lost approximately €4.9 billion closing out positions over three days of trading beginning January 21, 2008, a period in which the market was experiencing a large drop in equity indices. The bank states these positions were fraudulent transactions created by Jérôme Kerviel, a trader with the company. The police stated they lacked evidence to charge him with fraud and charged him with breach of trust and illegally accessing computers. Kerviel states his actions were known to his superiors and that the losses were caused by panic selling by the bank. Société Générale's own wrongs were later established by a French jurisdiction, which led the Cour de cassation to cancel the €4.9 billion sanction on Kerviel.

<span class="mw-page-title-main">Error account</span>

An error account is a type of account used for storing compensation for errors in trading, a transaction that is not posted in a timely manner because of inconsistencies, such as an incorrect account or routing numbers to the wrong name on the account, producing a claim that needs to be resolved as soon as possible so payments can be made.

<span class="mw-page-title-main">Trading jacket</span> Blazer uniform historically worn by pit traders

A trading jacket is a blazer garment worn by a broker who executes trades by open outcry in and around the trading pits of various financial exchanges. Throughout the twentieth century, trading jackets were simply white. Following counterculture of the 1960s, they became brightly colored and distinctive to assist in the identification of specific traders or the exchange members for whom they work. In the United States, American flags became a common accoutrement following the September 11 attacks. Today, trading jackets are mostly anachronistic as open outcry exchanges have been displaced by electronic trading platforms. Chicago-based PECO Inc has been the leading supplier of trading jackets since 1919.

Inside Story Special: £830,000,000 – Nick Leeson and the Fall of the House of Barings, sometimes referred to as 25 Million Pounds, is a 1996 British television documentary by filmmaker Adam Curtis. It details the collapse of Barings Bank in the mid-1990s due to the machinations of Nick Leeson, who lost £827 million primarily by speculating on futures contracts.

<span class="mw-page-title-main">2011 UBS rogue trader scandal</span> Unauthorized trading incident

The 2011 UBS rogue trader scandal caused a loss of over US$2 billion at Swiss bank UBS, as a result of unauthorized trading performed by Kweku Adoboli, a director of the bank's Global Synthetic Equities Trading team in London in early September 2011.

Kweku Adoboli is a Ghanaian investment manager and former stock trader. He was convicted of illegally trading away US$2 billion as a trader for Swiss investment bank UBS. While at the bank he primarily worked on UBS' Global Synthetic Equities Trading team in London, where he engaged in what would later be known as the 2011 UBS rogue trader scandal. After serving a prison sentence, he lost several appeals against the UK Home Office decision to deport him to Ghana.

Barings LLC, known as Barings, is a global investment management firm owned by Massachusetts Mutual Life Insurance Company (MassMutual). It operates as a subsidiary of MassMutual Financial Group, a diversified financial services organization.

<span class="mw-page-title-main">Galway United F.C.</span> Football club

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Mismarking in securities valuation takes place when the value that is assigned to securities does not reflect what the securities are actually worth, due to intentional fraudulent mispricing. Mismarking misleads investors and fund executives about how much the securities in a securities portfolio managed by a trader are worth, and thus misrepresents performance. When a trader engages in mismarking, it allows him to obtain a higher bonus from the financial firm for which he works, where his bonus is calculated by the performance of the securities portfolio that he is managing.

<span class="mw-page-title-main">Chia Teck Leng</span> High-profile white-collar criminal in Singapore

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References

  1. ↑ "Leeson to have cancer operation". BBC News. 8 August 1998. Archived from the original on 3 August 2013. Retrieved 26 November 2012.
  2. 1 2 "Nick Leeson: biography part II". 1 March 2011. Archived from the original on 5 February 2012. Retrieved 23 February 2012.
  3. ↑ "Former 'rogue trader' Nick Leeson joins corporate private eye firm". The Guardian. 22 March 2023. Archived from the original on 22 March 2023. Retrieved 22 March 2023.
  4. ↑ Rawnsley, Judith H (1996). Total Risk: Nick Leeson and the Fall of Barings Bank. University of Michigan: HarperCollins. pp.  88. ISBN   9780887307812.
  5. ↑ Powell, Robin (10 July 2015). "4 Lessons to Learn From Nick Leeson". Archived from the original on 31 March 2022. Retrieved 13 September 2019.
  6. ↑ Michael, Costello (6 June 2011). "The original rogue trader: interview with Nick Leeson". Archived from the original on 11 August 2023. Retrieved 13 September 2019.
  7. ↑ Elga, Drummond (2007). The Dynamics of Organizational Collapse: The Case of Barings Bank. Routledge. p. 20. ISBN   9780415399616.
  8. 1 2 3 4 5 Leeson, Nick; Whitley, Edward (1996). Rogue Trader: How I Brought Down Barings Bank and Shook the Financial World. ISBN   0-316-51856-5.[ page needed ]
  9. ↑ Laurent, Jacque (2015). Global Derivative Debacles: From Theory To Malpractice (Second ed.). World Scientific Publishing Company. p. 146. ISBN   9789814699891.
  10. 1 2 3 Floyd Norris (31 March 1996). "Upper-Class Twits Made Me Do It". New York Times . Archived from the original on 28 August 2011. Retrieved 23 February 2012.
  11. ↑ Maeda, Martha (2010). The Complete Guide to Spotting Accounting Fraud & Cover-ups. Atlantic Publishing Company. p. 31. ISBN   978-1-60138-212-2. Archived from the original on 11 August 2023. Retrieved 18 November 2019.
  12. ↑ Hal S. Scott (2006). International Finance: Transactions, Policy, and Regulation. Foundation Press. ISBN   978-1-59941-263-4.
  13. ↑ "Nick Leeson: biography part I". 1 March 2011. Archived from the original on 5 February 2012. Retrieved 23 February 2012.
  14. ↑ "How Leeson broke the bank". BBC News. 22 June 1999. Archived from the original on 25 August 2017. Retrieved 6 September 2018.
  15. ↑ "How account 88888 sank Britain's oldest bank" . The Independent . 16 February 1996. Archived from the original on 20 June 2022.
  16. ↑ "The man who broke the queen's bank". The Irish Times . 24 February 1996. Archived from the original on 11 December 2022. Retrieved 6 September 2018.
  17. ↑ "Barings rogue trader Nick Leeson: 'Money is not my motivation'". The Daily Telegraph . 19 August 2012. Archived from the original on 6 September 2018. Retrieved 6 September 2018.
  18. 1 2 Monthe, Paul (February 2007). "How Nick Leeson caused the collapse of Barings Bank". Next Finance. Archived from the original on 4 December 2018. Retrieved 4 December 2018.
  19. ↑ Marthinsen, John E. (2018). "Barings Bank PLC: Leeson's Lessons". Risk Takers. De Gruyter. pp. 200–204. ISBN   9781547400058.
  20. ↑ "25 Million Pounds". 27 December 2009. Archived from the original on 29 March 2012. Retrieved 23 February 2012.
  21. ↑ "Bonn approves Leeson's extradition". Archived from the original on 4 December 2018. Retrieved 4 December 2018.
  22. ↑ "Nick Leeson: Rogue Trader". Crime & Investigation Network. Archived from the original on 2 February 2012. Retrieved 24 February 2012.
  23. ↑ "Singapore Sentences Leeson to 6 1/2 Years in Prison". The New York Times. 2 December 1995. Archived from the original on 6 December 2021. Retrieved 6 December 2021.
  24. ↑ "Inside Story Special – BBC One London – 12 June 1996". BBC Genome . Archived from the original on 6 January 2016. Retrieved 20 October 2015.
  25. ↑ Culshaw, Peter (8 January 2009). "Nick Leeson Lecturing Others on The Current Recession". The Daily Telegraph . London. Archived from the original on 16 June 2012. Retrieved 23 February 2012.
  26. ↑ "Nick Leeson: Infamous Rogue Trader Responsible For The Collapse of Barings Bank In 1995". Archived from the original on 4 April 2012. Retrieved 23 February 2012.
  27. ↑ Carroll, Rory (2 July 2019). "Nick Leeson: lucrative new life of banking's most notorious rogue". The Guardian. Archived from the original on 17 September 2022. Retrieved 11 September 2022.
  28. 1 2 "Rogue trader Leeson 'eyes deals'". BBC News. 7 March 2007. Archived from the original on 8 February 2012. Retrieved 23 February 2012.
  29. ↑ Brendan White (2 February 2011). "Leeson resigns Galway Utd CEO position". Archived from the original on 14 May 2012. Retrieved 23 February 2012.
  30. ↑ "Rogue trader Nick Leeson who brought down a bank turns investigator of financial misdeeds". The Straits Times. Singapore. 22 March 2023. Archived from the original on 22 March 2023. Retrieved 22 March 2023.
  31. ↑ "Judges and Contestants". TV3.ie. Archived from the original on 27 September 2013. Retrieved 25 September 2013.
  32. ↑ "Guilty As Charged: Shocking crimes that have shaken Singapore since 1965". The Straits Times. 14 May 2016. Archived from the original on 15 May 2016. Retrieved 6 January 2021.
  33. ↑ "Guilty As Charged: 25 crimes that shook Singapore". The Straits Times. 8 August 2017. Archived from the original on 11 August 2017. Retrieved 6 January 2021.
  34. ↑ "Guilty As Charged: Rogue trader Nick Leeson brought down Britain's oldest merchant bank Barings". The Straits Times. 15 May 2016. Archived from the original on 8 January 2021. Retrieved 6 January 2021.
  35. ↑ Wearden, Graeme (5 April 2007). "Nick Leeson's jacket raises £21,000". The Guardian . London. Archived from the original on 3 April 2010. Retrieved 23 February 2012.
  36. ↑ "Howard makes his mark at Norwood's Distressed Investing Dinner". Norwood. 16 October 2007. Archived from the original on 25 February 2012. Retrieved 23 February 2012.
  37. ↑ McDonald, Brian (14 June 2003). "Rogue trader Leeson ties knot with Irish love". Irish Independent . Archived from the original on 24 January 2012. Retrieved 23 February 2012.
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