One Friday evening in September 1992 Nick Leeson and his team of traders at Barings bank discovered that an inexperienced woman dealer had run up pounds 20,000 losses on the Singapore markets, the imprisoned former dealer has disclosed.
In his first interview since being arrested in Frankfurt in February, Mr Leeson said it was this discovery that forced him to activate the notorious secret account which eventually led to the collapse of the bank earlier this year. He says the woman had sold 20 futures contracts instead of buying them.
"One of the locals had a young lady working for him, somebody who could work straightaway and help us out. But, you know, she had no real experience of working for a trading house," Mr Leeson tells Sir David Frost in an interview to be screened on BBC1 tonight.
"We tried to keep her away from the phones but there was one occasion ... when she had to answer a few phones ... everybody else was so busy that they couldn't really check what she was doing and she was just helping out."
When the traders later met up in the Hard Rock Cafe the woman was crying.
"I felt very sorry for the girl in that I didn't want her to lose her job and so ... that is the first trade that made its way into the 'five eights' account." The five eights account, or error account, was used by Mr Leeson to conceal from management in London losses that he or his traders made.
The account had originally been set up legitimately by Barings, says Mr Leeson, to hide errors made by the Singapore traders from the London regulators.
Speaking directly to the media for the first time since his arrest, Mr Leeson says that during 1992 the account was first used by him to conceal the errors of his colleagues.
He is not pushed in the interview as to if and when he went on to use the account to conceal his own trading losses.
By May 1993 Mr Leeson says that the error account had moved into credit. Mr Leeson says, though, that he continued using the error account after that to conceal the errors of his colleagues. He says that around 20 traders working for him all knew about the account.
Failing to give evidence against any of his superiors, Mr Leeson says that none of the people he worked for knew of the secret account's existence.
He explains that Barings Futures Singapore, the bank's subsidiary which he worked for, only took a balance sheet reading once a month. "So the concealment only had to occur once a month."
As business increased, Mr Lesson says, the size of the errors being made increased. By the end of 1994 the secret account had losses of pounds 208m.
"If you go through to 1995, and as crazy as it may seem, there were days when I could lose pounds 25-30m. There were days when I made pounds 50m, based off the position.
"Not every day is a down day. So it adds to your belief that you can do it because you probably find it easier to forget the debits and remember the credits in your own mind, because the credit is what you want ..."
He says he did not steal any money for his account. "If anybody does genuinely believe that any money has been stolen you would have heard about it from the Singaporean inspectors by now. Just to explain, I had no control over payments out of the bank accounts."
The only question which Mr Leeson does not answer concerns one of the offences with which he has been charged in Singapore, that of allegedly forging a document to conceal a missing pounds 50m from the Barings head office.Reuse content