Book Review / Why Barings will happen again

Rogue Trader by Nick Leeson with Edward Whitley Little Brown & Co, pounds 16.99 The Collapse of Barings by Stephen Fay Richard Cohen Books, pounds 20
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Despite the fact that he lost pounds 869m in Singapore and destroyed Barings, London's oldest merchant bank, the popular image of Nick Leeson is rather flattering. He is the ultimate "lad", the working-class boy who lived the good life, got himself a pretty wife and, with breathtaking nerve, almost pulled off the most spectacular financial coup of all time. OK, he is now serving a six-and-a-half-year sentence in Changi jail, but boy, did he go down with a bang.

Included in this image is the idea that it was not his fault. Sure, he gambled wildly, but no one stopped him. Lousy management controls at Barings and the old boy network of the City of London let him chase his losses. Leeson is the victim, not the bad guy.

This image has been shored up by a pathetically soft television interview with David Frost. Now it is further propagated by his own book, bought by the publishers for pounds 450,000.

Well, Little Brown, like everyone else who comes into contact with Leeson, has been sold a pup. The book is vile and mendacious. Even without taking the essential step of reading it in conjunction with Stephen Fay's sober, elegant account of the affair, its emotional and factual dishonesty glares at you from every page.

First, the vileness. Leeson, on the evidence of his own book, is a lout. He routinely dismisses colleagues with terms like "arrogant bastard" or "stupid cow". He crashes about the Orient like a football hooligan in a Hermes tie, at one point mooning at girls in a Singapore bar and getting arrested. He regards almost everybody with contempt. To say he makes one ashamed to be British is to understate the case by a mile. In this context, even his sugary professions of love for his wife and his glutinous bouts of contrition appear wildly unconvincing.

Second, the mendacity. Leeson persists with his defence that, basically, it was not his fault. He was simply allowed to get away with it. This is, at the very least, illogical. He is a bank robber blaming the bank for not stopping him. However lax the bank may have been, he remains the villain. But he has a second leg to his defence. This is that he started the notorious Error Account 88888 in which all the losses were made as a way of covering up blunders of colleagues. It was an altruistic act with, he admits, one selfish aspect: covering up the blunders helped to protect his own position.

This is, Fay convincingly argues , nonsense: Leeson carefully rigged that account to hide its contents from London and he was actively trading in it long before it was used to conceal the first colleague blunder. He had seen the chaos of Barings's management practices and how to exploit them. The point is decisive.

From then on the two accounts diverge utterly. Leeson portrays himself as a brilliant but hideously unlucky trader who cracked up under the strain of trying to put right his mistakes. Fay says he is a swindler, adding "even that term does not do justice to the crimes that Leeson began to commit".

Perhaps most damaging of all for the "lad" image is Fay's overwhelming evidence that Leeson was a lousy trader. If he bet a market would go up, it went down; if he bet it would fall, it would soar. Even when he faked a fax from a Barings director to confirm one of his phoney deals, he omitted to remove the "From Nick & Lisa" heading automatically put there by his own fax machine. The smart operator was a total klutz whose incompetence was exceeded only by that of his bewilderingly naive superiors.

Two big, lastingly significant images emerge from these accounts. The first is cultural. Leeson and Barings represent two of the most depressing personalities of modern Britain - the lout and the toff. They are both arrogant and they both display the most damaging and incurable kind of ignorance - the kind that does not know what it does not know. Arm-in- arm, lurching drunkenly into the booming Asian markets, the lout and the toff wreck everything in sight and run for cover, blaming everyone but themselves. No wonder the Singaporeans think the West is doomed.

The second image is that of the markets. Leeson dealt in derivatives. In effect, these are meta-markets in which reality - goods, services - is kept at a safe distance. These markets deal in nothing, not even money in any recognisable sense. Leeson, at one point, covers a pounds 50m hole in the accounts simply by saying the money is there. He is believed because, most of the time, that is as real as this kind of money ever gets. Whatever function such fantasies were ever meant to serve in the real world, it has long been forgotten.

We might say that never again will we give the louts and the toffs such credence, however smart their suits. But I doubt it and so does the wise Fay. "Will it happen again?" he asks himself. "Of course it will; somewhere, it - or something like it - is happening now." Technology and greed have turned us into a sucker society, ever-eager to succumb to the smiling lout in the Hermes tie.

Bryan Appleyard