I should have stopped Leeson, admits Barings director

Nick Leeson's boss at Barings Bank failed to implement urgent recommendations to scale back the trader's powers because the company's chief executive had ordered him to focus on problems at another Barings office, a court heard yesterday.

Simon Jones, the former finance director of Barings Futures Singapore (BFS), made the claim during a preliminary hearing yesterday in the long-running dispute between Barings' creditors and the bank's former auditors, Deloitte & Touche. Mr Leeson's unchecked trading activities at BFS caused the collapse of Barings in February 1995 after he clocked up dealing losses exceeding £800m.

An internal audit completed in November 1994 had recommended reducing Mr Leeson's powers and tightening the compliance function at Singapore "with immediate effect". However, Mr Jones said under cross-examination that he was too busy to implement the report because he had been personally instructed by Peter Norris, Barings' chief executive, to prioritise troubleshooting Barings' operations in New York.

"It was not done with immediate effect and I regret that," Mr Jones said. "I should have done a memo saying all the things I was working on. But Barings [was] not that sort of company.... I prioritised wrongly, I can't say more than that."

The judge, Mr Justice Evans-Lombe, queried why Mr Jones had not ordered Mr Leeson to act on the report's recommendations. "Surely you just send [Mr Leeson] the report and just say 'Get on with it'," he said.

Mr Jones also said there had been a delay before he saw a final copy of the audit, which covered Barings' entire South-east Asian activities, after it arrived in his offices on 1 November. The report had come in an envelope marked confidential and was addressed to another manager who was away, he said.

Barings' creditors, represented by KPMG, are claiming that Deloittes was negligent in its auditing of Barings' Singapore operations. Deloittes is seeking to prove that Barings' collapse is down to failures in the bank's management.

Mr Jones later accused Mr Norris of seeking to blame away Barings' collapse on management at the Singapore offices, and said the internal audit had itself been designed as a means to have him sacked.

It also emerged that Mr Jones had signed an application for Mr Leeson's registration with Singapore's financial authorities which wrongly purported to verify the trader did not have any convictions. At the time, Mr Jones and other senior managers at the firm were trying to keep the lid on a conviction against Mr Leeson after he bared his buttocks in public. "If he had a conviction for something serious, I would not have signed the form," Mr Jones said.

Last year, KPMG reached an out-of-court settlement with PricewaterhouseCoopers over a £1bn legal claim in relation to the former Coopers & Lybrand's role as auditors to Barings. PwC is thought to have paid about £75m to close the matter.