The original rogue trader

 

THE SATURDAY INTERVIEW: NICK LEESON:‘THREE-EIGHT-FOUR-OH-SIX.” Nick Leeson, the numbers man who fell to earth, recites the figure on automatic.

Of all the infinite possibilities swirling around the numerical galaxy, perhaps only the birth dates of his loved ones hold as much significance for him. For four years of his life, when he became a diabolical phantasm in world finance, the Englishman was effectively reduced to that number – 38406 was Leeson’s badge and his only real identity during a period when his name acquired the cachet of true notoriety.

This was 1995, when John Major was the British prime minister, Europe fell under the spell of a dreamy heat wave, Gangsta’s Paradisewas the big hit on the dance floors and Leeson became the most spectacular pilferer of money since the heyday of Jesse James. Instead of a cowhand’s scarf he wore the wasp-stripe colours of a stock trader’s jacket and a City geezer’s moneyed smile. In a matter of months, the Watford trader lost £862 million (€975 million) trying to cover a relatively minor loss in a desperate gamble that resulted in the demise of Barings Bank, a pillar of London finance since 1762 whose previous client list included the Duke of Wellington.

For the few weeks after he bolted from his home in Singapore to a luxury holiday resort in Borneo, Leeson was, at just 28, probably the most wanted man on earth. He was apprehended in Frankfurt, while trying to make his way back to London, and that detention marked the beginning of a descent into the primitive stink of a hardcore Malaysian prison and an eventual path to what must now seem like an entirely new, second life, living in the west of Ireland and working a regular job – although he will query whether pouring over the head-wrecking finances of Galway United FC is any more sane an occupation than derivatives trading in the Far East.

Fourteen years have past since the apotheosis of Leeson’s infamy. Although fatherhood and the vagaries of time have matured him, the disarming, caught-smoking-by-the-headmaster grin he flashed the cameras when the German police paraded him through Frankfurt airport is unmistakable. His years in the hothouse regime of the Tanah Merah prison have made Leeson quieter and more reflective, for sure, but the sense that he still derives a private, dark humour from the sheer insanity of what happened to him is never far away.

The ordinary world has deemed him rehabilitated and in recent years he has become accomplished at giving public lectures and post-dinner talks. Except that now that the entire market is stomping like Godzilla on the conceits and principles of the financial world, the sum of money that Leeson blew seems quaint in comparison to the billions being lost today. Now, the man known as the original rogue trader is on the outside like the rest of us. He moved to Galway after he met Leona Tormay in a club in Watford and the couple married. Their youngest son, Mackensey, is four and has a stepbrother, Alex, and a stepsister, Kersty. Leeson sometimes turns on the morning news shows as he prepares breakfast before the school run and hears the latest catastrophic report of financial rainmakers guilty of the same hubristic mistakes as he was all those years ago – both globally and here in Ireland.

“It is pure and utter greed,” he declares, in an accent that remains undiluted north London. “The world of finance is founded on one thing: arrogance. The banks have been making money for so long – even in the six years I have been here, there have been massive changes across the country. People have become very rich and very quickly. Everyone wanted in on it and it was propelled by the banks – telling Farmer Jack over there he can sell his land and get ‘X’ amount of cash.”

He adds: “The thing that is really, really strange here – and I think this is why it is so bad here – is that the senior management of the banks are caught up in it. In England, if you look for a loan from five grand to 50 million, the process is exactly the same. That doesn’t seem to have been true in Ireland. For me, for instance, what has happened in Anglo Irish Bank is a version of insider trading – bankers using their own influence to bring certain people together. More globally, the degree of leverage was crazy. I wrote about this phenomenon years ago – the max factor on credit cards said it all. The credit card debt was at two billion and the government would say it was fine. You get an AIB credit card and they look at your wealth and outgoings and they will give you, let’s say, six grand. Fine! But that should be it! You shouldn’t then be able to go across the street to Bank of Ireland and get one. But that is what happened.”

ON THE MORNING we met, he had dropped his daughter Kersty up to Salerno secondary school and then parked down by the Docks. He was taken aback by the quietness of the Galway streets. “I met two cars on the road! That is crazy.” In a coffee shop, he noticed that the prices had been reduced by a euro. It is the same sensation across the country: everything slowing, everything halting, the sound of machinery falling silent.

In the opulent and dazzlingly bold tearooms of the G hotel, there are few customers. More than ever now, this landmark venue seems symbolic of the bold fabulousness of the Celtic Tiger era. Its interior was designed by Philip Treacy, the Ahascragh man who became a celebrated milliner in the world of high fashion and the hotel features designs that rival the most daring of haute couture collection. If you can imagine eating an Irish breakfast in a modish version of King Louis XVI’s drawing room but with techno-ambient background music and a view of Lough Atalia and the beginning/end of the Galway-Dublin road instead of the Garden of Versailles, then you have a basic idea of the zaniness of the G. It seemed like the perfect place to hear Nick Leeson talk about the notion of the mythological “Ireland Inc” going down the plughole.

“The thing is, we would all expect the banks to act out of self-preservation. But the Central Bank is the guilty party here in allowing the banks to get so far out of line. That is true across the world, but in Ireland, the way that the top tier managements in banks have been able to get involved is just incredible. I mean, I hear tell of numerous episodes of bank managers buying into land deals for 50 million. A f***ing bank branch manager! How does that happen? Another guy made so much commission in one month that he didn’t really have to work for a year. And all he was selling was debt.

“I worry in Ireland that they have made the wrong decisions – or even sometimes have made the right decisions but not quickly enough. I feel they could think about nationalisation now. Banks with a lot of property on their books – you may need to take a 50 percent hit on that. And I think they will have to start moving on customers. The history in Ireland has been one of reluctance to move on people. The banks need to be selective about whom they carry, unpalatable as that sounds. And it is probably true that the whole crisis kicked off with the subprime thing but that was always doomed to fail. I have a good friend who sold a subprime business four years ago and made $450 million (€360 million) out of it. And good luck to him. But it was doomed to fail because at its essence, you are lending money to people who can’t get it anywhere else. When I am asked to do after dinner speeches, usually the angle I take is how badly banks can get it wrong. See, usually, when a thing seems to good to be true, it is too good to be true.”

That served as a metaphor for Leeson’s last days on the trading floor. His swift rise from back office worker at Coutts – the Queen’s bank – to the savvy young trader headhunted by Barings was impressive, even if the tabloids gleefully reported that he had failed his A-level maths in school. He does not pluck figures out of the sky like Rain Man but he is quick and he had a knack for absorbing the complexities of derivatives trading far more comfortably than peers with expensive educations often did. And he was workaholic in his commitment, often slogging through the night, showering in the health club near Barings and back on the floor at 7am.

He took a salary cut to go to Singapore because he craved the opportunity and earned excellent if not obscene bonuses for the profits he acquired for Barings.

“I was good at it. Extremely good at it – for a while. There is a lot of mystique that goes on in the world of finance. Reaction time is important if you are looking at discrepancies between two things. You need common sense. You need to get along with people. You need to be social. And I was certainly that.”

Those two years in Singapore were fast and occasionally mad days. He laughs sheepishly when he recalls the weekend that some traders came in from London. They ended up hiring a speedboat on nearby Batam island.

“And they wrote it off,” he groans. “They were pissed as farts and ploughed into a jetty or something. But they just paid for it up front and walked away. There were episodes like that. I recall an 18 grand bar bill. And being in Japanese bars where someone would order a bottle of whiskey that cost 10 grand. It was that kind of lifestyle. We started out living in Singapore’s equivalent of Watford but ended up on Orchard Road. Swimming pools, the rest. It was a lovely lifestyle but not as crazy as they made out.”

IN DISGRACE, LEESON was portrayed as typical London wide boy, a son of Thatcher’s England with street smarts. The Adidas sweatshirt and baseball cap he wore backwards when he was marched through Frankfurt airport helped to prejudice and harden opinion. Even the estimable London newspapers published stories about the “stash” he had secreted away. From the beginning, he accepted that what he had done was criminal.

“My lawyer liked to say I was the best client he ever had because I knew I was going to jail: I just wanted to know for how long.” He was originally sentenced to six-and-a-half years. Leeson talks with riveting clarity about what was later reduced to three-and-a-half years in confinement. He was one of three people sharing a 6ft by 9ft cell with a loo separated by a small partition. The shower was a funnel coming out of the wall. They slept on the floor. It was 110 degrees by dawn and when you were an Englishman used to a soft mattress, you woke to fresh boils on your skin. “The floor – I know this from my dad – is like a plasterer’s screed. It becomes bumpy and jagged. You got this one grey, dirty blanket, like a dog blanket and you folded that for a pillow.”

Violence was rare and extreme. Before inmates entered the workshops, they stripped naked and walked through a metal detector with a mirror on the floor that they had to squat over. But still the Singaporeans managed to smuggle items out of there for personal use. “They would go to the toilets in the general area afterwards and come out with bobbins and needles they had stuffed inside themselves . . . just so they could redesign their uniforms – cut their shorts into different lengths or change an arm on their T-shirts or whatever. It was like a fashion statement in the prison. The uniforms were identical except that blue collars were repeat offenders and red collars were lifers. It was crazy but it was about status and it gave people a distraction. In the end, I was in charge of administration and I remember they would be around me begging for a sniff of the Tipp-Ex.”

He had plenty of time to dwell on the eccentricities of human behaviour. Every month a package arrived from an American book dealer who sent him 50 books. “He probably thought I was wronged. I never thought that. Punishment was always coming.” He got about 15 letters a week, generally sympathetic. And in the stink and clamour, he says, “I played back my life from a certain point, over and over”. His downfall at Barings was, he now believes, down to a desperate attempt to maintain his status. “If you give an immature person status, they will do anything to hold onto it.”

That his first wife Lisa finally had enough and finished their relationship and that he then suffered colon cancer seemed like a natural extension of the bad direction in which his life had taken. He just weathered it through, day by day and, perhaps to his surprise, lived instead of died. Today, Leeson is funny and anecdotal. He chose to brazen out his notoriety, to accept it and use it as a source of income rather than cower under it – and he makes no apologies for that. He can sound bloke-ish and sometimes insolently offhand about his misdemeanours and punishment.

But the masks slips. He tells you about how his dad, Harry, responded to a reporter from the Daily Mirrorthat door-stepped the family house. “My dad was a plasterer – he had no real knowledge of this world, which is not to demean him. So the bell rings and there are two guys there and my father decks one of them. He hit the fella.” He leans back and laughs and then remembers suddenly: “I told people that at his funeral service last year – when I could stop crying, that was.”

Leeson’s father was already ill when he was released from prison in the summer of 1999. His mother Anne passed away when he was 20. “My mother was more academic than my father. They met when she was fairly young and she probably didn’t achieve what she wanted in life. She died from lung cancer at 48. Not far off that myself now.”

Perhaps the speed of Leeson’s dizzying climb through England’s oppressive class system did influence his terrible decision-making during those critical months in Barings. He gambled the Barings reserve and more on Japanese derivatives and his investments went up in smoke on the day of the Kobe earthquake. The tremors might as well have tumbled the venerable building back in the City.

When the French trader Jerome Kerviel lost Société Générale’s €5 billion last January, his story drew immediately international comparisons to Leeson. “Well, he lost more money than me, he is certainly having more fun than me. And he is still free. So he is more successful than me,” Leeson jokes. “He does need to go to jail. I knew what I was doing was wrong – he does, too.”

AT A TIME WHEN Irish people want to start constructing gallows for the local banking princes, Leeson is ambivalent about whether he wants to see others reduced and humiliated as he was.

“I don’t really like to see anyone going to jail for the sake of it. The thought of these guys retiring on a nice package and living out their days in Cyprus leaves a bad taste. But is stupidity a crime? What has happened here is that the banking façade has come crashing down. And it is clear that many institutions have been run by stupid people. But if, for instance, if the routes that the Anglo Irish Bank board took in lending money to the ‘golden circle’ to basically prop up their share price – which in turn drew other investors in – turn out to be unlawful, then absolutely. They should be punished.”

If it happens that they do so, then fine. He left prison armed with a new-found fatalism. He looks back at the trader he once was, going berserk with the stresses of his job and he can barely recognise that young man.

“Everything falls one side of the line now. I only worry about mine. I have a family that I love. I have a job – even though it may not be the one I want just now because it is f***ing tough out there. But I survive. If I learned anything in Singapore, it is that there are things you can’t control. You know, we could be in the car and Leona will go mad at something some driver does and I will just be totally serene about it.”

His colleagues in Galway United FC talk of Leeson as some kind of financial sorcerer, juggling the money to keep the club solvent in savage times. He still trades but gets exasperated as he recalls an English newspaper account that exaggerated his habit.

“We were in Thailand at the time. Leona’s parents read that I am trading five grand a day! They are thinking about their daughter! It is more like £1,500 (€1,700) in a trading account and I probably pull two-and-a-half a week just through jobbing a few little trades around. It is decent income. I am back to what I used to do.”

Nick Leeson laughs warmly. He knows how that sounds. But Galway Bay is a long way from Orchard Road. And as the stock exchange indexes go haywire every day now, he knows he would rather be here than there.