Odd Lots - How The Original Rogue Trader Rebuilt His Life

Episode Date: November 5, 2018

If there's one person associated with the term "Rogue Trader" it's Nick Leeson, who singlehandedly brought down Barings Bank in the early 90s, following a series of efforts to cover up bad trades. After the collapse of the bank, he spent time in a Singapore prison. On this week's podcast, we talk to Nick about the experience, what he learned, and how he managed to rebuild his life.Correction: Corrects the spelling of Barings Bank in the description of the podcast.See omnystudio.com/listener for privacy information.

A lot of short daily news podcasts focus on just one story. But right now, you probably need more. On Up First from NPR, we bring you three of the world's top headlines every day in under 15 minutes. Because no one's story can capture all that's happening in this big, crazy world of ours on any given morning. Listen now to the Up First podcast from NPR. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenpaw. And I'm Tracy Allaway.

Tracy, I think we might have our most famous guest ever on the episode today. No way. We've had some pretty, like, well-known people before. Yes, but the person we are speaking to today was, at least for a brief period, one of the most well-known people in finance in the entire world, if not actually one of the most well-known people, period, like in any news. Yeah, yeah, you're probably right. Do you want to go ahead and introduce who it is or say who it is? Yes, I will. And, you know, I think one also might characterize, as I said, that he's going to be our most famous guest ever.

Others would probably say he's our most infamous guest ever. But our guest this week is Nick Leeson. He is famous for being probably the biggest quote unquote rogue traitor of all time in the, early 90s. It was his trades and the attempt to hide them that brought down the UK's Bering's bank, which was a bank that had been around for over 200 years. He then was discovered and he went to Singapore where he spent years in a Singaporean prison. There's books about him. There's a movie made about him. And then I think like after all that ended, probably most people never really thought about him again and probably have no idea what he's been up to since. Right. But Nick Leeson is almost the original rogue traitor of modern times, right? You mentioned

there was a movie famously with Ewan McGregor called Rogue Trader and it was, I'm sure it was the first time that a lot of the stuff entered the public consciousness. And as you mentioned, he was in Singapore at Bering's Bank when he did his rogue trades and then he ended up in jail. And then he sort of mounted a comeback career, right? Yeah, absolutely. And I do think that point you made is really key that from time to time, and I'm sure we'll have them again in the future, a rogue trader emerges. Someone who went way beyond their risk limits at a financial institution, tried to cover them up, failed to cover them up, and then their behavior or their trades resulted in staggering losses.

But as you say, I do think that term probably originated with Nick. I guess I'm not 100% sure, but that's something we can bring up. So without further ado, Nick Leeson, thank you very much for joining Oblots. I guess I'll start. Were you the first rogue trader? I look, I think there were many before me. There probably weren't as many that hit the headlines as dramatically as I did. I think, you know, rogue trader is one of those things that, or rogue trading is one of those things that goes hand in hand with the market.

People would often mismark their positions, the market or they would trade outside of their position. And I was certainly not the first person to do something like that at bearings. I was definitely the last one. And I probably took it a little bit further than anybody had prior to that. And I think, obviously, one of the reasons that I'm trading activity is the catastrophic effect that my actions had in the majority of cases. Most rogue trading episodes are course. Whilst they do financial damage to the institution, they don't usually really. result in the collapse of the bank.

So I don't think we want to dwell too much on your actual trading at Bairings, because at this point, it's been really, really well covered. But for the purposes of this podcast and the conversation that we're about to have, what would you say about what you actually did at Bairings? Was it a rogue trade? Was it authorized? Was it as insidious as some people made it out to be? I know, look, it was definitely road trading. I got myself into, I had an awful lot of autonomy in Singapore. I could pretty much do what I wanted. It was a remote subsidiary of the bankroll or expertise that surrounded me in terms of making sure that I was doing. So when things started to go wrong and I found myself in a difficult situation, it was a lot easier than you would expect it for a period of time. Now, you know, I used to wake up. every day thinking that today would be the day that somebody would expose what was going on. It was only ever supposed to be a short-term thing. Like I said, trades into error as a regular occurrence, a fairing. Obviously, everybody appreciates that it's not correct, but people used to do it,

warehouse the trade overnight, I think it used to be called. And then the following day, they'd usually close the trade out with hopefully no loss on the transaction. So I just took it a little bit, oh, I took it a lot from the beginning. I knew what I was doing. I knew that I shouldn't be doing it. I continued and, you know, was rightly punished for my activities during that period. So, Nick, what would you say is the difference between a good trader versus a rogue trader who's trying to book profits? I don't know if there's differentiation.

I mean, obviously, people are, everybody knows what their position limits are. They know what they're supposed to be doing. People who work in the financial markets are intelligent. I think when you find yourself in a difficult situation, you're surrounded by people that can help you. And I just thought that I could cope with the situation that I was in. I didn't want to succeed in and being successful. I had a huge fear of failure.

So I didn't really communicate very well that was going on at me. So, I mean, being disciplined, being diligent, being, I think one of my biggest failings throughout that whole period, and it's not something that you see of communication both from me as an individual from the organisation and creating an environment where people could talk about their failures and problems that they were facing within the organisation just against other people. You know, only the strong survive. And it wasn't what was going on, number one, but also doing. a really simple thing which would have changed the pattern of everything that I did. And that's just simply asking for help. And 25 years old at the time thought a sign of weakness. And, you know, as you all know, banking 90s wasn't.

I think that's really interesting how you characterize that, just sort of the culture of not being able to make mistakes, fail, or ask for any advice or help from anyone. I think when people these days think about some of the risks that trading or proprietary trading takes, that they see a sort of inherent asymmetry in which a trader can capture a bonus if they have big upside gains. But if they don't have that, you know, they might lose their job, but that's the worst. They don't have unlimited downside in the same way. Now, of course, if one ends up in prison, that's different.

But how much do you think that asymmetry is part of the mentality versus just what you described, sort of just, it sounds a little different, not quite that calculating, but just sort of a very sort of discouraging culture? Well, I mean, I think culture, conduct has a huge part to play and regulators and financial institutions alike. I spend a lot of time looking at that these days. I mean, the short-termism obviously is a key component of people's behaviour, and I think a lot of banks and financial institutions are changing the way that that happens. But that bonus does create that short-term approach to what you're going to get paid in the very near future, and that does cultivate a risk healthy. But, you know, I think if people, I mean, like I look back over, I'm 51 years of age now,

So this is, you know, half of my lifetime ago as we currently stand. And, you know, creating an environment where people can talk and feel empowered enough to talk about things that they're experiencing within the work environment, I think is a crucial factor. And if you can then reduce some of that short-termism that we see with the bonuses that are paid within the world of banking, it makes for a safer environment. And, you know, for me at the time, I come from a very working class background. I wanted to be successful. I wanted to do better than my family members have done and sort of move along in terms of the way that...

And being successful was the key part of that. And, you know, trying to announceiate my failure or to try and confront that myself was... I'm not going to say it's impossible because sometimes you just have to... do it, but the, you know, it was just something that I didn't do during that time. Everybody story that surrounded me and it propelled everything forward and, you know, whenever everybody else is then getting paid this maelstrom that you, that you kind of have no control over. I know it's difficult to understand, but everybody was buying into the success story that surrounded me at the time. It's kind of amazing to me to think that you were 25 years old when

when all this was happening. Let's fast forward a little bit. So you have the rogue trades at Bering's. They get discovered and eventually you go to jail for, I think it was three to four years. What happened once you got out of jail? Like, what was your initial thought about what your future was? And what was your plan at that point? Yeah.

Well, I was sentenced for six and a half years in jail. you get a standard one third remission. So I spent four years and four months in itself whilst I was in prison in Singapore as well. So when I was released, the first thing after four years in prison, you struggle to make decisions, a little in making process.

I think something quite weird that happened in the period that I was away in prison, infamy, celebrity, whatever you want to call it, and certainly in my case, it was infamy. People are intrigued by that,

They're interested by that. So I had a very short window in terms of three months, the next six months or whatever. But then I started to get offers to do TV programs to talk about what happened during my time at Bairings. I'd written a book before I went to Singapore. I was originally arrested in Germany and spent nine months there, which paid for my legal fee. Reasonably well off, but I wasn't wealthy enough to pay the not that there was much of a difference. It took nine months before legal fees that needed a nurse. So after dinner speeches and then that's moved on to a lot of conference and keynote addresses at events that, you know, range from things that are very finance orientated.

So risk management compliance, organizations who are looking to promote their own products through to, you know, sometimes I might host a dinner for a small group of people who are, who are a vulture or venture capital, looking to do some business. and key individuals. Other times, it can be a conference for upwards of five, six hundred people at an event where somebody wants to focus on compliance and the things that can go wrong if you don't manage risk appropriately. So you didn't have, obviously people were intrigued by your experiences, by what you learned, and you got a number of invites, as you said, to speak. But in terms of rebuilding a life, you have to figure there's only so much of a window where people want to hear it before eventually this sort of infamy fades. And what did you think then? Did you have some idea for like, okay, what is a career?

What is a full second life possibly look like? It's weird, Joe, to be honest with you. I mean, I do as many after dinners and conference events right now as I did 19 years ago when I was released. So it's, you know, and I suppose things like recently the Celebrity Big Brother program that I was on in the UK kind of introduce you to a younger generation. I mean, so I travel the world talking at events. So the mainstay for the last 19 years since I was released from prison has been after dinner talking at conferences. and I probably do somewhere between 30 and 35 of those a year. Has anyone from bearings, people whose careers and jobs were lost because the banks collapsed,

people who lost a fortune, do they ever express resent that you've had built this career getting paid to speak on these subjects, getting flown around the world, going on TV, becoming a sort of mini-celebrity, which is in a way, arguably at their expense? The honest are across many people who worked with parents during that time. I think the thing, and you find this with a lot of speakers as well as you go around the world and you listen to them, if you tell lies, you get seen through. So I told enough of them years ago when I worked at the bank, I fully accept that. So it's very honest and candid.

It doesn't paint me in a very good light. So, you know, I've met Peter Norris, who's the CIO, a bearings at the time. I've met many of the people who worked on the Asset Liability Committee, several of the main board members. No, there's no resentment. You do get a bit of negativity, and it tends to come from people of a certain age group who work, you know, probably chartered accountants and think that I, you know, sought to undermine the banking system in the UK. And it's just a, you know, it's a story of errors and stupid decisions during that period, which ultimately led to the collapse of the bank.

It's, you know, it was fraud. My part in it was definitely criminal. And I was rightly punished for that. And, you know, the punishment is not just the sentence. You know, I developed cancer whilst I was in prison. I was divorced by my wife, and I've had to rebuild my life after that. So all of that is part of the punishment, and I accept that. Everybody's entitled to their opinion, but so am I.

And, you know, I don't walk around with my head bowed. When you're released from prison, as I was in 1999, you have a choice. You can hide away, or you can confront what you did, try to understand it, and then move forward from that point. But if you don't take yourself apart and really rip away all the veneer and really look at yourself and understand that you didn't like yourself

and what you did and how you reacted in certain situations, that it's impossible to build yourself back up. You know, you have to go through that process. So when you look at some of these other road trading episodes that exist around the world, you know, Jerome Curve, who had a... Bowley still has lots of issues that he's campaigning against.

But they did wrong. It's reliable rate fixes. People who work in banks, as I've mentioned already, are amongst the most intelligent people in the world, and they know when they're doing something wrong. So when a lawyer stands up and tries to convince the court that there's lots of other mitigating factors, that's rubbish, because these people know what they're doing.

They know they shouldn't be doing it. me included, and for that reason, they need to be punished. And if you don't punish people, you don't have deterrent. And, you know, that's what needs to happen. Hi, I'm PJ Vote. My podcast Search Engine has a new two-part series for you. Of all the new technologies coming out of AI, the most transformative one might be driverless cars.

They're already on the road in 10 American cities, and they're quickly coming to more. We tell the story of how we got here. The secret team at Google that spent 15 years building what might be the safest vehicle on the road, and we cover the fights brewing in blue cities, where unions and politicians are working to keep those cars off the streets. Listen to search engine wherever you get your podcasts. So I think we do want to focus on, you know, how you rebuilt your life and your career.

But since you brought up Jerome Curvial and Kuiku Adeboli at UBS, I'm just curious to get your take on this, like, do you think there is a common thread that, runs through all these different modern rogue traders or is each rogue trader scandal different in some way which would suggest that you know for big financial institutions there's actually no one like silver bullet way of protecting themselves i think you hit the nail on the head there i don't think there is a silver bullet i think you can you can look at and people have done this over the years people have tried to look at personality types and, you know, behavioral analytics and how people are behaving.

And I think there's, you know, there's very clear differences, I think, between myself, Curvial, Adaboli. There was a guy, um, Biguchi at Daewa in New York, who was exposed around the same time as me as well. So there been, you know, during that period, there were quite a large number. I think eventually the industry, you know, rather than trying to work out, who potentially is going to be the next road trader. It's about making sure your controls and your systems are as robust and effective as they possibly can be.

And then you expose people far sooner, which I believe is what happens within the world of banking these days. There are still people who post road trades not on a daily basis, but it happens. And people are just exposed a lot sooner and the net effect of their actions is very, very limited. You know, I think the day of these big excessive road trading episode is a long way behind us. You know, because the industry has changed, compliance and risk management is better than it's ever been. So I don't think there is a silver bullet. It is about just making sure that your controls are as good as they possibly can be, that you freshen them up.

You're not doing the same thing today that you were two years ago. because if you are, you can guarantee that somebody's circumventing those rules already. So it's about being proactive and making sure that you're as good as you possibly can be. And that's what everybody aspires. You know, when you're looking at compliance and risk management roles around the glass at any particular location, you know, people don't like asking the difficult questions. They don't like rocking the boat. They're getting paid a big salary for not doing a great deal. Maybe that's an incorrect characterization.

but they don't want people need to think if you see something's going wrong or you're worried about something, you need a voice that's being heard. And banking over the years haven't, and I'm not talking about the U.S. or any particular location, but certainly in the UK, banking, you know, have a voice. You know, you're talking about your speeches that you gave and the lessons that you've learned. There are a couple other episodes in your recent career that are in. interesting, including for several years, you were the head of a soccer team or a football club, Galway United. How did that happen? How did you become the head of a football team?

Well, I mean, the football teams in Ireland are quite small, to be honest with you. So, no, I live in Galway. My wife said I was getting in her way at home that you wanted me to go and do something. and that's the genuine story. So I've been here for about 15 years since I remarried. And, you know, there's a lot of big American bio-pharmaceutical companies around here from Shannon down to Galway. But they're not things that, you know, that I would be able to turn my hand to.

So apart from working in financial markets, the only other real interest that I've had is football. So when somebody asked me to get involved with the football club, I did. And, you know, it was a bit of fundraising at first. And then I moved on to become the chief executive of the football club. And then resigned from there in 2010. And like I say, I mean, the mainstay over the last 15 to 19 years has been the after-dinner speaking. I'm involved in an online trading education business at the moment, which has been going for three or four years.

There's lots of people. It doesn't really apply for getting involved in. And losing a lot of money because they don't really have any experience of the market. They're lured in with some quite misleading advertising. So, you know, my name signifies more than anything else that this can be really dangerous and you can lose a lot of money. So, I mean, that makes sense in the context of an online trade. education system, but you were also on the most recent season of Celebrity Big Brother in the UK.

And I'm just wondering how that came about, because if you forgive me, you know, when I think about celebrities, I don't necessarily think about a rogue trader from the 1990s. So what was the approach that they made to you? And what do you think you brought to that show? Wait, wait, can I just before you, can I just intervene here? real quickly because I don't think many people probably do think of a former rogue trader as a celebrity. But my impression of UK media culture is that there is a very large enduring interest in, just to be blunt, reality shows about what we would call C and D list celebrities. And so people that aren't exactly

the biggest names, I get the impression stateside that the media in the UK. is much more into, oh, do you remember this name from the past? Well, here he is. So anyway, you can answer Tracy's question. But in a way, I didn't find it that surprising of a choice. How dare you call Kirsty Allie a D-less celebrity, Joe? Kirsty. Kirsty is lovely.

I won't have a bad word said about her. She was lovely throughout my experience in the house. I think there's two things. I think you're right. I think a lot of the reality programs that we have in the UK, I think you can even go lower than D and probably get down to Z. But they have themes as well. So the theme for this year was for people that were caught in the eye of a storm,

so a media storm, which obviously applies to me. And I think if you look through, I think there were 13 people that went into the house at the beginning. and I think mine was probably the biggest media storm at the time. I mean, as you characterised at the beginning, it took over the world's media for a period. So, look, for me, it was a bit of a challenge for me. It's 20 years since I've had cancer,

so, you know, I was given a 60% chance of living for five years. So, you know, it's a bit of a milestone for me, and it was one way of marking that. they obviously pay you quite well for your time on the program. So I'm not going to, I'm not going to deny that part either. But, you know, 99% of the response has been extremely positive. And it's been good.

And, you know, as you mentioned at the beginning, I came forth. So Kirstie was one of the people that beat me. So, yeah, look, it was, I think it was a worthwhile experience. Okay. So, Nick, here's a question for. you. You know, you had the rogue trade, which clearly erupted into a media storm, as you put it, and ended in a jail sentence. But after that, you were able to rebuild your career. You were, you know, a motivational speaker. You were the head of Galway United, and you were on Celebrity Big

Brother. Do you think you're happier with that career outcome versus what would have happened if you had been at bearings without the rogue trading scandal? If you had just been a successful trader at bearings, which would you have preferred? I would definitely have preferred to be the successful trader at bearings. You know, you have to look back on, like life has lots of different twists and terms and you're the sum of all your experiences. is I don't have to look away when I look at people. That period of my life will always be the most embarrassing period of my life.

There's absolutely no doubt about that. But I've dealt with it. I've faced it. So I can look people in the eye and move forward. I'm going to use the phrase to say that be proud of myself, but that's not exactly right. I'm comfortable and self-confident in who I've become. but I'm not, I'm certainly not proud of what happened during that period between 1992 and

1995 because it's the complete opposite of what I wanted to achieve. So the ask you a question is, all things being equal, I would have preferred to be the CEO of Bearing at this time. But, you know, that's, at this point, unfortunately, that is just wishful thinking because life for lots of different reasons, primarily my own. stupidity took. Nick, Lisa, there's been a fascinating conversation.

Obviously, we've known your name for years in the news and really appreciate you coming on your candor and perspective. So thank you very much for joining out. Thank you, both. Thanks, Nick. That was great. Tracy, I really

thought that was an interesting conversation. Like I said at the end, you know, Nick Leason is one of those names. I've just heard forever. fact, I think I can remember being in middle school when I guess I was 12 years old and reading in the news or seeing something on TV about the collapse of this legendary multi-century old bank bearings and how it was brought down by a trader in Singapore. And so to actually hear the voice of that person and get their perspective, I thought it was incredibly fascinating. Right. Well, I will say,

I think you were a much more engaged 12-year-old than I probably was. But one of the things that struck me a lot is, you know, this notion that a 25-year-old trader basically brought down one of the oldest merchant banks from Britain at the time. And, you know, as much as you want to lay the blame on a single person, the notion that any, like, 25-year-old could do that to a single entity kind of speaks volume. about the controls that were also in place at that company. Absolutely. And as he, as Nick pointed out, there have been multiple rogue trader incidents in recent years. And they're almost certainly will be in the future because there's no silver bullet. But they haven't been on the scale that they've brought down an entire bank.

And it seems kind of hard to imagine. I mean, you know, knock on wood. But it's hard to imagine in this day and age when. there are so much more awareness of this and sort of surveillance of traders, internal controls, things like that, that that could happen. But, you know, going back to 1992, the small sort of satellite branch way out in Singapore, different time zones than the people who were really running the bank, you know, much less ability to sort of watch everything in real time. it's almost not surprising that that was eventually going to happen.

Right. But you're right in the sense that we do have additional measures now that are aimed squarely at preventing this type of behavior. And that's actually, from what I remember, I think that's how Kuaku Adaboli, the UBS rogue trader, was initially found out, was he went away on, you know, a lot of traders nowadays have two weeks mandated holidays so that, if they are cooking the books, those things can actually come to light. And I think that's how they found him. So clearly, the industry is adapting to rogue traders and is installing new methods of finding them out. But I guess the challenge is always sort of adapting and making sure that the traders don't become used to your detection. Yeah, absolutely. I think also, I just, there are a number of people in the sort of Nick Leeson model of career rehabilitation that we've seen.

So, you know, the Wolf of Wall Street guy wasn't a rogue traitor, but he got in trouble. And then he sort of goes around and talks about stuff. But without judging any of those other people, I did get the impression that Nick is sort of totally honest and upfront about what he did. And the fact that he doesn't like sort of like pat himself on the back for having, you know, some great insights or blame other people. It felt like a sort of honest, sincere reckoning and assessment of his own career. Yeah.

And I did think it was interesting that he said, you know, if he was given the ultimate choice between like his current comeback versus having been a legitimate trader who rose through the ranks of bearings that he would have chosen the latter, that kind of says a lot. Absolutely. Well, this has been another episode of the Oddlots podcast. I'm Joe Wisenthall. You can follow me on Twitter at the stalwart. And I'm Tracy Allaway.

I'm on Twitter at Tracy Allaway. And you should follow Nick Leeson on Twitter. He is at the Nick Leeson. And don't forget to follow our producer, Tofer Forges on Twitter. He's at Forges T, as well as the Bloomberg head of podcast, Francesca Levy, at Francesca today. Thanks for listening. The news doesn't stop on the weekends. Context changes constantly.

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