Nicholas Leeson biography

Synopsis

White-Collar Crimes

Nicholas Leeson was born on February 25, 1967, in Watford, Hertfordshire, England. The son of a plasterer, Leeson grew up in a working class neighborhood but always had high aspirations for himself. Teachers considered him a poor student and he graduated from school with only a few qualifications.

With no financial experience, Leeson managed to find work as a clerk at the royal bank Coutts in the early 1980s. This was followed by several other banking jobs, and in the early 1990s, he began work at Barings Bank—not only was it the United Kingdom's oldest investment bank, it was the personal bank to the queen.

Leeson worked at impressing his superiors and was soon promoted to the trading floor. Within a few years, he was promoted to manager of a new operation in futures markets on the Singapore International Monetary Exchange.

Leeson's London bosses trusted him implicitly, as he brought in large profits betting on the future direction of the Nikkei Index. He and his wife, Lisa, lived a life of luxury on his 50,000 pound salary with bonuses of up to 150,000 pounds.

In 1992, Leeson began making unauthorized speculative trades. These proved successful at first and made significant profits for Barings. Leeson appeared to be an exemplary employee. However, it was not long before things began to take a turn for the worse. At that time, a derivatives trader only needed to bring to the table a small percentage of the amount being traded, thereby making it possible to incur huge losses if the deal went sour.

Many of Leeson's deals did turn sour and he opened a secret account (numbered 88888, considered extremely lucky number in Chinese numerology) to hide his losses from the company. By late 1992 the account, for which Barings was responsible, was in the red by over two million pounds and by late 1994, the sum had grown alarmingly to 208 million pounds. Executives at Barings were none the wiser, and by the end of 1993, Leeson had made in excess of 10 million pounds, accounting for 10 percent of Barings's total annual income. The whiz kid could do no wrong in their eyes.

On January 16, 1995, Leeson placed a short straddle (a non-directional options trading strategy, involving substantial risk) in the Tokyo and Singapore stock exchanges. It was basically a bet that the Japanese stock market would make no significant overnight move. This seemed reasonable, as the Japanese economy was experiencing a rebound after a 30-month recession. However, the following morning, at 5:46 a.m. on January 17, 1995, the Great Hanshin Earthquake struck.