Nexus - 0302 - New Times Magazine-pages

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THE SOUND OF ONE HAND CLAPPING IN UNISON The Bank of England's tediously dull but majestically entitled "Report of the Board of Banking Supervision Inquiry into the Circumstances of the Collapse of Barings" is a shining example of the lack of heuristic enterprise on the part of the inquiry team, and has some echoes of the discredited Warren Commission Report in that vital information was either not followed up or was altogether disregarded, but nonetheless it rapidly concludes that the lone trader (lone assassin) is to blame. The most salient points of the entire inquiry are summed up in the innocuous-sounding "Limitations on access to documents and individuals" section of the report. This section, more than the other 337 pages of the teport combined, is the most revealing and has not been discussed in the press to any extent. Firstly, Leeson, the man whose name is on everyone's lips and who is at the very centre of the scandal, was not interviewed. Displaying some small signs of displeasure at Leeson's refusal to be interviewed, the team did not, as might be expected, call for Leeson to be extradited to London and subjected to examination to reveal his knowledge of the events, despite the fact that he was pleading for this to happen. Instead, he was left to rot in a Frankfurt prison waiting extradition to Singapore. The inquiry fared little better with Barings Plc. The team were not permitted direct access to Barings offices—anywhere. Formal conversations were held with some directors and staff in London, and some documents and records were provided when requested by the Bank of England. Knowing precisely which documents to request must have been problematic for the Old Lady's ace investi- gators. Other directors and staff, particularly in Singapore, were not permitted to be interviewed, nor were any Barings Singapore records or documents provided other than a partial photocopy of the all-important 'five eights' account. Requests for vital informa- tion, including the electronic mail between London and Singapore, met with the deadpan response that they “have not been retained". Unfazed, the team requested access to the all-important computer file archive but were told it was “either missing or corrupted". The team did not press the point. They also did not consider the option of invoking statutory powers to enter the premises of Barings and seize documents—a fact to which we shall return. Undeterred, the inquisitive inquirers turned to Barings’ auditors, hoping to gather the all-important data they needed to proceed with their investigation. Alas, they were disappointed. Coopers & Lybrand, who carried out the December year-end audit for 1994, refused the team access to either its work papers or members of its staff who undertook the audit, citing "its obligation to respect its clients’ confidentiality”. Strangely, Deloitte & Touche, who con- ducted the audit for the years 1993 and 1994, did likewise. Having exhausted the obvious choices, the team turned to the more exotic. They approached SIMEX, the Singapore Money Exchange, which has significant records regarding the cash flow of funds from Baring Futures (Singapore) Pte Limited (BFS) that represent- ed the massive margin calls that eventually totalled £827 million. SIMEX also has records covering the all-important 88888. account through which the ‘unauthorised’ trading of Nick Leeson was booked. SIMEX refused to provide the team with records of the this account as well as other "significant categories of documents”. Following the collapse of Barings, Singapore's Minister of Finance appointed Price Waterhouse as the Singapore Inspectors and authorised them to investigate the events leading to the col- lapse. Presumably they conducted their investigation with level-. headed professionalism. However, they did not allow documents and other information they had gathered to be passed to their London colleagues in the Bank of England who were doing the same thing at the same time, and told them that this was due "to legal constraints in Singapore”. The Singapore High Court appointed Price Waterhouse as Judicial Managers on 27th February 1995. They became the legal repository of the majority of BFS records. Having provided some initial documents to the team, they then changed their minds and “thereafter did not permit the inquiry team access to any further documents requested, nor have they permitted interviews of BFS staff". Being wholly unfamiliar with Singapore law, I cannot comment on the dual role Price Waterhouse played as both the Inspectors and the Judicial Managers. Perhaps, like American banks, leading accounting firms have a system of ‘Chinese walls’ to guard against any conflict of interest, supposing there is any conflict in the first place. Thus far we have most of the world luminaries of the account- ing fraternity gathered together in this big hole in the banking bal- ance sheet. Only one major name is missing from the commission merry-go-round: Ernst & Young. Perhaps unsurprisingly, we learn that they were appointed administrators of Barings Ple and “certain of its subsidiaries in the late evening of Sunday 26 February 1995". I wonder who is going to pick up the multimil- lion-pound ‘fees’ these firms will undoubtedly charge for their ser- vices. Still buoyant and in fine fettle, the inquiry team approached the Singapore Commercial Affairs Department (CAD) which was charged with the responsibility of conducting criminal inquiries into the now familiar collapse. Surely they would cooperate. The CAD shrugged shoulders, simpered a few times, uttered the word "reglet", mumbled “so solly", and smiled a Chinese smile. Yes, they would like to cooperate, they really dearly would, but, unfor- tunately, the Judicial Managers (the nice people at Price Waterhouse) would not permit it. Back in London, Leeson provided the Serious Fraud Office with important evidence contained in a letter. The SFO wasn't interest- ed. Morcover, the letter is "confidential" and couldn't be released to members of the inquiry because of this. This is a Chinese wall, isn't it? Former Barings 'lone trader' Nick Leeson arriving under police escort in Singapore, where, as of December 1995, he is serving a six-and-a- half-year prison term. (AFP photo) 32 ¢ NEXUS FEBRUARY-MARCH 1996