Rogue trader: Lessons from Nick Leeson

Rogue trader Nick Leeson proves crime does pay, but advises others not to try it.

Crime may not pay, but talking about it does if you’re Nick Leeson. The 41-year-old Brit who lost US$1.3 billion in 1995 at Barings PLC and spent less than five years in prison as a result, is now rumoured to earn about US$12,000 for a 30-minute speech. But the irony of one of his latest gigs, two speaking sessions hosted by the University of Western Ontario’s Richard Ivey School of Business, is that Leeson is also imparting ethical wisdom for a price.

Self-deprecating, Leeson makes no bones about the fact he was guilty as charged for hiding trading losses at what was then one of England’s oldest merchant banks. “I knew from the beginning what I was doing was wrong,” he told the Toronto media in May, before proceeding to explain to a group of business people that they should do as he says, and not as he did.

To be fair, Leeson didn’t exactly have the pedigree of a budding criminal mastermind. He grew up in a working-class family, and started out in an entry-level position as a bank clerk, before working his way up the corporate ladder to be the kind of model employee Barings was looking for in the early 1990s to manage its Singapore business and oversee its futures markets operations. But Leeson, who started working immediately after his A-levels — the equivalent of high school in the U.K. — when he was 18 years old, says he never received the right kind of training to take on such a task. Thrust into a situation where he had to sink or swim, Leeson floundered and hid his mounting losses from his employer. He didn’t set out to defraud anyone, he says. But he didn’t want to be a failure, and saw asking for help at Barings as a sign of weakness. Each error in judgment just compounded his lack of knowledge.

But while Leeson is guilty of poor judgment, Barings doesn’t escape getting some of the blame. His bosses didn’t see the need to offer Leeson any training, and they failed to realize that an employee’s past performance isn’t necessarily an indication of future performance. Like most traders, Leeson had a Type-A personality, and sometimes they need guidance. “Those Type-A personalities can make you a lot of money,” Leeson says. “But they can lose you a lot of money, too.”

Barings also didn’t question why Leeson was asking for large sums of money in wire transfers, nor did it question what was in the account where he recorded his losses. Organizations need a strong set of risk controls, and those in charge need a sophisticated understanding of organizational processes, Leeson says.

But here’s the issue folks such as Andrew Crane, professor of business ethics at York University’s Schulich School of Business, raise: Can you say crime doesn’t pay if you pay a convicted criminal to speak about it? Most people know what’s right or wrong, says Crane. Yet there are times when people are caught in an ethical dilemma at work, which is why raising such issues are important. However, employees — and students — could probably learn more from the more mundane ethical problems they face at work, rather than from an incident like Leeson’s.

Tony Frost, the director of the Ivey School of Business MBA program, agrees that it was an unusual approach to have a convicted criminal speak about ethics, but said there was something to learn. After all, here is a man who had made poor decisions, admitted his responsibility and could now take a step back and give perspective.

But Leeson has more than just perspective now — he has cachet. As his agent told the Wall Street Journal, “He doesn’t do anything for free.” Besides speaking engagements, Leeson is the CEO of Irish soccer team Galway United FC, author of two books, and had hot Scottish actor Ewan McGregor star in the movie of his life, Rogue Trader. Not a bad career for a reformed criminal.

But despite his recent achievements, Leeson seems repentant, saying he will never be a professional success because of his profound failure at Barings. “If an episode like mine had been highlighted or explained to me, I might have made some different decisions,” Leeson says. “I spent four-and-a-half years in a gang-infested prison, got cancer of the colon and was divorced. If any of that sounds attractive, I guarantee it’s not.”