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Barings May Be Gone, but the Story Isn't Over : Singapore: Bank's collapse leaves a legacy of continuing inquiries, fears for other firms, even plans for a movie.

October 30, 1995|JOHN-THOR DAHLBURG | TIMES STAFF WRITER

SINGAPORE — The ignominious February collapse of Britain's oldest merchant bank was the stuff of gripping drama, its disappearance seemingly attributed to the hubris and blunders of a single ambitious young man operating from offices on this booming island nation. Not surprisingly, someone has concluded it would make a fine movie.

The British newspaper the Mail reports that Hugh Grant, star of "Four Weddings and a Funeral" and "Nine Months," covets the leading role in a film on the Barings bank scandal that Sir David Frost hopes to produce. "He'd be absolutely perfect for this," Frost was quoted as saying.

But that's not the only reason the conversation keeps turning to the Barings scandal when futures traders and merchant bankers congregate here on a muggy evening for a drink or plates laden with fettuccine Alfredo at one of the trendy open-air bistros along Boat Quay. The fact is that the real-life script is still being written.

Barings' collapse is still being felt by many in Singapore's populous financial community. At least six separate external auditors have descended on one of the oldest stock brokerages in town to ensure that its books don't contain any financial time bombs like those that blew apart Barings, employees say.

And at the Singapore International Monetary Exchange (Simex), the bourse where fugitive British trader Nicholas Leeson racked up $1.4 billion in losses and doomed his venerable British employer to collapse, efforts have been stepped up to identify and better police high-risk accounts.

"Everybody is sick and tired of the Barings affair," says Christopher Chong, director of Kay Hian James Capel, one of Singapore's oldest and largest stock brokerages. "Especially since we have suffered the effects of it."

In macro terms, though, this former British colony--which has become an international banking center--seems to be weathering the storm just fine. "There has been not a blip in capital in-flow," one businessman who closely watches the financial markets said delightedly.

Yet the unraveling of exactly what happened at Barings may only be beginning. A report by two government-appointed inspectors released this month painted a startling picture of "institutional incompetence" and "total failure of internal controls" at the bank and portrayed a high-level conspiracy by senior managers to cover up allegedly fraudulent trades by Leeson.

Leeson, 28, the former general manager of Barings Futures Singapore, ended his bid Sunday to fight extradition from Germany, saying he will return voluntarily to Singapore to face charges against him. He is accused of 11 counts of fraud and forgery, and could be sentenced to up to 14 years in prison if convicted.

After their six-month investigation, Michael Lim and Nicky Tan of Price Waterhouse concluded that the London-based bank might have been saved had senior executives not covered up one of Leeson's major transactions. "At best," the inspectors said in their 183-page report, senior executives were "grossly negligent, or willfully blind and reckless to the truth."

Indeed, if the inspectors hired by Singapore's Finance Ministry are correct, Leeson may have to share the dubious credit, off and on screen, for having killed his employer.

In particular, they allege that James Bax, managing director of Barings Futures Singapore and Peter Norris, chief executive of the British-based Barings Investment Bank, suppressed investigations into a receivable, or IOU, allegedly forged by Leeson to conceal losses he incurred by having bet massively and wrongly on Japan's Nikkei index.

Singapore's Commercial Affairs Department, the government agency responsible for investigating white-collar crime, is still conducting its own investigation into the bankruptcy. It has shown interest in a plea-bargain if Leeson can help implicate others.

Leeson earlier had offered to cooperate with British authorities to avoid extradition and what he called a "show trial" in Singapore. This new report seems to have reassured him he will not be held accountable here for all of Barings' misfortunes.

"I am hopeful that Nick Leeson's responsibility will be identified and he will be sentenced for it, if convicted, on a much more fair and accurate basis," says Stephen Pollard, Leeson's London attorney.

In their inquiry, the Singapore inspectors found that Simex, where Barings was listed, also did not do its job thoroughly. Though Simex had concerns with Barings Futures Singapore by late last year, it "did not follow up on them with urgency" and failed to inform the country's central bank, the Monetary Authority of Singapore.

Since the Barings collapse, Simex has multiplied its unannounced audits of traders and named an international advisory panel to recommend changes to bring the exchange, where 44 million contracts were bought and sold in 1994, more in line with the industry's "best practices."

Last Wednesday, the exchange said it had also taken steps to better spot high-risk accounts and that settlements and margin calls were being analyzed daily.

Amendments to Singapore's Futures Trading Act have also toughened licensing requirements for traders and increased the auditing power of the Monetary Authority of Singapore.

Stricter laws, though, will not necessarily ensure that there is no repeat of the Barings disaster, insiders said.

"It is not a lack of regulation that caused the problem," said Hugh Young, managing director of the Singapore office of Abtrust, a fund management firm. "It was a maniac and a badly run company. And you can always have maniacs and badly run companies. In Singapore or anywhere."

Meanwhile, life goes on in Singapore's financial markets. Insists a veteran stockbroker: "This is history now. In Asia, we like to look ahead, not backward. And people are now looking where to make their next dollar."

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