Rogue Trader: Nick Leeson Part Two?

Category: , By Stuart
In the news the last couple of days have been reports about the alleged fraud committed by a "rogue trader" at the French investment firm Societe Generale (www.socgen.com) .

http://edition.cnn.com/2008/BUSINESS/01/24/societegenerale.fraud/index.html

What is really alarming about the whole issue is that a single trader was responsible for a whopping $7.2 billion fraud. Basically he took positions much above his authorised powers. While, the bank might cite him creating fictitious firms and blah blah.. the pressing question to ask is how and why did such large positions get built without getting detected by anyone?

This also reminds us of the other infamous rogue Trader nickleeson (www.nickleeson.com) whose aggressive bets on the Nikkei futures on the now defunct Singapore International Monetary Exchange (SIMEX) and the infamous 88888 account led to $1.4 billion loss for Barings bank which also led to the collapse of Barings.

“How Leeson Broke the Bank.” BBC Online. June 22, 1999. British Broadcasting Company. 12 March 2005. http://news.bbc.co.uk/2/hi/business/375259.stm

Later Nick also authored a book titled Rogue Trader which was later turned into a film. http://www.nickleeson.com/books/rogue_trader_book.html

Nick Leeson spent 6.5 years in prison, battled cancer and divorce and is now back into the mainstream. We have to wait and watch what happens to the Socgen trader.

The financial markets are already battling the subprime crisis, and if we have more skeletons out of their closets, investor confidence (which is already thrashed thanks to the stock market roller coasters) will plummet into an abyss.

Trading in SocGen's shares was suspended following the announcement.

This also raises the questions of ethics and its importance in business. And this is a question that we as MBAs and future business leaders or (Rogue!) traders need to ask ourselves.

Incidentally if we look at B-schools with the lens of Ethics, social responsibilty the FT rankings tend to get turned on their head. Beyondgreypinstripes is a site that looks into these issues and has its own ranking
have a look http://www.beyondgreypinstripes.org/rankings/index.cfm

Stuart
 

3 comments so far.

  1. DomoDomo@INSEAD January 25, 2008 at 12:39 PM
    Hey buddy,
    My own perception about this Rogue trader episode is that the guy's boat is being loaded. SocGen notoriously is the most elitist French bank by far -they pride themselves in recruiting only X-Mines grads (Top 2 French engineering schools). My guess is thet these people are too proud, and it is too against SocGen's influential circles to recognise they have been over-risky and have taken a beating on the subprime biz. Come on, though this Jerome Kerviel probably is a clever chap, but since he does not belong to X-Mines, in SocGen world he is a nobody. So €5bn? Who is trying to fool whom in this story? The bigger fish are still out there...

    Enjoy your final months buddy!
  2. DomoDomo@INSEAD January 25, 2008 at 12:39 PM
    Hey buddy,
    My own perception about this Rogue trader episode is that the guy's boat is being loaded. SocGen notoriously is the most elitist French bank by far -they pride themselves in recruiting only X-Mines grads (Top 2 French engineering schools). My guess is thet these people are too proud, and it is too against SocGen's influential circles to recognise they have been over-risky and have taken a beating on the subprime biz. Come on, though this Jerome Kerviel probably is a clever chap, but since he does not belong to X-Mines, in SocGen world he is a nobody. So €5bn? Who is trying to fool whom in this story? The bigger fish are still out there...

    Enjoy your final months buddy!
  3. Anonymous May 20, 2009 at 11:16 AM
    Thanks for this really nice posting. Keep it up........

    http://www.bestschoolsformba.blogspot.com/

Something to say?