In earlier articles, we read about how and the reasons for frauds and improper governance.
To further emphasis on the importance of maintaining proper internal control and corporate governance framework within an organization, below are some past illustrations of the lack of proper corporate governance and internal controls which created disastrous losses to financial institutions and to a large extent brought to their downfall:-
( article extracted from Reuter )
Sept 2011 – Switzerland’s UBS AG had discovered unauthorised trades by a trader in its investment bank had caused a loss of some $2 billion.
Oct 2010 – Former Societe Generale trader Jerome Kerviel sentenced to three years in prison by a Paris court for his role in a trading scandal and ordered to reimburse the French bank 4.9 billion euros ($6.7 billion). The 33-year-old was found guilty of breach of trust, computer abuse and forgery.
April 2010 – MF Global employee Evan Dooley indicted on fraud and other charges after racking up $141 million in losses speculating in wheat futures contracts in February 2008. The incident was disclosed in December 2009 when U.S. regulators slapped a $10 million fine on MF Global for lax supervision.
June 2009 – A trader at London-based oil brokerage PVM Oil Futures racked up losses of almost $10 million following a series of unauthorised trades believed to have caused a spike in global crude prices. The trader, named as Steve Perkins, was later banned.
May 2009 – Former Morgan Stanley trader David Redmond banned after building up a big unauthorised oil futures position after a long liquid lunch and then hiding the deals overnight.
February 2009 – Former senior trader at Merrill Lynch in London Alexis Stenfors banned for at least five years for deliberately overvaluing his trading positions to hide his losses, forcing the U.S. bank to make a $456 million writedown.
July 2006 – David Bullen and Vince Ficarra, two former foreign exchange options dealers at National Australia Bank , jailed after a 2004 scandal that cost NAB A$252 million ($187 million). They were found guilty of making false trades to safeguard bonuses and hide losses, and joined other former NAB traders Luke Duffy and Gianni Gray in prison. Bullen had already published “Fake: My life as a rogue trader”, about how he had replaced hard drinking and drugs with Buddhism.
March/April 2006 – Hedge fund Amaranth Advisors LLC racked up $6.4 billion in losses from natural gas contracts on NYMEX before folding in 2006. The Commodity Futures Trading Commission later charged Amaranth and its former head trader, Brian Hunter, with trying to manipulate natural gas futures prices.
February 2002 – Allied Irish Bank said rogue trader John Rusnak had defrauded its U.S. subsidiary Allfirst of $691 million. Rusnak sentenced to 7-1/2 years in prison after he admitted devising a scheme that netted him $850,000 in salary and bonuses from 1997 to 2001.
January 2001 – Former chief financial officer of the now-defunct Griffin Trading Co, Scott Szach, charged with diverting more than $5.56 million from a company bank account to a brokerage trading account to fund unauthorised trading in the 18 months before the firm’s demise.
March 1998 – Joseph Jett, a former top Kidder Peabody bond trader, accused of creating false profits of $350 million to hide losses and failing to keep proper records, in a scandal that eventually led to the sale of the firm. He was ordered by a judge in September 2007 to repay $8.2 million in losses and was fined $200,000.
June 1996 – Japanese trading house Sumitomo Corp suffers a $2.6 billion loss over 10 years from unauthorised copper trades, primarily by chief trader Yasuo Hamanaka. Sumitomo fired Hamanaka, once dubbed “Mr Five Percent” because his trading team was believed to control five percent of the world’s copper trading. He was later jailed for eight years.
September 1995 – Japan ‘s Daiwa Bank suffered a $1.1 billion loss from unauthorised bond trading by Toshihide Iguchi, one of its executives in the United States. He was imprisoned in 1996.
February 1995 – Barings, one of Britain’s oldest investment banks, collapses after Nick Leeson, a futures trader in Singapore, lost $1.4 billion in derivatives trading. Leeson was jailed in Singapore. Barings subsequently sold to Dutch bank ING for one pound.
April 1992 – Indian banks and brokers accused of colluding illegally to siphon $1.3 billion from the interbank securities market to fuel a boom on the Bombay Stock Exchange . Top broker Harshad Mehta, the main person accused in the scandal, died in jail during the trial.
(Compiled Steve Slater; Edited by David Hulmes and David Holmes)
