Search Heats Up; Probes of Barings Begin

Potential buyers picked over the corpse of Barings on Tuesday as police stepped up their hunt for a rogue trader whose $1 billion in losses from unauthorized futures and options trades toppled Britain’s oldest investment bank.

The Bank of England is examining Barings’ books to discover how much its top management knew of the activities of Nicholas W. Leeson, 28, the Singapore-based trader who caused the crisis.

Singapore newspapers reported today that the Singapore government’s Commercial Affairs Department is investigating possible cheating offenses at London-based Barings. The newspapers said at least one top Barings executive had his passport seized this week by investigators.

Meanwhile, world markets shook off the firm’s collapse Tuesday, with currency investors returning to the British pound from the German mark and Asian markets rebounding from Monday’s turmoil. Tokyo’s Nikkei-225 stock index, for example, rose 1.46% after declining 3.8% on Monday.

“The initial panic about Barings is over, and it’s not going to be as bad as people expected,” said John Lidyard, senior foreign exchange trader at BHF Bank in London.

The California Public Employees Retirement System, which used Barings as a manager for a portion of its international investments, has “no exposure to losses right now,” CalPERS spokesman Patrick Hill said Tuesday.

Of the pension fund’s $78 billion in total assets, about $14 billion is invested overseas and divided among several managers, Hill said. He declined to estimate the size of Barings’ share, but it is thought to be about $1 billion.

The CalPERS assets at stake are physically on deposit with Boston-based State Street Bank, and CalPERS “will not allow Barings to make any more trades for us without our approval, for the time being,” Hill said.

Although Barings’ investment management customers are thought to be unscathed by the firm’s collapse, U.S. banking firms that do business with Barings--particularly Citicorp, the nation’s largest--may be at risk.

Citicorp officials confirmed that the firm has exposure to Barings, but said Tuesday that because of the complexity and size of its relationship with Barings, determining its position could take several days.

Although regulators have started to assemble details of Leeson’s astonishing trail of trading, no one has yet come up with a firm motive.

Leeson disappeared from his luxury home in Singapore on Thursday as the trading fiasco became apparent to Barings. His last known location was Kuala Lumpur, the Malaysian capital, where he checked out of a hotel Friday.

On Tuesday, Commercial Affairs Department investigators in Singapore spent 40 minutes searching Leeson’s condominium apartment, witnesses said.

Barings has lodged a complaint with the Commercial Affairs Department, according to a department source who spoke on condition of anonymity.

Thai police said Tuesday that they have joined the hunt for Leeson. Officials said a 24-hour watch has been established at all entry points, even though police haven’t received an official request from Singapore to look for him.

Peter Baring, chairman of Barings, said Monday that he believes Leeson might have built up a $7-billion futures position to enable an accomplice to profit from corresponding contracts when Barings collapsed.

However, investigators in Singapore failed to find evidence of such secret contracts with a single partner. The bank discovered that Leeson had been trading with “many, many people,” a senior banker said Tuesday night.

Representatives of European and U.S. institutions are thought to be interested in acquiring the firm’s brokerage and fund management units. But a spokesman for Barings said Tuesday that the firm is inclined to sell itself as a whole rather than in pieces.

Executive recruiters in London have been working overtime to take advantage of the crisis to woo Barings’ better employees. One group canvassed pubs around Barings’ black glass, high-rise headquarters in London’s financial district to try to grab employees during their lunch break Monday.

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