Can a ‘Nick Leeson’ strike twice in Singapore?

At the last CEO breakfast meeting, I was amused to hear the following table talk.
“What do you think of misdeeds in US companies? Is it greed only or, something

“I don’t think we have to worry about it – this is Singapore.”

“Yes, there is no room for it in our clean environment. US companies have grown too
big to manage. And, it is a society of mixed cultures.”

“Do you think the influx of foreign talents these days, can change the morale of our

All of us believe (rather strongly believe) that the reputation earned by Singapore as
that of being squeak-clean is a boon.

Singapore’s squeaky-clean reputation can be a bane sometimes.

  • Makes people complacent (towards compliance)
  • Scandals won’t happen here (blind faith) No need to invest in required compliance costs
  • It is not easy to cheat and escape here
  • Controls are in place –regular audit by Public accountants

You are right Thomas, said Cindy, the Finance director of Vivelta View, the optical
instrument company. ‘’what happened to APB (Asia Pacific Brewery), or Citiraya for
that case? Why they fail? We are always late in saying, How could you not see it

Well, the answers are not simple. Ethical failure is the decline of morality. It happens
when you fail to see what’s right and wrong. Bankers become sales person for
selling more loans (famous prime lending problem).

Culture of the company plays a vital role – no one wants to hear the bad news. One
can dig little deeper to find the soul and potential of a company. The list is too long –
Milken junk-bond,, Enron, Arthur Anderson,, HeatlhSouth,
Nortel, Fannie Mae, or Rafco.

It seems that people in companies have drifted into rationalizations and legalism.
They are driven by numbers they want and need at almost any cost. This drift into
‘’Everybody does this’’ and ‘’It’s not a question of ‘Should we do it?’ it’s ‘Can we do it
legally?’ ‘’ Such companies do meet with legal requirement; but do not realize long
term implication of technicalities. They try to take advantage of loopholes.

Many of us have experienced that announcing quarterly results against the forecast
is the devil causing many ethical collapses – you can manage three quarters by
faking Sales turnover, expenses, capitalization, etc. What happens in the fourth
quarter? Following spirit of the law, is the key. They should pause and ask, wait a
minute – are we looking at our management practices and checking whether they
are legal, and if yes, are they ethical?

The caution is about using ‘’stuff’’ for winning contracts. These ‘’stuffs’’ include
lunches, dinners, golf rounds, cookie platters, clubs, VIP passes – these stuffs start
small and grow bigger and bigger.

As long as there pressures to perform and there human beings to manage, there will
be some fraud of some kind, somewhere.

Who would have thought of a sound and solid Bearing corporation to collapse like a
flash of cards?

Can Nick Leeson do it again?

Is it the people who take instructions are not clean OR, the people who are at the
helm of the organizations are behaving differently than their earlier generations?

Do not blame the influx of foreign talents.

Introspect ourselves first.

Look into How and Why.

Formerly ethical people and organizations are descending into moral meltdowns?

Are there clear signals of ethical collapse?

Pause for a while here ….

The culprit for Bearings to collapse could be ‘no segregation of duties’.
Initially, you can see the benefits of lean management; whereas, in hindsight, you
regret to see the consequences.

Nick Leeson made the transactions and approved it too.

There was no one to supervise, or question the justification of such transactions.
It can happen in any other place.

Take example of Citiraya.

Contracts awarded to relatives and friends without having to justify by evaluation.
NKF followed almost similar path.

Senior Finance manager of APB can borrow any amount without having to answer

We can go on talking about such cases. There are endless such examples in
Singapore or, any other country.

Penn Central (1970), AM International Inc. (1980), Barden Corporation (1981),
Stauffer Chemicals (1982), United American Bank of Knoxville (1983), Enron
Corporation, WorldCom, China Aviation Oil, Accord Customer Care Solutions, Asia
Pacific Breweries (Tiger), or, Citiraya.

“Hey David, why are you silent?” (David comes from a leading Public accounting

“Tell us about ‘Creative accounting’ practices followed in these companies.”

David narrated few of the ‘Creative accounting’ that he has encountered.

  • Borrowed large sums to maintain payment of dividends
  • Used leasing extensively, to give lower gearing
  • Leased extensively under disguise of ‘Profit maximization’
  • Extraordinary income was not separated, and treated as ordinary income
  • Ordinary expenses were classified as ‘Extraordinary expenses’
  • Paper profits (unrealized gains) on property deals were taken in as earnings
  • Earnings from subsidiaries with holding of 50% or less were taken into profits; previously only the profits of wholly-owned subsidiaries were so treated Bristol Myers Squibb – Overstated earnings by $2.5 billion; settled charges of channel stuffing with SEC through a deferred prosecution agreement Kmart – Restatements; former CEO and CFO charged by SEC with improper booking of revenues; company enters Chapter 11 bankruptcy Delphi Automotive Systems – Admitted overstating revenue; filed for bankruptcy Halliburton Changed its accounting voluntarily and settled with the SEC for disclosure of changes. The list is endless.

Albert, you have managed large corporations. Are there any symptoms that can
signal unfair practices? If yes, why no one stops it?’’

The classic ‘No one wants to hear the bad news’ syndrome exists in these
organizations to the point of paralysis and inaction.

In every corporation that has collapsed ethically (and almost as a result, financially),
there were employees to get their questions answered, or their concerns addressed.


  • Companies had no avenues for employees to raise concerns
  • Employees were rebuffed by supervisors
  • Employees were fired, demoted, or transferred.

Fear, silence, and sycophancy are things you can feel in these companies that are
teetering near ethical collapse as they flirt with invincibility.


Family-friendly organizations are at risk of ethical collapse.
Conflicts run rampart – their officers hire relatives, sign contracts with companies
owned by their families or friends, and generally use nepotism to the fullest extent.

The culture of conflicts becomes so pervasive that the very purpose of company is
reduced to mutual benefit for the various players.

Conflicts of interest are a type of math – you work for a company, you can’t double
money by working with someone else that does business with your employer.

One can hardly debate the merits of vendor chargeback or advertising accounting
when your son-in-law is the vendor or your niece is has the ad contract.

What difference can it possibly make as long as everyone has two or three parts of
the pie?
Frederick, a venture capitalist said, “I tell you what happened during

The entire industry was a culture of conflicts, destined to self-destruct.

When the companies went public during the internet go-go, stocks of their
IPO were doled out to suppliers, customers, family, lawyers who drafted the
prospectus for stock offerings.

And, anyone else the founders wanted to help them perpetuate the myth that their
company was legitimate phenomenon.

The lawyers touted the mightily in the prospectus – knowing that the extent
of their payment came from the success of stock offering.

Customers assured the world they held long-term contracts with these wonderkinds
running the dot.coms

Suppliers promised discounts, for dot.coms to create a buying frenzy when they went
And, why not? Everyone had vested interest – suppliers wanted to increase the
revenue, customers wanted to blow the assured supplies, and so on.

Moreover, everyone who helped to create the myth, profited by dumping
their stock allocations onto the market during the initial sale of stock.

The specifics in a conflict of interest can vary; however, the underlying theme is
always the same. Any individual can play two roles, and her or his role in one regard
has interests that are at odds with another role.

If dot.coms were the industry of conflicts, their stock sales produced an era of
conflicts in the stock market. Consuming investment bankers, analysts, auditors,
consultants, and Wall Street were webs of interrelationships that had become so
sophisticated that the simple notion of conflicts was lost in the complexities of how
the conflicts arose.

Stupidity, Ignorance, or Dishonesty too good to be true
Cindy was keen to narrate her experience when a lucrative proposal she rejected,
was then accepted by someone in the company she invested. She said, “when it was
offered to us, it sound too good to believe. I always ask a question myself, why there
are no other buyers if this is a genuine offer!’’
You know very well what happened in Pacific Plush when they bought the offer.’’

Fear and Silence

Mr. Scott, once in high praise of now ill-famed Enron Corporation, said. ‘’You guys
might not have heard this inside information (of course, open secret now) from

The former CEO, Jeffrey Skilling used to withhold business from companies whose
analysts did not give Enron a ‘Strong Buy’. Jeffrey has a Harvard MBA and came
through McKinsey consulting.

‘’You should know why Enron restructures so frequently.’’ (employees’ top ten list on

  • Basic business model is to keep the outside investment analysts confused.
  • A Guinness book World record of structuring 942 companies in one year.


‘’Do you guys had a chance to look at a note written by Sharron Watkins, Times
person of the
year 2001, on the gimmicks played by Enron? She calls it ‘fuzzy accounting’.’’

‘’Not that everyone working with Enron could be blamed for wrongdoings. They all
seemed fully aware that they were cruising on the Titanic, but fear trumped reason
and they wouldn’t even venture to rearrange the deckchairs. They all stayed aboard,
hoping against all odds that the iceberg they all duly noted would met in a miraculous
tsunami of sunshine.’’

Morale of the story is to watch out for the Signs of Ethical Failures at your place or
the companies you are interested in (investing in). Institutionalize the discipline of
compliance and internal controls in your organization.

Suresh Shah, Managing Director, Pathfinders Enterprise

One response to “Can a ‘Nick Leeson’ strike twice in Singapore?”

  1. I have flown from MA to FLA several times on directair and it was always give and take sure you pay less but flights were always delayed, planes are refurbished, lax security BUT it was also SUPER convient, cheap, easy to check in, easy to upgrade to first class I truly hope they work things out, while there were some obvious cons to flying with them the prices and convience were AMAZING…