Rogue trader faces extradition and jail

New evidence emerges of Barings `cover-up' as Leeson spends night in Frankfurt cell after flight from Malaysia

Nick Leeson, the 28-year-old financial trader who brought Barings Bank to its knees, spent last night in a cell in Frankfurt, facing extradition to Singapore and a possible 30-year jail sentence.

His wife, Lisa Sims, who disappeared with Leeson a week ago today, starting an international manhunt, was also briefly detained by Frankfurt police and then released. Her husband's lawyer said she flew on to London but this could not be confirmed last night.

The couple were detained yesterday morning as they stepped off a flight from Brunei at Frankfurt-Main airport, following a tip to German authorities from a journalist in Malaysia. Their capture, with such little drama in such mundane surroundings, was something of an anti-climax after feverish speculation in the world's press about sightings in Thailand and elsewhere in South East Asia.

Leeson, who was travelling under his real name, told German police he was on his way to London - apparently to explain his version of events.

The arrest came as new evidence emerged of an apparent cover-up by senior Barings staff in London of the risks surrounding its Singapore futures operations. An audit by accountants last July said there was "a significant general risk" that Leeson could override controls. But the report is thought not to have reached all members of the main board.

It has also emerged that Leeson may have been planning to flee Singapore as long as a month ago, according to colleagues. A number of removal firms were asked to give Leeson quotes on the cost of shipping all his belongings out of Singapore. From sources in London and Singapore the Independent has built up a detailed picture of Leeson's final weeks.

Two to three weeks ago, Peter Norris, chief executive officer of Baring Securities flew to Singapore to congratulate Leeson on the profits he had been earning to for the bank. Over a slap-up lunch, Leeson was told that his bonus for last year would be $2m. Other traders under his command would receive bonuses commensurate with their basic salaries.

Behind Leeson's back, however, there was serious concern over his activities. Already London had funded huge margin calls on his trading strategy.

Norris told Peter Jones, one of the three employees who ran the Singapore operation, to check out all Leeson's activities. Because Leeson was such a high earner for the bank, however, it was to be done in a way which would not upset him.

Barings was at that stage in the midst of a complex reorganisation. Leeson was not directly answerable to Mr Jones. Because of the "matrix" management structure then in place he answered to one boss on futures trading, another on sales and yet another on settlement, all of them in London. "In other words, he was answerable to no one", one source said.

Engrossed in other things, it was not until last Thursday that Mr Jones, who is helping police with inquiries in Singapore, got round to questioning Leeson in detail about his activities. Mr Jones demanded to look at all Leeson's books and client accounts. Leeson then took a phone call from his wife, and in a state of apparent agitation told Mr Jones he would have to visit hospital immediately because she had had a miscarriage. That was the last they saw of him.

Leeson later phoned colleagues to to say he was being made into a scapegoat for what London knew about all along. "There are a lot of people who would much rather I was never seen again" he told one. He also promised to "name names" going right up to the top.

Colleagues believe Leeson must have had a collaborator to hide the transactions behind fictitious clients. Many of the trades failed to show on reports dispatched to London and to outside auditors. "Leeson was a pocket calculator man with no computer skills", said one familiar with him. "He would have to have been told of the computer loophole that allowed him to do all this".

Leeson will appear in court today to face an extradition claim from Singapore, which accuses him of forgery of documents, passport falsification and mishandling funds. His elaborate bets on price movements in the Japanese stock market are alleged to have cost Barings at least £600m.

The Frankfurt chief prosecutor, Heinz-Hermann Eckart, who interviewed Leeson and his wife, said he had "no doubt" the Briton would fight the extradition. "He has let one lawyer go and has got another one, I understand." Mr Eckart said an extradition battle could last up to three months.

The chain of events that led to Leeson's capture began on Tuesday when Leeson and his wife paid over $1,500 in cash for two tickets to Frankfurt at an airline office in Kota Kinabalu, East Malaysia.

Police in Frankfurt were tipped off at 4:50am yesterday, that the couple would be arriving within two hours on a Royal Brunei Airlines flight. When the flight landed at 6:23am the police were waiting. Leeson and his wife were taken into custody - passing on the way a group of journalists in the arrivals hall.

German authorities said they were waiting for an international arrest warrant and an extradition request from the government of Singapore before they could proceed. Three Singapore government officials are expected to arrive in Germany with the documents today.

Leeson has plenty of incentive to fight a return to Singapore. In Britain, defendants in fraud cases rarely receive more than a sentence of five years: up to 30 years is said to be possible in Singapore.