Nab's Rouge Trader
Chris DaCosta’s Case Study 10.1:
Power and Influence in National Australia Bank’s Foreign Currency Options
Dr. John Pucic
Humber College
Abstract
National Australia Bank’s (NAB) foreign currency options desk is located in Melbourne. Its senior staff members were found guilty of unprincipled practices causing $350 million in losses in one year, which led to the imprisonment of a few senior traders due to securities violations. Several executives, including the chief executive and chairman, lost their jobs as a result of events that led up to the crisis. Prior to this, junior trader Dennis Gentilin had been aware that his boss, Duffy, was altering transaction records. Gentilin reported Duffy’s unethical practices to Duffy’s boss, Gary Dillon, expecting the issue to be resolved. A day later, Duffy arranged a private meeting with Gentilin and told him, “[i]f you want to stay in the team, I demand loyalty and don’t want you going to Dillon about what’s happening in the team.” Afterwards, Gentilin was transferred to NAB’s London office.
Employees who interfered with Duffy’s plans were mocked into submission, according to Duffy’s admission in court. Despite recently being warned to stop unethical practices in NAB, Duffy, Dillon, and a few other senior traders continued to consider themselves as invincible and continued to abuse their power and position in the company. Karma soon struck back as Duffy and his senior rogue trading unit placed an unfortunate bet against the rising Australian dollar. Once Gentilin became aware of the escalating cover-ups and fake trades to compensate for the losses, he asked a junior trader in Duffy’s department in Melbourne, Vanessa McCallum, to disclose Duffy’s transactions to others. The results showed evidence of countless transaction record irregularities and over 800 breaches of the bank’s trading limits.
Discussion
Due to the loss of $350 million, including reputation damages, the decision that needs to be made is how NAB is
Power and Influence in National Australia Bank’s Foreign Currency Options
Dr. John Pucic
Humber College
Abstract
National Australia Bank’s (NAB) foreign currency options desk is located in Melbourne. Its senior staff members were found guilty of unprincipled practices causing $350 million in losses in one year, which led to the imprisonment of a few senior traders due to securities violations. Several executives, including the chief executive and chairman, lost their jobs as a result of events that led up to the crisis. Prior to this, junior trader Dennis Gentilin had been aware that his boss, Duffy, was altering transaction records. Gentilin reported Duffy’s unethical practices to Duffy’s boss, Gary Dillon, expecting the issue to be resolved. A day later, Duffy arranged a private meeting with Gentilin and told him, “[i]f you want to stay in the team, I demand loyalty and don’t want you going to Dillon about what’s happening in the team.” Afterwards, Gentilin was transferred to NAB’s London office.
Employees who interfered with Duffy’s plans were mocked into submission, according to Duffy’s admission in court. Despite recently being warned to stop unethical practices in NAB, Duffy, Dillon, and a few other senior traders continued to consider themselves as invincible and continued to abuse their power and position in the company. Karma soon struck back as Duffy and his senior rogue trading unit placed an unfortunate bet against the rising Australian dollar. Once Gentilin became aware of the escalating cover-ups and fake trades to compensate for the losses, he asked a junior trader in Duffy’s department in Melbourne, Vanessa McCallum, to disclose Duffy’s transactions to others. The results showed evidence of countless transaction record irregularities and over 800 breaches of the bank’s trading limits.
Discussion
Due to the loss of $350 million, including reputation damages, the decision that needs to be made is how NAB is