Early Monday in Asia, investors were already nervous, having read newspaper accounts of the disaster. When the markets opened, they went into a tailspin, while regulators throughout the region rushed to take preventive action.

Hong Kong shut Baring's bank branch and suspended six of its subsidiaries from the stock market. South Korea froze Baring's Korean assets. Japanese authorities appealed for calm.

Singapore, intent on promoting itself as Asia's stable, corruption-free Switzerland, was angry and embarrassed. Investigators broke into Leeson's apartment and moved into Baring's offices in one of the snazziest skyscrapers in the city state.

Before the day was out the markets began recovering as investors realized Baring's downfall would be less painful than they thought. But everyone wanted to know how Barings let things go so far.

The first apparent flaw to emerge was the setup of its Singapore operation. Leeson, general manager of Baring Futures (Singapore), was not only the chief futures trader but also the head of settlements, meaning he was policing himself.

Barings explained that its Singapore operation was too small to merit creating two separate positions. But to many people, it seemed very much like putting the cat in charge of the cream.

Barings also confirmed that Leeson's nearest direct supervision was in London, eight time zones away.

This past Friday, the Financial Times of London said it had obtained a copy of an auditor's report from last July warning of ``a significant general risk'' that Leeson could override the controls on his operations.

Whether Leeson committed crimes is not known. There have been newspaper reports of fictitious customer accounts being forged, but Singapore authorities have refused to make any comment.

A report in the London tabloid Sun said Friday that while Leeson was still at large, he phoned a friend and claimed that he was being framed and that senior Barings officials knew what he was doing. Barings refused to comment.

Last Tuesday, the Leesons checked out of the Shangri La, paying cash, and on Wednesday they took a Royal Brunei Airlines flight to Frankfurt, Germany.

When the plane landed early Thursday, German police went aboard and detained Leeson at the request of Singaporean authorities. Wearing jeans and a casual shirt, a bag slung over his shoulder, he walked past reporters looking impassive. His lawyer said Leeson was trying to get to London.

He spent the next two days in prison. On Friday, he was ordered by a Frankfurt court to face extradition proceedings on a warrant from Singapore accusing him of ``forging documents in preparation for fraud.'' His lawyer said he would fight extradition.

Leeson would face up to seven years in prison if convicted in Singapore.


EDITOR'S NOTE: AP reporters Dirk Beveridge in London, Peter Landers in Tokyo, John Leicester in Hong Kong, Vijay Joshi in Singapore and Rob Wells in Washington contributed to this story. Darren McDermott, an AP-Dow Jones News Service reporter in Singapore, also contributed.

End Adv for Sunday March 5