See how Crikey subscribers have been informed on the unfolding saga of
the huge losses amassed by four rogue foreign exchange options traders.

David Bullen’s NAB morgage on modest $392,500 house

Sealed Section – January 28

Alan Kohler wrote in his first post-holiday column for Fairfax
yesterday that NAB spin doctors had managed to “clamp a hand” over the
mouth of suspended NAB trader David Bullen since his amazing comments
in the first couple of days of the scandal:

SMH – With or without Cicutto, bank is neutered

But the spinners must have lost their grip, as Bullen was at it again
yesterday repeating his claims NAB management knew about the risk to
the ABC’s 7.30 Report and PM, as well as the papers, just when his
former bosses were trying to minimise the damage.

Bullen told the 7.30 Report, “We were over the limits and they were
being signed off on a daily basis…so my boss was aware, his boss was
aware and then other areas of the bank were aware of this type of
thing. You know, it’s not like, you know, [you] can hide limits and
stuff like that from the rest of the bank.”

He also said the NAB risk management department never stepped in – “as
far as putting the foot down and saying get inside limits and things
like that, never, it never happened to me personally.”

Read the full transcript here: NAB clams up as trader meets the press

But it was Bullen’s comments to the Fin Review that would’ve really
annoyed Cicutto and the board. When asked about the declared $360
million loss, Bullen said he was surprised it was so high but
explained, “I don’t think that there are really many people still there
with much market experience to get them out of those positions in a
cost-effective manner – we could have done it a lot more cheaply than

He also rejected Cicutto’s claims that the traders’ behaviour didn’t
reflect the bank’s culture saying, “All they ever really wanted was for
money to be made, and the way that came about was secondary – as long
as you make money, it doesn’t really matter how that money came about.”

And in The Oz, Bullen went on to express his own disappointment that
the bank could allow this incident to arise, saying “A little bit more
money spent on setting up systems and stuff like that maybe could have
prevented this type of thing. Maybe it’s good it’s been caught.”

Meanwhile, Crikey did a land title search on Bullen’s modest East
Malvern home yesterday and discovered he paid $392,500 for it in March
2000. Amazingly, the NAB still has a mortgage over the property.

Why has a man who reportedly earned more than $400,000 last year,
including a $200,000 bonus paid earlier this month, still not paid off
his relatively modest mortgage four years later? Has he been donating
all his money to worthy causes?

Did Luke Duffy have a real gambling problem?

Sealed Section – January 21

A former colleague of suspended NAB forex trader Luke Duffy writes:

“’I was intrigued to read on Crikey that although Big Luke has by all
accounts been raking in the cash at NAB, he still hasn’t paid off the
relatively modest (some proportion of $530,000) mortgage on his
pad in Albert Park.

If I had ever pulled in Luke’s salary and bonuses,  I’d have got
the bank off my back as soon as possible. As I recall in his Sydney
days, Luke had quite a nice little terrace in Newtown that he must have
done well on when he moved to Melbourne, assuming he sold it.

But then the penny dropped – Luke was a big punter on the pokies.

On a typical day in Sydney, Big Luke would make his triumphal entrance
on the FX Options desk at 7.30am to commence loudly trading and being
the life and soul of the party. Cut to 6pm – the day’s dealing is done,
the book is passed to London.

CBA’s former dealing room was in Harrington St in Sydney’s Rocks area,
conveniently located across the road from the back bar at the Fortune
Of War Hotel which was a favourite watering hole of the CBA dealing

The walls are dotted with pokies and I vividly remember our hero
holding centre stage whilst pouring coin after coin into one or other
of these machines, with his small band of acolytes hanging off his
every move, cheering his every victory over the laws of probability, as
the night wore on into morning.

Fast forward to the dealing room the next morning and we were usually
regaled with tales of the machine dropping several hundred dollars at
him. Funnily enough, I can’t recall tales of it ever going the other

Extraordinary luck the man must have had. The same sort of luck he carried for years in his FX trading, perhaps?

Success as a trader comes to a large extent down to judgement, and when
assessing the judgement of a trader who habitually and routinely p*sses
away an entire evening and pours hundreds of his own dollars into a
machine which inexorably keeps one dollar out of every five, you have
to question whether they really understand the odds they are being
supported to play professionally with other people’s money.

As our hero would say, “Ask yourself a question’.”

Clearly NAB didn’t.

The Trader”

NAB losses could hit $600M

Second sealed – January 19

The All Ordinaries index rose 13 points today but National Australia
Bank shares fell another 9c to $29.83 today after the bank told the ASX
that “there is a very low probability that the total losses will be as
high as market speculation of $600 million”.

Embattled CEO Frank Cicutto has today distinguished between
the value of the “fictitious” trades and potential losses in the
broader foreign currency options portfolio.

The fictitious
trades have been put at $185 million, slightly up from the original
$180 million, but now the bank is doing a broader revaluation of the
entire portfolio and is hinting that there will be more losses to

David Bullen is talking about jail and if it is
true that the four currency dealers specifically entered trades that
did not occur to cover up the losses then they could be in serious

Making a loss is one thing, but making fake accounting entries to cover it up is something else altogether.

Here is how one former forex trader explains the situation:

looks as though Luke Duffy and David Bullen started their careers at
Westpac but their honchos didn’t care much for their cowboy attitude,
even though they were writing heaps of business, and showed them the

The Commonwealth Bank had a lesser aversion to their
risky portfolio and took them on. Hearing great things about the amount
of business they were writing NAB poached them down to Melbourne.

NAB forex options business had been pretty small until then and they
had pretty basic systems which almost collapsed under the weight of new
business written by the new team.

NAB wanted to save some
money so they decided to create the new system in house. Who was the
designer of the new system you might ask? None other than head trader
Luke Duffy.  And it wasn’t enough that he designed the
system, he also did the front, middle and back ends, not to mention the
systems accounting.

If there was a way to hide a loss, the guy would have to know.

The Trader”

We did a title search on Luke Duffy’s Albert Park pad on Friday and it
seems the huge Sydney Uni second rower paid $530,000 in August 2000 but
can’t have been paid too much by NAB as it is still mortgaged to the
bank. And there will be no dodging the bullet if NAB goes after his
assets as the property is registered jointly with his wife. Ironically,
Duffy bought it from James Reyne.

Check out today’s NAB announcement here.

The continued ravings of DAvid Bullen

Sealed section – January 19 

options trader David Bullen has followed his revelations that NAB
management knowingly signed off on his trading team’s huge losses, with
some more amazing quotes for the weekend papers.

The Sunday Herald Sun had these comments from the devoted “Buddhist”:

$180m is not ‘lost’. Someone else in the world has it, so the planet
has not lost anything. If someone drops $1 million on the road and
another person picks it up, it is not lost. The fellowship of man has
lost nothing in absolute terms.

“I’m not a currency trader anymore. I am nothing; I don’t actually exist. I experience no self, but only enlightenment.”

“Jail for me would be an opportunity to practise Buddhism and maybe people in jail would be interested to hear about it.”

media is continuing to give this nutter a big run, because there isn’t
much else to keep the story rolling. The papers are really struggling
to find anything to new to report – the Sunday Telegraph’s double page
spread just a rehash of what we already knew.

The front
page of the Weekend Fin went straight to the crux of the issue, “Who do
you believe?” The Gilligan-lookalike Bullen or NAB CEO Frank Cicutto.
It still remains to be seen who the investors will believe?

comments do raise some interesting questions. If he has been dedicated
to Buddhism for the last two years, to the point where he became
estranged from his family, why did he continue to work for the bank?
The mantra of a ruthless options dealer is about as far away from the
non-materialistic ideals of Buddhism as you can get.

then he lied and deceived management in order to protect his $200,000
bonus. Isn’t one of the key precepts of Buddhism, “refrain from taking
what is not given”? Surely a true Buddhist would return his ill-gotten
bonus to the bank.

Peter Wilson had a great get for the
Weekend Oz, tracking down “biggest ‘rogue trader’ of them all” Nick
Leeson somewhere in Ireland for an exclusive interview on the NAB
scandal. Leeson claims NAB bosses must be either involved, negligent or
incompetent to allow the rogue trades to occur, but it seems a bit rich
for this guy to be blaming management after what he has done.

other interesting point on this story is that NAB should be condemned
for reappointing KPMG as their auditor two years ago after they failed
to spot the Homeside debacle. The audit tender process was neither free
or fair and it is interesting that the losing bidder, PWC, has been
called in to do the special investigation.

We won’t be surprised if is damning of KPMG.

Getting the dollar wrong

Sealed section – January 16 

Some details
are starting to emerge on the four NAB foreign exchange options dealers
– known within the industry as a “very high-profile, aggressive trading
team” – who blew $180m of NAB’s money.

We were wrong yesterday
when we had a go at the media for not naming the suspended traders –
The Australian did name two of them, Luke Duffy and David Bullen, on
the front page yesterday. And the Fin named the other two, Vince
Vicarra and London-based Gianni Gray, today.

The Fin has the
best coverage of “how the juggernaught crashed to a halt”, an
interesting tale of pride, greed and over-confidence. It seems the NAB
options team made a loss in October last year, right around the time
they were expecting their performance bonuses, and rather than
jeopardise them they tried to push the loss forward and wait for an
opportunity to trade out of it – then decided to bet on the $A
dropping.  With the $A charging ahead late last year, they were
left with a $180m loss within weeks.

It’s amazing that the Hun
has this great story in its own back yard and has given it little
attention – who are these young maverick traders who have lost
Australia’s biggest bank $180m? Where did they come from? It seems like
a perfect investigation for the Hun, though today’s front page splash
on the bailed drug baron’s Queensland holiday was a good get.

Nick Leeson lost more than 800m pounds on risky trades and collapsed
Barings, we knew within hours that he was a working-class boy from
Watford who became a young gun trader.

According to the Fin, the senior dealer Luke Duffy is 34 and David Bullen, chief dealer of foreign exchange, is only 31.

gave the Oz some amazing quotes for its front page story – “Dealer has
not a friend in the world”. When asked if he and Duffy were friends he
said, “To be honest, I don’t have any friends in the world. I am not
mates with him any more than I am mates with you”. He also said he was
sure the bank’s investigation would come up with “the correct answers”.

Oz reports Bullen lives in a double-fronted home in “comfortable
Malvern East”, just down the road from the Crikey bunker. We suspect
they all have silent phone numbers by now.  The Crikey interns
went down to check out the only D. Bullen in East Malvern but no
self-respecting forex options trader would reside in that overgrown

We haven’t seen any clues as to who blew the whistle on
the dodgy trades, an action which NAB says saved it from losing even
more money. We know it’s a fellow trader but no-one has named the
whistleblower yet or the relationship they had with the gang of four.

interesting angle on this is that NAB’s failure to prevent unauthorised
gambling on FX options is going to cost taxpayers $54 million as the
losses will be tax deductible. That’s a fair number of doctors,
university places, hospital equipment or whatever down the Suwannee.

Why hasn’t NAB moved on Christopher Lewis?

Sealed section – January 16

This is the man who the NAB
board should put under the most pressure for the $180 million forex
trading loss. We’ve taken his bio straight from the NAB website:

“Mr Christopher D. Lewis
Executive General Manager, Risk Management

Christopher Lewis joined the National Australia Bank Group in July 2001
as Executive General Manager, Risk Management. Prior to his appointment
to the National he was a Senior Partner of KPMG Assurance and Advising
Division specialising in Financial Institutions. He was Head of
Professional Practice Matters for KPMG Melbourne. In 1999 Mr Lewis was
appointed to the Audit and Assurance Standards Board of Australia. As a
Chartered Accountant and auditor, Mr Lewis has worked across a range of
industries including manufacturing, mining, financial services and

What NAB doesn’t say is that even before the trading
loss fiasco, Chris Lewis was corporate Australia’s worst example of
conflicted auditing. This is the man who former NAB CEO Don Argus
dispatched to Florida to head a KPMG due diligence team to advice
whether the bank should buy Homeside. He recommended the purchase and
NAB shareholders duly paid $1.7 billion in July 1997.

He then
became the KPMG auditor who signed the 2000 accounts and claimed they
were “free of material mis-statement” when in fact the bank was about
to drop $3.6 billion from something called mortgage servicing risk
(MSR) at Homeside which wasn’t even mentioned in the annual report.

NAB then hired Lewis in his current position.

this what happens when you have auditors who spend years convincing
themselves everything is okay and then go and take over the reigns of
internal audit at the same client?  Where’s the fresh perspective?

issue with Chris Lewis was first raised publicly by former NAB banker
Stuart Mackenzie in this magnificent dissection of the Homeside
disaster published two years ago on Crikey:
“Nightmare on Bourke Street”
hasn’t seen it raised anywhere else in the media although we did ask
NAB chairman Charles Allen about the Lewis appointment at the 2002 AGM
and he defended him as a fine executive who was doing a terrific job.

media and analysts seem to be gunning for the head of NAB CEO Frank
Cicutto in something of a feeding frenzy but there are plenty of other
senior executives inside the bank who should be under the pump and
Chris Lewis is certainly one of them.

Besides, NAB is still
easily Australia’s biggest bank with a market capitalisation of $45.8
billion. The big four stack up as follows in terms of value:

NAB: $45.8 billion
CBA: $39.1 billion
ANZ: $32.5 billion
WBC: $29.7 billion

all means beat up on Cicutto but let’s keep the NAB’s so-called
“disasters” in perspective. Doesn’t anyone remember how they bought
Michigan National in 1995 and sold it for a $2 billion profit in 2000.
It was beautifully timed when the Aussie was down around US50c.

A real disaster would have been paying $21 a share for AMP – that would have almost broken the NAB.

NAB trader loses the plot

Sealed section – January 15

The NAB scandal
has certainly been spiced up by some amazing quotes from rogue forex
trader David Bullen, who has clearly lost the plot. He seems to be
talking to anyone who will listen, ignoring NAB’s orders not to talk to
the media.

Yesterday the Oz reported Bullen spoke in a cryptic
and curious style during their interview, responding to several
questions with the peculiar phrase, “You are speaking with vowels and
consonants”. He also claimed, “To be honest, I don’t have a friend in
the world.”

And after reading the bizarre quotes which appeared in today’s papers we believe him.

Herald Sun reported that Bullen says he wants to dedicate his life to
Buddha and Taoism, “I’m more interested in enlightenment and things
like that than trading, to be honest.”

He then claimed, “This might be the best thing that’s ever happened for the bank, myself, and the people involved”.

comments like these obviously wouldn’t have pleased the besieged NAB
executives, Bullen’s more serious claim was that the bank’s
risk-management department had been signing off on the losses for

Bullen told the Fin Review, “We were already over the
limits for a number of months and the bank knew about it…It has been
going on and off for a year and consistently every day since October.
It was signed off every day by the risk-management people.”

is a direct contradiction of the bank’s claims that the $180 million
loss was the result of unauthorised trades that had been hidden from
senior management.

And a big pat on the back for The Age’s
Sharon Kemp who got the details on the $200,000 bonuses paid to Bullen
and Luke Duffy at the start of January, just weeks before they were
“NAB paid $200,000 bonuses to traders”

we all know about this figure of fun David Bullen, who looked a bit
like Gilligan on the front of today’s Australian and in that posed shot
holding a plastic bag of fruit for The Fin, what about the other
traders concerned.

Crikey hears that Luke Duffy is a huge
two-metre tall, 120kg  former second rower at Sydney Uni who has
enormous self-belief and saw his pay double when the NAB poached him
from CBA and enticed him to Melbourne.

His boss was NAB forex
chief Gary Dillon who worked with big Luke at Westpac and brought him
across to the CBA before the gang of four were all recruited by the NAB
on double the money.

The rule of thumb with forex traders is
that they should be paid about 10 per cent of what they make. Bullen
and Duffy were probably all on base rates of about $200,000 and the
bonuses of $200,000 and $250,000 reported in The Age suggest they
probably each made the bank about $4 million for the year to September
and therefore collected a total pay packet of $400,000.

However, we doubt they’ll manage to pay back 10 per cent of the $180 million loss as that would be a hefty $18 million.

Finally, a former options trader writes:
can tell you that NAB have been doing dodgy trading stuff for much
longer than a few months. The global FX options market has been waiting
for them to blow up for years. No-one is surprised by this at all,
except the fact that it took so long.”

Get Crikey for $1 a week.

Lockdowns are over and BBQs are back! At last, we get to talk to people in real life. But conversation topics outside COVID are so thin on the ground.

Join Crikey and we’ll give you something to talk about. Get your first 12 weeks for $12 to get stories, analysis and BBQ stoppers you won’t see anywhere else.

Peter Fray
Peter Fray
Editor-in-chief of Crikey
12 weeks for just $12.