KPMG in £200m Barings battle

THE latest chapter in the spectacular collapse of Barings begins today in the High Court as liquidator KPMG starts its £200m case against the bank's former auditors Deloitte & Touche.

KPMG will join Arthur Andersen, liquidator of the Barings Singapore operation that employed rogue trader Nick Leeson, in a bid to prove Deloitte was negligent when it signed off the bank's Singaporean accounts for 1992 and 1993.

The marathon hearing will wade through the disastrous events and poor record keeping that led to the collapse of Barings in 1995. The liquidators are understood to be seeking about £200m from Deloitte in addition to the £70m they are believed to have secured through last year's out-of-court settlement with PricewaterhouseCoopers, another auditor of the group.

Lawyers for the liquidators will argue that Barings' accounts were 'hopelessly wrong' because they failed to reveal the £800m of losses racked up by Leeson during his spell as a derivatives trader for the bank. Leeson later spent four years in a Singapore prison for his role in the disaster.

The liquidators will claim that forgery and a range of other methods were used to cover the losses and that Deloitte signed accounts that were 'completely false'.

However, Deloitte is expected to argue that loans of about £800m made to Barings' Singapore operation by other members of the group were partially to blame for the bank's failure. 'The trial will provide Deloitte with the opportunity to establish that its audit services were sound,' said Deloitte Touche Tohmatsu director Rick Murray. 'It is bizarre to suggest that providing £13,000 of services could have caused or prevented the greed which destroyed the bank.'

The extensive legal teams and huge bundles of documentary evidence have prompted officials to move the case into the High Court's biggest room, which is usually reserved for family court proceedings. It is thought that the case, which will find Andersen in the somewhat unusual position of suing another accounting firm for negligent auditing, could run for up to a year.

The trial was due to start in the middle of last year but was delayed when PricewaterhouseCoopers, which was Coopers & Lybrand at the time of the audits, agreed to enter negotiations about an out-of-court settlement.