There is no such thing as a rogue trader. So I wrote in 1996 in analyzing the Nick Leeson/ Joseph Jett losses and characterizations. Joseph Jett was the then-32-year-old bond trader who found an accounting loophole/computer internal control flaw and was able to fabricate nearly half a billion in sales for his bond division at the now-defunct Kidder Peabody, with, of course, the accompanying bonuses for him. Since the time of Jett, the pattern of the so-called rogue has repeated so many times that the question that perhaps needs to be asked is, "How do we keep missing these wildcards in organizations?" In the following sections, you have a chance to study the so-called rogues, but with a new approach. Are they really rogues or did their organizations contribute to their behaviors that cost their companies billions?

About the same time as the Leeson-Barings debacle, Robert Citron, a government funds manager in Orange County, had positioned the county in risky derivatives and got it all wrong. On December 6, 1994, Orange County, California, filed for bankruptcy protection. \({ }^{73}\) The chairman of the Orange County Board of Supervisors said the step was necessary to prevent local agencies from withdrawing their funds from the county's investment fund of \(\$ 7.5\) billion, which might force a fire sale of the fund's assets. \({ }^{74}\)
The investment pool had substantial holdings in risky financial instruments known as derivatives that would provide returns only if interest rates continued to fall. For a time, the strategy was effective. Orange County had an \(8.5 \%\) return on its money, whereas the state investment pool in California had only a \(4.7 \%\) return. However, interest rates rose, and Orange County had large debts from borrowing to invest in derivatives. As a result, the county could not pay its creditors, and its investment pool lost \(\$ 2.5\) billion. The investments had been masterminded by County Treasurer Robert Citron.
Twelve different brokerage houses were left with loans to Orange County that were repaid. \({ }^{75}\) The announcement of the county's bankruptcy caused the stock market to plunge 50 points. Hiring was frozen in the county, and many people with disabilities whose funds were in the Orange County investment pool could not withdraw their money because of the bankruptcy, \({ }^{76} \mathrm{Mr}\). Citron and others entered pleas to various charges. Mr. Citron spent a year in prison and was famously known for his statement at the California Senate hearings on the losses in the county: "I must humbly say. I was not as sophisticated a treasurer as I thought I was."'77 Mr. Citron was a frugal man who wore discount suits, ate a lunch of soup at the local Elks Club, never failed to go to his office to work on weekends, and invested his own funds in savings accounts and tax-free funds. \({ }^{78}\) He was never accused of acting for personal gain-he even consulted a psychic as he saw the county's investments dwindling to see what he could do to save the funds. One of the many analyses of why Mr. Citron did what he did concluded that it was "hubris" and "ambition," the drive for recognition among government treasurers that fueled the missteps.....................

Discussion Questions 1. Listen any common threads you see in behaviors of these traders other than those noted in the chart.
2. Describe what the organizations could have done that might have prevented the conduct of the rogues.
3. Warren Buffett described a necessary combination for people who are involved in investing, "Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing. "124 What does Mr. Buffett mean by his statement, and how does it apply to rogue traders and their organizations? How would you develop the necessary temperament he describes?