French police said Jérôme Kerviel was being cooperative on Sunday, as the Société Générale revealed that the suspected fraudster had bet 50 billion euros of the bank's money on illicit trades.
PARIS, Jan 27 (Reuters) - A junior dealer detained over the
biggest fraud in banking history is helping investigators,
police said on Sunday, as his employer revealed that he had bet
50 billion euros ($73.3 billion) of its money on illicit trades.
French bank Societe Generale <SOGN.PA> said on Sunday it
discovered the full extent of the fraud last weekend and unwound
the mass of positions in slumping markets between Jan 21-23,
leaving it nursing a 4.9 billion euro loss.
Police have named the trader as Jerome Kerviel, a previously
anonymous derivatives dealer who was not considered a star by
his superiors, but who had gained extensive knowledge of
SocGen's risk control systems during his 7-year career there.
Kerviel, 31, handed himself into police on Saturday.
He can be detained for questioning until Monday afternoon at
which point the police will have to decide whether to refer him
to an investigating magistrate ahead of possible charges, or
release him for lack of evidence.
"The detention is going very well. He is talking about the
things he has been accused of," Jean Michel Aldebert, the head
of the financial section of the Paris prosecutors office, told
reporters on Sunday afternoon.
Many market experts have cast doubt on SocGen's affirmation
that a lone trader was able to conceal positions that were
higher than the gross domestic product of Morocco.
In a 7-page statement on Sunday, the bank said their staffer
created fictitious accounts to make it look as though his
positions had been covered, when in fact they remained open.
It said he also falsified documents to justify his actions.
The anomalous trades only came to light on Jan 18 and SocGen
said the trader had acknowledged "committing unauthorised acts
and, particular, creating fictitious operations."
The bank said the deals conducted as it unwound the trader's
positions accounted for between 5.9-8.1 percent of trade in the
broad Eurostoxx stock index futures, 5.7-7.8 percent of the
futures trade on the German benchmark DAX index and up to 3.1
percent of futures on the British FTSE.
Some market analysts have questioned whether the heavy sales
orders from SocGen played a crucial part in the sharp falls seen
in world markets at the start of last week -- a drop that helped
convince the U.S. Federal Reserve to slash its rates on Tuesday.
SocGen says it informed Bank of France Governor Christian
Noyer of its crisis last Sunday, but the Fed has said it did not
know about the problem when it lowered its rates.
There has been no suggestion that Kerviel tried to profit
from the deals and his family say he is being made a scapegoat
for the world's worst rogue trading scandal.
A lawyer acting on behalf of small SocGen shareholders, who
has filed a complaint tied to the losses, said it was impossible
that Kerviel could have acted alone or without leaving any trace
of his activities. He accused the bank of negligence.
"Traders' positions are limited according to seniority. He
had a junior rank and every evening you have about 10 people
involved in checking up everything that has happened," lawyer
Frederik-Karel Canoy told Reuters.
Some analysts have questioned who SocGen's top managers can
survive such a huge blow to their credibility and keep the
French lender's successful investment banking unit growing.
"There is very little escape from this and it involves
looking outside for new blood," said Ian Harnett, head of
Absolutely Strategy, who used to work for SocGen in London.
The banks' executive chairman, Daniel Bouton, who has run
the bank for more than a decade, tendered his rejection to the
SocGen board last week but was asked to stay on.
SocGen has lodged a complaint with police based on three
main charges -- fraudulent falsification of bank records,
fraudulent use of such records and computer fraud. A group of
small SocGen shareholders have also filed a complaint, which
includes accusations of fraud and breach of trust.
The various charges carry maximum prison terms of between 2
and 5 years, plus fines of up to 375,000 euro ($550,000).
Date created : 2008-01-27