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France

Kerviel defiant as SocGen managers take the stand

Video by William EDWARDS

Text by News Wires

Latest update : 2010-06-09

Current and former managers at French bank Société Générale give their first evidence at a Paris court Wednesday a day after alleged rogue trader Jérôme Kerviel accused his former employers of "encouraging" him to take risks.

AFP - French trader Jerome Kerviel faces one of his former bosses from Societe Generale in court on Wednesday on the second day of his trial on charges of secretly gambling away tens of billions of euros.

The bank blames Kerviel for 4.9 billion euros (7.1 billion dollars at the time) of losses in a case seen as a symbol of the banking excesses blamed for the financial crisis.

Societe Generale, one of Europe's biggest banks, said it suffered the heavy losses when it was forced to unravel 50 billion euros of unauthorised trades when it discovered the fraud in January 2008.

The court was to question Jean-Pierre Mustier, the former head of Societe Generale's investment division in which Kerviel worked on the "Delta One" trading desk.

Mustier stepped down as head of investment banking in May 2008 in the wake of the Kerviel scandal and finally left the bank altogether last year.

The 33-year-old Kerviel went on the attack at the opening of the showcase trial on Tuesday, saying managers "encouraged" him to take excessive risks and turned a blind eye as long as the earnings rolled in.

The trial continued on Wednesday with the court seeking to examine the trading limits Kerviel was supposed to be subject to and whether he secretively broke them.

It questioned its first witness Jean-Francois Lepetit, former head of the French market authority AMF, on the technicalities of trading limits, after Kerviel's lawyers argued the bosses must have known they were being broken.

"It happens that limits get exceeded, but when that happens, transparency is always strictly required," Lepetit said.

The bank accuses Kerviel of logging fake transactions to hide his gambles.

The judge concentrated on the first day on examining Kerviel's psychological profile.

In a hearing that broke down into squabbling between the lawyers, Kerviel denied he was to blame for the losses and insisted his bosses knew the risks and backed him.

"The daily encouragement from my superiors did not stop me. Rather they encouraged me to continue," he told the judge.

It would be "impossible" to make his trades without others knowing, "not for more than a day, in any case", he said.

A psychological assessment cited at Tuesday's hearing described Kerviel as a "balanced" individual, but presiding judge Dominique Pauthe sought to shed light on what prompted the risky trades and asked: "Who are you, Mr Kerviel?"

The ex-trader presented himself as an ordinary, hard-working man, now a computer consultant earning 2,300 euros per month -- a big mark-down from the tens of thousands he earned in salary and bonuses when he was a trader.

Kerviel risks a maximum sentence of five years in prison and a fine of 375,000 euros if convicted on charges of breach of trust, falsifying and using fake documents and entering false data into company computers.

Branded a crook by his ex-employer but seen by others as a scapegoat, Kerviel faces criminal charges along with civil suits by the bank and other plaintiffs, including employees and shareholders.

His lawyer Olivier Metzner on Tuesday showed the court a projection of the seating plan in Kerviel's office to illustrate his point, saying bosses could also view his trades via the computer system at any time.

He showed a spreadsheet recording the transactions of Kerviel's trading team, saying it showed that his activities were easily traceable. The bank's lawyers contested this claim.

Societe Generale's lead lawyer Jean Veil told reporters that he would show a video that demonstrates how traders did stressful work on several screens and could not be expected to monitor their neighbours' activities.

Mustier, due to testify later on Wednesday, was subject to an insider-trading investigation by the French market regulator AMF, which has yet to rule on that case.

Trial hearings are set to end on June 25 and the court is expected to deliberate for several weeks before giving a verdict.

Date created : 2010-06-09

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