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Business

Ex-SocGen boss says trading scandal caused by Kerviel's 'lies'

Text by News Wires

Latest update : 2010-06-22

Ex-Société Générale chairman and CEO Daniel Bouton said that the company’s 2008 trading scandal was a "catastrophe" spurred by former trader Jerome Kerviel's "lies". Bouton made his remarks Tuesday during Kerviel’s trial.

AFP - The ex-boss of French bank Societe Generale said its 2008 trading scandal was a "catastrophe" caused by Jerome Kerviel's "lies", at the former trader's trial Tuesday.

"It was a catastrophe. Regardless of the losses or the amounts, it was a catastrophe in itself ... because confidence was lost," Daniel Bouton told the Paris court in keenly awaited testimony.

Standing just feet from Kerviel, he slammed the ex-trader's "capacity for lies, his capacity for concealment" in making risky trades, which the bank says caused it to lose 4.9 billion euros (7.1 billion dollars at the time).


Bouton recounted the bank's efforts to get to the bottom of the risky positions it discovered in January 2008 and accused Kerviel of continuing risky trades to try to cover his tracks, pushing the bank close to collapse.

"On the one hand he was sending text messages to his broker and friend saying 'I am in trouble,' and on the other he was continuing to increase the position that was potentially fatal for his employer," he said.

Bouton branded the young trader a "terrorist" and a "crook" in 2008, but others see him as a scapegoat.

Kerviel faces up to five years in jail and a fine of 375,000 euros if convicted of breach of trust, forgery and entering false data into computers.

Societe Generale said it suffered the heavy losses when it was forced to unravel 50 billion euros -- nearly all of the bank's nominal worth -- in allegedly unauthorised trades made by Kerviel.

Kerviel has admitted regularly exceeding trading limits and logging false transactions to cover his gambles, but says this was common practice and that his bosses turned a blind eye as long as earnings were high.

"I admit I made mistakes," Kerviel responded to Bouton's testimony on Tuesday. "It it serious... but I do not agree that these actions were invisible" to the bosses.

Bouton, 60, helped build Societe Generale into one of the world's biggest banks but left in April 2009, in the wake of the Kerviel affair and a scandal over directors' bonuses.

French President Nicolas Sarkozy has said he himself called for Bouton to step down.

On Tuesday the senior trader who oversaw the operation to disentangle Kerviel's off-the-book trades, Maxime Kahn, 39, told the court the bank had faced collapse due to the "astronomic" bets Kerviel had taken.

The 50 billion euros of trades was "10 times the total risks taken by Societe Generale's 2,500 (traders) and 25,000 times the average risk that a trader takes," Kahn told the court.


He said Kerviel's positions had to be unwound "because the bank was facing potential collapse."

Neither the bank nor the defence had called Bouton to be questioned by the court to bolster their claims, but lawyers for several civil plaintiffs including bank employees and shareholders demanded that he testify.

Kerviel earned tens of thousands of euros in bonuses at the bank but maintains he did not profit personally by ramping up his bets to the level he did.

Bouton urged him to reply to the question that the trial, now in its third and final week, has done little to answer.

"Mr Kerviel owes his former colleagues an explanation" for his actions, which could have sparked "catastrophic social consequences" for Societe Generale employees, Bouton said.

"Try to be honest for 10 seconds ... and tell us why you did this?"

The trial is set to end on Friday and the court is expected to deliberate for several weeks before handing down a verdict.
 

Date created : 2010-06-22

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