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France

‘Rogue trader’ Kerviel faces jail at appeal ruling

Text by FRANCE 24

Latest update : 2012-10-24

Jérôme Kerviel, the Société Générale trader whose reckless gambling lost his bank 4.9 billion euros in early 2008, faces up to five years in prison Wednesday when a Paris court rules on his appeal against his 2010 sentence.

Société Générale 'rogue trader' Jérôme Kerviel, who lost his employer a record-breaking 4.9 billion euros in 2008, is due on Wednesday to hear the Paris appeals court’s final ruling on a prison sentence handed down in 2010.

His original three-year sentence for breach of trust, forging documents and computer hacking included an order to repay the bank’s massive losses.

Kerviel has been at liberty pending the appeal, but he risks immediate incarceration if the court upholds the verdict on Wednesday. As part of the appeal process, prosecutors have asked the court to impose the maximum five years’ sentence.

Kerviel has never denied masking the huge 50-billion-euro positions that tore a hole through Société Générale balance sheet and reputation at the dawn of the financial crisis. He has also admitted putting fictitious orders through discreet channels, for example, via a little-monitored internal unit.

"(I hid the positions) to save appearances,” he said during his 2010 trial. “What I was doing was obvious to everyone, but I wanted to give the impression, the appearance of a cover.”

But the 35-year-old former trader has insisted throughout the investigation that his Société Générale bosses had known exactly what he was doing – and that the ultimate responsibility lay with them.

In an appeal hearing in June 2012, Kerviel claimed the French bank had let him amass 50 billion euros in stock index futures so it could later hide losses on “sub-prime” loans.

Société Générale strongly denies these assertions and insists that Kerviel was working illegally and entirely on his own.

'Smoking gun?'

According to lawyers, the appeals court has not discovered a “smoking gun” against the banking giant - and Kerviel is unlikely to win his appeal.

Prosecutors have called for the court to impose the maximum five-year prison sentence and for Kerviel to repay all the bank’s losses, an impossible feat that his lawyer David Koubbi has described as a “civil death sentence.”

Reuters reporter Thierry Leveque, who has been following the Kerviel case since 2008, told FRANCE 24 he had no doubt that whatever the appeals court’s decision, the former trader would not escape punishment.

“But it is incredible to think that Kerviel was able to gamble such vast amounts of money without his managers knowing about it,” he added.

“The reality is that these managers were completely unable to understand the very complex positions he and other traders were placing.”

Leveque compared Société Générale’s defence to a homeowner leaving his front door open and then complaining about being burgled.

“The consequences of a big European Bank like Société Générale going under would have been catastrophic for the whole of Europe and beyond,” he said.

“That this could have happened as a consequence of one man’s actions and the incompetence of a couple his managers is extraordinary and frightening.”

Société Générale, which has acknowledged management failures, was fined 4 million euros by the French Banking Commission in 2008 for failures in its risk control system.

Two of Kerviel’s direct managers were sacked, and in 2009 Société Générale Chairman Daniel Bouton was forced to resign.

Bouton described Kerviel as an “evil genius” whose “catastrophic” actions almost destroyed the 148-year-old bank.

Date created : 2012-10-23

  • JUSTICE

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    Prosecutors seek five-year sentence for SocGen rogue trader

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  • FRANCE

    Kerviel fraud could have collapsed markets, SocGen insider says

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