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Societe Generale trader says bosses must have known

 (The Spokesman-Review)
Kerviel (The Spokesman-Review)

PARIS – Terrorist bombs hit London, financial markets wobbled, and Jerome Kerviel was hooked.

The trader at the center of a massive banking scandal in France told investigators that his spiral of trades that ended in a loss of about $7 billion for Societe Generale began with a 2005 bet that markets would fall – which proved true after the London bombings that July.

Perhaps more damaging for Societe Generale, Kerviel also claimed to investigators that his bosses at France’s second-largest bank must have been aware of his massive risk-taking on markets but turned a blind eye as long as he was earning them money.

Kerviel, 31, was questioned by police from Saturday through Monday and then presented to judges who pinned him with preliminary charges of breach of trust, forgery and unauthorized computer activity. Such charges mean judges decided that further investigation is needed. If sent to trial and convicted, Kerviel risks up to three years in prison and hefty fines.

“I can’t believe that my superiors were not aware of the amounts I was committing, it’s impossible to generate such profits with small positions, which leads me to say that when I’m in the black, my superiors close their eyes about the methods and volumes committed,” Kerviel told investigators.

Respected daily Le Monde and a French Internet news site, MediaPart, published portions of his police questioning on Tuesday. Isabelle Montagne, a spokeswoman for the Paris prosecutor’s office, confirmed the remarks were Kerviel’s.

A lawyer for the bank, Jean Veil, accused Kerviel of lying, telling RTL radio: “When you are questioned by police or judges, you have the right to lie.”

He said the bank was “a victim of someone who lied, who cheated.”

Kerviel said the mere fact that he only took four vacation days in 2007 should have been a glaring sign to the bank that he was unwilling to let another trader step in for him.

“The techniques I used were not at all sophisticated, and in my opinion, any correctly conducted check should be able to detect these operations,” he said, according to the testimony in Le Monde.

The bank has acknowledged that Kerviel triggered alarms with his transactions “from time to time,” but it also said that he explained away the red flags as trading errors and that his mistakes did not outnumber those of other traders.


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