Trial opens for accused French rogue trader
June 9, 2010 The scandal led to euro5 billion (more than $7 billion) in losses
once the bank unwound Kerviel's positions in January 2008. The case
broke ahead of what would become a spiraling series of crises in
the finance world, from the fall of Lehman Brothers to the Bernard
L. Madoff multibillion-dollar Ponzi scheme.
Kerviel, 33, who is now working at a computer technology company
earning euro2,300 ($2,700) a month, plans to argue that he was a
scapegoat for the bank, that risky betting practices were
commonplace among traders, and that higher-ups knew what he was
doing and said nothing as long as he was making money for the bank.
Societe Generale denies those claims.
Kerviel's superiors were questioned in the probe, but none of
them face charges. A few bank executives resigned in the scandal's
aftermath, including longtime Chairman Daniel Bouton.
Kerviel has told investigators that the weight of money lost
meaning for him, that he was living in a virtual world and had
disconnected from reality. Prosecutors and the bank have said he
did not appear to profit from his massive unauthorized trades.
The former futures trader is charged with forgery, breach of
trust and unauthorized computer use. He risks five years in prison
as well as a fine of euro375,000 if convicted. The bank is also
expected to ask for euro4.9 billion in damages - symbolic because it
is the amount lost in the scandal's aftermath, though it's a sum
Kerviel could never pay.
Kerviel has argued that Societe Generale was trying to deflect
attention from subprime-related losses by making him a scapegoat.
The bank says Kerviel made bets of euro50 billion on futures
contracts on three European equity indices. Societe Generale
secretly began unwinding his positions on Jan. 21, 2008, when U.S.
markets were closed, putting massive pressure on futures markets
and exacerbating its losses.
The bank revealed its actions three days later, when it also
announced subprime-related writedowns and provisions of euro2.05
billion. Societe Generale's legal team has said it is absurd to
claim the bank was seeking to hide its subprime exposure.
Since the scandal, Societe Generale has tightened computer
security, reinforced controls and taken more account of the
possibility of fraud. Amid economic crisis and other scandals,
better generalized financial regulation is still high on today's
agenda for governments worldwide.
Societe Generale has had its ups and downs since the Kerviel
affair exploded. This year the bank has faced another challenge -
euro3 billion in exposure to Greek government debt - but reported
euro1.06 billion in profit for the first quarter and is forecasting a
profitable year.
The trial is expected to last through late June.