Jerome Kerviel didn’t try to evade trading controls at Societe Generale SA, he said during a trial over his role in unauthorized trades that cost the bank 4.9 billion euros ($6 billion).
Kerviel told a Paris court his objective in faking hedges was to carry his real trading positions forward, “to be able to realize a gain for the bank.” Kerviel, 33, is charged with falsifying documents, computer hacking and abuse of trust in connection with the 2008 trading loss at France’s second-largest bank by market value.
Judge Dominique Pauthe read a series of Kerviel’s trades indicating that his positions rose from 2.4 billion euros in April 2007 to 14.4 billion euros by November of that year. While he said he never explicitly told his supervisors about the trades, Kerviel said the scope of the trades bolstered his claims that the bank knew about his activities.
“Did I get up one day and say I’ll go see a manager and tell him I’ve got 30 billion euros? The answer is no,” Kerviel said.
As his positions grew larger, Kerviel said he was in a “spiral” and changed records on bank computers.
Kerviel testified he entered the bank’s computerized control systems to alter details of some transactions, saying he did so to be sure the risk for each was accurately recorded. He denied that he altered data in another system, saying he didn’t have the log in information.
“A lot of false things have been said,” Kerviel testified. “Traders didn’t have access to the back office control system.”
Claire Dumas, a risk controller who is testifying on behalf of the bank, said Kerviel used friendships he made during the years he worked with the compliance and control group to avoid closer review of his actions.
“There was a clear breach of the famous Chinese wall” between traders and controllers, Dumas said. “The chain of control was clearly misused.”
Yesterday, a friend of Kerviel testified that he was “very tense, very tired” the January 2008 day Societe Generale uncovered the faked hedges.
Valerie Rolland-Lesueur, who had worked with Kerviel at the bank’s compliance and control group, wiped her eyes and accepted a bottle of water from Kerviel while testifying about their friendship and the bank’s compliance techniques.
“I found him very tense, very tired that day, but he was often tired,” Rolland-Lesueur told the court, saying she had coffee with him on Jan. 18, 2008, the day the bank spotted the faked trades.
Christophe Mianne managed the bank’s market activities at the time. He said he ordered his traders to follow three rules: “You must be faithful, you must be transparent, and you must respect the limits.”
Kerviel knew he was going to be discovered, Mianne said.
“And what did he do? He increased his position. He was running into a wall. And he accelerated,” Mianne said.
Jean Veil, a lawyer for the bank, said Kerviel’s position that the bank looked away as long as he was winning was “incoherent” given the fact that for the first half of 2007, his positions were losing.
“You’ll have to ask them,” Kerviel said when asked why his bosses didn’t act then.
He faces as many as five years in jail and 375,000 euros in fines if found guilty.