Kerviel’s Refusal to Be Scapegoat Seen Harming Appeal Bid

Kerviel’s Refusal to Be SocGen Scapegoat Seen Harming Appeal
Jerome Kerviel, the former trader at Societe Generale SA, right, and his lawyer David Koubbi arrive outside the Paris appeals court on the opening day of his trial in Paris. Photographer: Balint Porneczi/Bloomberg

Jerome Kerviel began his fight today against a 2010 conviction for Societe Generale SA’s 4.9 billion-euro ($6.2 billion) trading loss, telling a Paris appeals court that the bank knew about his actions.

His defense is based on proving during the four-week appeal that the bank knew before the 2008 trading loss that he was exceeding his mandate with risky bets and can’t claim to be an innocent victim.

“I think that I’m not responsible for this loss,” Kerviel told judge Mireille Filippini at the start of the hearing today, in response to a question about why he was appealing. “I always acted with the knowledge” of the bank.

Kerviel’s stance is similar to the defense he used with his previous legal team when a lower court held him responsible, sentenced him to three years in jail and ordered him to repay the loss. Those arguments aren’t likely to impress the appellate judges, said Stephane Bonifassi, a Paris criminal lawyer.

“What courts like to hear, if they think a guy is guilty, is that he understands what he did,” said Bonifassi, who isn’t involved in the matter. “Here, it’s a guy who says, ‘It’s not my fault, it’s other people’s fault.’ He still hasn’t accepted what happened.”

Kerviel’s defenders say he will own up to his actions and the appeal won’t recycle the lower court defense.

Kerviel “is ready to take responsibility for what he did, but he will never accept the blame for what he didn’t do,” said David Koubbi, his lead lawyer. Kerviel “is guilty of nothing” as the case rests on him betraying the trust of the bank.

‘Very, Very Regularly’

When asked by Filippini about how the bank monitored his activities, Kerviel said today he and others exceeded their limits “very, very regularly,” and that he would receive e-mails in the morning alerting him when his exposure was beyond the lines, recalling one message alerting him that he was one billion euros past the line.

Claire Dumas, head of operational risk at the bank, said that the lender’s policy was to display trust in traders.

“Confidence is important,” Dumas said. Traders are expected to voluntarily disclose to their boss when they are outside their limits and to return within the lines. In “99.99 percent” of cases, traders self-report and return within bounds.

Kerviel said he never informed his supervisors, and disputed that it was common for traders to do so. Still, he continued to insist today that they knew about his actions.

When asked why it would be necessary to create fictitious positions to mask his exposure if they were known, he said he did so to allow him to keep the real position open for longer, his explanation in the 2010 trial.

Kerviel ‘Aggressive’

Jean Veil, a lawyer for Societe Generale, told Bloomberg TV during a break in the hearing that Kerviel seems to be “much more aggressive” in his appeal than he was at the trial.

This may be because the verdict had made him “afraid,” Veil said. Other than the tone, his defense “is exactly the same.”

Koubbi has also filed complaints accusing Societe Generale of trying to obscure information. Paris prosecutors began preliminary inquiries in May into claims the bank misled the lower court by hiding a nearly 1.7 billion-euro tax credit on the loss and gave investigators an audio recording that had been tampered with. An inquiry into the defamation complaints Societe Generale filed in response is also under way.

The bank reported in August 2008 it got a deferred tax credit on the loss. Further, in its defamation filings, Societe Generale said it gave the court an account detailing the calculation of the loss, and said the recording was encoded and impossible to have been cut as Koubbi claimed.


Kerviel, now 35, was found guilty of breach of trust, forging documents and computer hacking. He amassed 50 billion euros in unauthorized positions concealed with faked hedges. A bank board-commissioned report found his supervisors failed to “react in an appropriate manner to several alert signals” and missed at least 1,071 bogus trades.

Kerviel changed legal teams four times since the January 2008 loss, reiterating what he said from the start that he feared being made a “scapegoat” for what he said was a common practice of evading risk controls and exceeding limits.

Societe Generale was fined 4 million euros by France’s bank regulator for risk control failures related to the loss. The bank said after the 2010 verdict that it had “learned its lessons” and improved oversight.

The bank said in a statement that it is confident the sentence handed down by the lower court will be upheld, permitting Kerviel’s guilt to be “definitively” recognized.

Bouton Testimony

Daniel Bouton, in charge of the bank at the time of the loss, will testify on June 21.

Four months after announcing the loss, Bouton ceded the chief executive officer post to his deputy, Frederic Oudea. Bouton stepped down as chairman the following year.

Unlike in the U.S. where appeals courts focus on questions of law, the French judges will rehear the trial almost from scratch. There’s no transcript of the first trial, though the judges have a summary prepared by the lower court’s clerk from notes of the arguments.

Kerviel left his job at a computer consultancy in early 2011 and told the court today he has no income.

Hearings will resume on June 6 and run through June 28.

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