Jerome Kerviel lost his bid to reverse a 2010 guilty verdict holding him solely responsible for Societe Generale SA’s 4.9 billion-euro ($6.35 billion) trading loss.
Judge Mireille Filippini today upheld the verdict finding Kerviel guilty of abusing the bank’s trust, faking documents and entering false data into computers. Kerviel argued the bank knew he was exceeding his mandate and used him as a scapegoat for losses on subprime mortgages.
The 2008 trading loss was one of the biggest ever, wiping out almost two years of pretax profit at Societe Generale’s investment-banking unit. Kerviel, 35, was called a “terrorist” by then-Chief Executive Officer Daniel Bouton, a comment he refused to apologize for during Kerviel’s June appeal trial.
“It is clear that Societe Generale was a victim of these crimes, of which Jerome Kerviel was the sole conceiver,” Filippini said, upholding a three-year prison sentence and an order for him to repay the bank. “Societe Generale is entitled to recover the full amount of the financial harm from unwinding this position.”
Kerviel said in an interview on RTL radio that he was “distraught” over the decision and will appeal it to France’s highest court, the Cour de Cassation.
“Clearly, I didn’t expect this at all,” Kerviel said. “I don’t understand this decision at all. I think the decision protects Societe Generale.”
His lawyer, David Koubbi, who appeared on the radio program with him, said that he expects the appeal may take as long as a year-and-a-half. By going to the Cour de Cassation, Kerviel will remain free at least until that court rules.
“He would be crazy not to,” said Christopher Mesnooh, an American lawyer practicing in Paris. “He doesn’t lose anything in doing so and it’ll keep him out of jail.”
In France, the initial appeal is almost always a retrial, with the judges hearing the case essentially from scratch. The Cour de Cassation considers legal issues involved in the decision. The bid for a hearing at the top appellate court is automatically accepted, unlike in the U.S. or U.K., said Stephane Bonifassi, a French criminal lawyer.
“Appeals in cassation have very, very little chance in criminal matters,” Bonifassi said.
Jean Veil, a lawyer for the Paris-based bank, said Societe Generale is realistic about the chance of Kerviel repaying 4.9 billion euros.
“Societe Generale is ready to forget Jerome Kerviel, but I don’t think the damage he did to the bank and to its employees can easily be forgotten,” Veil said.
Kerviel’s story -- a native of Brittany, who rose through the ranks to Societe Generale’s trading floor without having attended any of France’s elite schools -- made him a cult hero in the aftermath of the 2008 loss. There was a comic book, fan clubs and t-shirts supporting his cause. A poll taken after news of the loss broke showed 77 percent of French respondents saw him as a “victim.”
He told the appeals court that he left his job at a computer consultancy last year to focus on his appeal.
Societe Generale’s 2008 announcement echoed through the financial world, as testimony yesterday at the London trial of former UBS AG trader Kweku Adoboli showed. The bank sent two e-mails warning its staff to be on alert for suspicious activities that might indicate a “rogue trader,” prosecutors said.
Adoboli, 32, is on trial for fraud and false accounting dating back to October 2008. He is accused of causing a $2.3 billion loss at the Swiss bank. He’s pleaded not guilty and, like Kerviel, his lawyers have sought to show coworkers knew about his trading. Adoboli’s trial is scheduled to conclude early next month.
Kerviel changed defense teams and pursued an aggressive strategy on appeal, filing criminal complaints against the bank in the weeks before the trial began. Societe Generale retaliated with defamation claims and Filippini openly clashed with Koubbi during the hearings, threatening at one point to refer him to the bar association over his treatment of witnesses.
Prosecutors asked Filippini to increase Kerviel’s sentence to the maximum five years, from the three years.
“Given how the hearings went, one wasn’t expecting much of an improvement for Mr. Kerviel,” said Bonifassi. “If there was any suspense, it was whether the punishment would be harsher.”