Kerviel Wins $517,000 as Judge Attacks SocGen Over Firing

  • Paris employment court rejects request for billions of euros
  • Employment case verdict is latest twist in saga over Kerviel

Jerome Kerviel, who was convicted of causing a record $5.6 billion trading loss at Societe Generale SA, won more than half a million dollars in compensation as a Paris judge berated the lender for its role in the affair.

The 455,500 euro ($517,000) award Tuesday includes 100,000 euros for unfair dismissal and his 300,000-euro bonus for 2007. Judge Hugues Cambournac questioned some of the bank’s defenses since the scandal first emerged nearly a decade ago.

"Societe Generale can’t pretend it was not aware of Jerome Kerviel’s fake operations" before January 2008, Cambournac said. The dismissal "didn’t sanction Kerviel’s acts, but its consequences."

The employment tribunal verdict is the latest twist in the story of the former trader who has taken equal turns as villain and folk hero since he was blamed for causing the record loss at France’s second-largest lender. The ruling could have an effect on other pending cases including a trial over damages set to begin in the Paris suburb of Versailles next week.

While Cambournac rejected points made in the bank’s favor in previous rulings, he threw out Kerviel’s multi-billion euro compensation request for more than the net loss incurred by the bank.

Immediate Appeal

The bank will "immediately" appeal the ruling, which includes an order to pay Kerviel more than 80,000 euros upfront. "It’s a scandalous decision," said Arnaud Chaulet, a lawyer representing Societe Generale.

In his ruling, Cambournac said Societe Generale knew about Kerviel exceeding his trading limits since at least April 2007 through several alerts and in November that year, the bank got a Eurex alert about Kerviel’s “substantial” positions on Allianz SE.

Societe Generale "tolerated" Kerviel’s acts and it can’t use the argument of a fault from the trader to dismiss him in February 2008, the judge said.

Furthermore, Societe Generale didn’t explain how Kerviel’s trades in excess of the 125 million-euro limit didn’t reduce trading capacity for other staff at his desk, according to the ruling. The bank also failed to justify that "only Mr. Kerviel exceeded this limit, and that any other trader never exceeded these limits."

Kerviel’s performance goals quadrupled to 12 million euros between 2005 and 2007, and his outsized results weren’t challenged, the ruling says. Kerviel in November 2007 had a "very positive" evaluation, according to the ruling, citing a senior manager.

Kerviel’s Profits

Societe Generale confirmed that Kerviel’s earned the bank 1.4 billion euros to 1.5 billion euros in 2007, according to the verdict.

At a hearing last month, Kerviel’s lawyer, David Koubbi, justified the tit-for-tat demand for compensation by telling the tribunal that it was only fair because the bank had previously pressed for the 39-year-old to pay back the full trading loss.

While an order requiring him to repay the bank has been overturned, Kerviel’s claims that he wasn’t responsible for the scandal have fallen on deaf ears in French courts.

Several verdicts found Kerviel exclusively guilty for the trading loss, yet he contests the amount of the loss and says Societe Generale should also be held responsible. The former trader has mounted a fresh legal challenge to his conviction after Nathalie Le Roy, the police officer who led Kerviel probes in 2008 and 2012, expressed concerns last year about how she was pressured to focus solely on evidence that would incriminate him.

Bid for Retrial

France’s court of review and reassessment in March indefinitely delayed a decision on the bid for a retrial. Judges said they want to wait for separate lines of inquiry into the use of forged documents, witness subordination and obtaining a ruling under false pretenses to run their course. This month’s civil trial concerns the amount Kerviel owed the bank.

Bankers routinely turn to specialist labor courts throughout Europe in a bid to recoup lost bonuses and rehabilitate tarnished reputations. Many of the cases involve former traders who lost their jobs in the wake of the Libor and foreign currency rigging scandals.

The Kerviel case is an extreme example of a disgruntled former banker bringing an employment type claim against his former bank, said Jo Keddie, a London-based employment lawyer.

Tuesday’s ruling shows it’s “essential” to “have good grounds for dismissal and, equally importantly, ensuring a fair and proper investigation and dismissal process, even in the most serious of cases where trading misdemeanors are suspected or have occurred,” Keddie said.

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