Kerviel Says He Hid Nothing From Societe Generale
Jerome Kerviel, the former Societe Generale SA trader accused of causing a 4.9 billion-euro ($5.8 billion) loss at the bank with unauthorized bets, told a Paris court he “hid nothing” from his supervisors and that all of his actions were visible.
Kerviel, 33, answered questions from Judge Dominique Pauthe about his professional history yesterday, the first day of his trial. He is charged with abuse of trust, faking documents and computer hacking related to the bank’s losses and faces as many as five years in jail and 375,000 euros in fines.
Kerviel and lawyer Olivier Metzner this month will battle prosecutors and Societe Generale, which is seeking to recoup the losses. The Paris-based bank disclosed the unauthorized bets on Jan. 24, 2008, with then-Chief Executive Officer Daniel Bouton calling Kerviel a “terrorist.”
During questioning at yesterday’s hearing, the former trader recounted his education, saying he was “interested in finance” when asked why he focused on market operations, including financial controls, in his master’s program. He described his salary and bonus history, telling the judge he knew “strictly nothing” about decisions, such as the one awarding him a bonus of 60,000 euros in 2006.
Kerviel had anticipated a 300,000-euro bonus for 2007, when he made a 1.4 billion-euro profit trading for the bank. Metzner asked bank official Claire Dumas, appearing on behalf of Societe Generale, why Kerviel’s superiors didn’t question how he could have made so much, in light of his trading parameters.
Ebb and Flow
“It was just a temporary shift” of funds, Dumas said, describing it as a regular part of the ebb and flow of trading. Dumas, a member of the team that uncovered Kerviel’s activities in January 2008, and now deputy to the head of operational risks at Societe Generale, said the bank could have spotted the fake trades sooner, “but you have to know what you’re looking for.”
Metzner displayed slides showing the seating arrangement for Kerviel’s work station, arguing he was too close to supervisors and colleagues to hide his activities.
“There was two meters, three meters maximum, proximity between Kerviel and his superiors,” Metzner said after the hearing.
Societe Generale lawyer Jean Veil said Kerviel’s colleagues wouldn’t have noticed what was on his computer, noting each trader had six screens.
Kerviel became a popular figure in France after the loss, as stories of his upbringing in a small Breton town and education outside the elite French “Grandes Ecoles” system contrasted his background with that of the bank’s leaders.
When asked by the judge if he was an ordinary man, Kerviel answered: “Absolutely.”
Kerviel, Societe Generale and investors presented their potential witness lists to the court, including Bouton and Jean- Pierre Mustier, the former head of Kerviel’s division.
Bouton wrote to the court declining to appear, a position Kerviel’s lawyer, Olivier Metzner, didn’t challenge. Pauthe said he would decide later if he would require Bouton to appear.
The bank filed a criminal complaint the day it announced the loss. France’s second-largest bank by market value is participating in the trial as a civil party, a status that enables it to seek damages under French law. In France, criminal claims precede civil claims, so if Kerviel is cleared, the bank can’t seek restitution. The trial is scheduled to end June 25.
Dumas was asked by the judge to describe the events on Jan. 18, 2008, the day she was called in to help deal with a “very big problem with a trader.”
“Kerviel’s explanations were a bit obscure,” Dumas said. He was “extremely uncooperative.”
Dumas described how Kerviel was taken to a separate room where she and her team could observe his questioning while they worked to uncover the extent of his operations.
It “was a surreal scene” when Kerviel returned to the bank over the weekend, Dumas said. “On a personal level, what stays with me is the horror of the situation.”