Caisse D’Epargne Ex-Trader Convicted Over $424 Million LossHeather Smith
Former Caisse d’Epargne trader Bruno Picano-Nacci was found guilty by a Paris court of charges his unauthorized trading cost the bank 315 million euros ($424 million) in 2008.
The court said he had to repay the money and issued a suspended jail sentence at a hearing today. The 37-year-old former trader breached the trust of the bank, continuing to trade on risky positions after he was ordered otherwise.
The bank announced a 751 million-euro loss less than a year after Societe Generale SA said in January 2008 that unraveling positions taken by Jerome Kerviel cost it 4.9 billion euros. Caisse d’Epargne calculated the damages figure as what was lost through unauthorized trading rather than poor portfolio management.
Kerviel, whose guilty verdict was upheld by an appeals court in October, sued former Caisse d’Epargne Chairman Charles Milhaud for slander over his comment that the loss attributed to Picano-Nacci wasn’t “a new Kerviel affair.” Kerviel lost the case in June 2009.
Picano-Nacci denied he exceeded his authority, arguing he made risk-management mistakes and didn’t hide those errors from superiors or acted outside his mandate. Caisse d’Epargne is now part of Groupe BPCE, France’s second-largest bank by branches.
Picano-Nacci’s lawyer, Martin Reynaud, said he didn’t know if the former trader would appeal the two-year suspended sentence and damages award. Under French law, Picano-Nacci faced as much as three years in jail and a 375,000-euro fine.
Caisse d’Epargne lawyer Jean Reinhart said repayment would be “difficult” and the question of any compensation for the bank must be approached with “intelligence and tact.”
Picano-Nacci joined the bank in 2003 and took on the derivatives portfolio for Caisse d’Epargne’s eight-man proprietary-trading business in 2006. In April 2008, the bank decided to terminate proprietary trading and traders including Picano-Nacci were told to close their portfolios by the end of the year and not to take on more risk.
He stuck to the plan through Sept. 15, 2008, then switched to a “risky strategy,” according to the criminal investigation report into the trading loss.
BPCE successfully fought a 20 million-euro fine by France’s Banking Commission for failing to detect the unauthorized trades.