Kerviel Plays Covert Recording in Bid to Unravel SocGen Case

Updated on
  • ‘Societe Generale knew,’ senior prosecutor says in recording
  • Damages trial focuses on responsibility of Kerviel, SocGen

Convicted rogue trader Jerome Kerviel got to play French judges a covert recording he hopes will unravel years of claims that he was solely responsible for Societe Generale SA’s 4.9 billion-euro ($5.5 billion) trading loss nearly a decade ago.

On the second day of a trial at the Versailles court of appeals, judges heard 13 extracts of a secret tape made last June by a police officer who led Kerviel probes in 2008 and 2012 and who has voiced concerns about the case.

“Societe Generale knew, they knew,” Chantal de Leiris, a former vice-prosecutor on the case, told the police officer, Nathalie Le Roy, according to the recording played in court. “That’s obvious, obvious.” Kerviel’s lawyer, David Koubbi, grabbed the opportunity to play the recordings in court for the first time since details of their existence leaked out in January.

The civil trial -- scheduled to run through Friday -- will determine how much, if anything, Kerviel owes the bank for the loss that occurred eight years ago, and whether Societe Generale is responsible.

Stinging Criticism

Kerviel entered the latest trial buoyed by last week’s Paris employment tribunal ruling, which included stinging criticism for Societe Generale. While an order requiring him to repay the bank’s massive losses has been overturned, Kerviel’s claims that he wasn’t responsible for the scandal have fallen on deaf ears in French courts and several verdicts found him exclusively guilty for the trading loss.

On the opening day, Claire Dumas, the lender’s chief financial officer of retail banking in France, told the court that it’s “nonsensical” to say that the bank knowingly let Kerviel amass 50 billion euros in futures positions. The former trader contends that his “hierarchy knew and accepted the risk.”

Judge Patrick Wyon, a member of the three-judge panel in Versailles, said he struggled to understand why Societe Generale would have knowingly let Kerviel amass such positions leading to the loss.

Wyon pointed out that the former trader has admitted he was masking the exposure with fake hedges. “Why would he go through all that trouble if the bank knew what he was doing?” the judge asked.


The bank brought in former head of the French market regulator Jean-Francois Lepetit to testify on Thursday.

“It’s inconceivable that Societe Generale wouldn’t have taken immediate action if the management had been aware he had crossed so far over the line,” said Lepetit who also previously worked for BNP Paribas SA.

Lepetit also said the bank was right in getting rid of the positions taken by Kerviel so swiftly otherwise “it’s likely that Societe Generale would have disappeared.”

Jacques Werren, the witness brought by Kerviel’s defense team who formerly worked at French futures exchange Matif, said a Eurex alert in November 2007 about Kerviel’s “substantial” positions on Allianz SE shows that Societe Generale must have known about his trading activities.

‘Very Rare’

“These warning letters are very rare,” said Werren, pointing to the fact that a clearing houses such as Eurex doesn’t have an interest in deterring banks from trading big volumes as that would lower their profits. “Getting such an alert is a very serious matter.”

Jean-Marie d’Huy, the assistant public prosecutor, questioned how Kerviel had managed to hide his trades with fake hedges for nearly a year. This is “an extremely long time” in this sort of trade, d’Huy said.

Lepetit said that “if the control systems had been fool-proof we wouldn’t be here,” adding that “a zero failings situation is hypothetical.”

(Updates with comments from judge starting in sixth paragraph.)
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