Kerviel Gets Boost as Prosecutor Says He Owes SocGen Nothing

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  • Prosecutor says there was ‘voluntary slackening’ of controls
  • French judges to release decision in case on Sept. 23

French prosecutors continued the unlikely rehabilitation of convicted rogue trader Jerome Kerviel, telling a French court Friday that Societe Generale SA doesn’t deserve any compensation from the ex-employee because of the bank’s “multiple, long-standing” failings.

Jean-Marie d’Huy, the assistant public prosecutor, pointed the finger at Societe Generale’s “voluntary slackening” of its control systems on the final day of a trial to determine how much Kerviel owes the bank for the 4.9 billion-euro ($5.5 billion) trading loss eight years ago. The ruling will be issued on September 23.

“I’ve been waiting for this for eight years,” Kerviel said on Friday at the Versailles court of appeals. “The fight goes on.”

Societe Generale is “surprised” by the prosecutor’s positions, which don’t reflect the hearings nor previous steps in the case against Kerviel, the bank said Friday in an e-mailed statement.

The 39-year-old former trader -- seen as a folk hero by some -- is trying to shift blame for the loss onto France’s second-biggest lender. While several verdicts have found him guilty for the massive losses, an order requiring him to repay the bank was overturned.

He was buoyed last week by a ruling at a Paris employment tribunal, which included stinging criticism of the bank, and a decision after this week’s hearing could have an effect on the bank’s taxes after ministers promised to monitor court rulings.

‘Voluntary Slackening’

“Societe Generale accepted for a long time and continuously the price risks that can only be explained by a voluntary slackening of the rules with a view toward short-term gain,” d’Huy told a three-judge panel led by Patrick Wyon. “These failings are sufficient to wipe out their right to any damages.”

“Kerviel’s wrongdoing highlighted the bank’s wrongdoing and the bank’s wrongdoing allowed Kerviel’s wrongdoing to take place,” d’Huy said.

Kerviel’s lawyer David Koubbi said he was surprised by the support expressed in the assistant public prosecutor’s closing speech.

Still, Koubbi said Kerviel won’t give up his demand that judges order a fresh review of the exact amount of the bank’s loss, arguing that the 4.9 billion-euro figure was provided by Societe Generale rather than an independent source.

“No expertise has been requested in this case,” Koubbi said. “Isn’t it the case that under French law the one alleging damage has to provide proof?”

‘Intentional Negligence’

To lambaste Societe Generale, d’Huy cited a report compiled by independent board members in 2008 that concluded that the Paris-based lender failed to follow up on several warnings and Kerviel wasn’t properly supervised by his bosses.

“Societe Generale took no measures -- as requested by banking regulations -- to shield itself against rogue traders,” the assistant public prosecutor said.

“Negligence over a long stretch of time becomes intentional,” d’Huy said. “It’s clear that the setting up of permanent and efficient controls weren’t deemed at the time necessary, and even less a priority” so long as gains were trickling in.

Earlier Friday, Marion Lambert-Barret, a lawyer for Societe Generale, said the failings of the bank’s control systems -- “considered as exemplary at the time” -- are all down to Kerviel’s intent to deceive with bogus trades, fake e-mails and abuse his colleagues’ trust. Kerviel went out of his way to be seen as a trustworthy person, Lambert-Barret said. His colleagues “had no idea he was lying to their faces.”


Francois Martineau, another lawyer for the bank, said Kerviel is trying to prove he is the victim in the case, instead of Societe Generale, an “absurd” theory which doesn’t absolve him of responsibility.

“He was convicted for forgery, now he’s accusing Societe Generale of forgery,” Martineau said. “He was convicted for abuse of trust, now he’s accusing Societe Generale of a con.”

Societe Generale’s bid for damages should be rejected by the Versailles judges “all the more so as Jerome Kerviel derived no profit from his fraud,” d’Huy said.