Kerviel Bill Cut to $1 Million From $5.5 Billion by Judges

Updated on
  • Disgraced banker was behind 4.9 billion-euro trading loss
  • Court says SocGen bears responsibility; tax break in jeopardy

French judges said Jerome Kerviel must pay Societe Generale SA 1 million euros ($1.1 million), a fraction of the initial 4.9 billion-euro trading loss he caused more than eight years ago.

Societe Generale’s “multiple faults” mean the bank “had a major and decisive role” in allowing the incident, one of the most famous cases of rogue trading in history, the Versailles court of appeals said. The ruling may jeopardize a 2.2 billion-euro tax credit Societe Generale received in 2008 because of the record trading loss caused by Kerviel.

The 39-year-old former trader -- seen as a folk hero by some -- has been trying for years to shift blame for the loss onto France’s second-largest bank. While a 2014 criminal verdict found him solely responsible for the loss, an order requiring him to repay the bank was overturned at the same time.

“Whatever the craftiness and determination of the one who committed the acts, or even the sophistication of the methods deployed, such a great damage would never have been reached without the patchy nature of Societe Generale’s control systems, which created a high degree of vulnerability,” according to the 29-page ruling.

On Friday, French Finance Minister Michel Sapin and Budget Minister Christian Eckert asked tax authorities to examine the ruling’s impact on the bank’s 2008 filing, according to a statement from the finance ministry. Just minutes earlier, the Paris-based bank said the ruling “will have no effect on the tax situation.”


“Societe Generale should get its checkbook out and sign a 2.2 billion-euro check” to the French state, Kerviel’s lawyer, David Koubbi, said. “The climax of this trial and this ruling is the absolute necessity of paying back the 2.2 billion euros of public money.”

Societe Generale’s lawyer Jean Veil called the verdict “satisfactory.” He said it was an “intelligent, serene decision that can be understood by the French people.”

The judges recognized that while Kerviel’s actions led to the losses, the bank’s systems failed, and the ruling holds both parties responsible, according to Eric Vernier, a researcher specializing on tax and finance at the French Institute for International and Strategic Affairs.

“It seems a more rational decision than in the past,” Vernier said.

Prison Time

Kerviel served five months of his three-year sentence for abusing Societe Generale’s trust. He’s attempted to cast himself as a victim, maintaining that his superiors looked the other way so long as he was making money.

Kerviel had amassed 50 billion euros in positions in European stock futures using fake hedges and false documents. The French bank unwound the positions during three days in January 2008 after uncovering Kerviel’s unauthorized trades. Kerviel’s lawyers have asked for a new independent estimate of the loss.

His legal luck began to change this year.

In the space of two weeks in June, an employment tribunal awarded Kerviel about half a million dollars for unfair dismissal, while in another courtroom a prosecutor criticized Societe Generale for “multiple, long-standing” failings.

Corrupt System

Casting himself as a victim of a corrupt financial system has won Kerviel support over the years from people with backgrounds as varied as priests and left-wing politicians. In the early days, he inspired a comic book and fan club and featured on T-shirts. Earlier this summer, “The Outsider,” a movie dramatizing his account of the events, hit French cinemas to mostly positive reviews.

The son of an iron-worker and a hairdresser, Kerviel grew up in Pont l’Abbe, a small town in Britanny. He didn’t attend one of the elite universities from which French banks typically draw their top financial talent and worked his way up to the trading floor. During the chaotic hours in January 2008 after the bank unloaded his positions and announced the loss, then-Chief Executive Officer Daniel Bouton described him as a “terrorist.”

The battle between Kerviel and Societe Generale is far from over. While the bank said the 1 million euros in damages is “realistic” with Kerviel’s ability to pay, the former trader’s lawyer said Kerviel will challenge any recovery orders. Koubbi added that the Versailles ruling will provide “excellent fuel for pending procedures.”

In addition, Kerviel’s bid for a criminal re-trial is on hold after judges at France’s court of review and reassessment said in March they want to wait for inquiries into the use of forged documents, witness subordination and obtaining a ruling under false pretenses to run their course.

“This gives me a lot of energy to keep on fighting,” Kerviel said.

(Updates with comments from French ministers starting in second paragraph.)
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