Kerviel’s Legal Run Ends as Prosecutor Dismisses Request

Updated on
  • Kerviel was asking for probe into Societe Generale’s actions
  • French trader found guilty of causing massive loss at bank

Jerome Kerviel’s run of legal luck came to a halt as Paris prosecutors sought the dismissal of a probe requested by the rogue trader who was found guilty of causing a massive trading loss at Societe Generale SA, according to a person familiar with the case.

Prosecutors asked Dec. 27 to dismiss allegations by Kerviel that the bank used forged documents and obtained his guilty verdict under false pretenses, according to the person, who asked not to be identified because the probe is private. Investigative judges will have the last say in the matter after Paris prosecutors issued their final recommendations in the case.

Jerome Kerviel

Photographer: Marlene Awaad/Bloomberg

The former trader -- seen as a folk hero by some -- has been trying for nearly a decade to shift blame for a 4.9 billion-euro ($5.2 billion) loss he caused onto France’s second-largest bank. Kerviel began finding court success last year as the Paris employment tribunal awarded him about half a million dollars in compensation for unfair dismissal after berating Societe Generale for its role in the affair.

Later that year, French judges said that Kerviel should pay Societe Generale 1 million euros, a fraction of the initial trading loss he caused nine years ago. The Versailles court of appeals said 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 ruling has put in jeopardy a 2.2 billion-euro tax credit Societe Generale received in 2008 because of the record trading loss caused by Kerviel. French tax authorities decided to start a procedure to recover all or part of the tax deduction, the French newspaper Les Echos reported last year, without saying where it got the information.

The latest legal move follows September recommendations from Paris prosecutors to dismiss further allegations that Societe Generale bribed a witness, the person said. Kerviel’s lawyer, David Koubbi, didn’t immediately respond to requests for comment. Agence France-Presse reported the prosecutors’ recommendations earlier.

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.

(Adds details of Kerviel’s prison time in final two paragraphs.)
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