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French rogue trader jailed and ordered to pay €4.9bn

Jérôme Kerviel, the French rogue trader, has been sentenced to three years in jail for losing his bank almost five billion euros and has been ordered to pay the astronomical sum back.

Paris’ criminal court found Mr Kerviel, 33, guilty of breach of trust, forgery and entering false data into computers in the affair, in which his bosses at Société Générale, France’s second largest bank, said he carried out huge and illicit stock bets without their knowledge.

Mr Kerviel sat expressionless as he received the three-year jail term, a two-year suspended sentence, and an order to pay back the €4.9bn he lost the bank.

Dominique Pauthé, the presiding judge told the court that defence evidence heard in his trial in June “does not allow us to deduce that Société Générale was aware of Jerome Kerviel’s fraudulent activities”.

The former trader had “exceeded his mandate by taking speculative positions without the knowledge of the bank, on a gigantic scale,” he added.

The trader, who became something of a David versus Goliath anti-hero in France in the run-up to the trial, sat in court in a dark suit and white shirt, as the judge read out the verdict.

The trader’s star lawyer, Olivier Metzner, said his client would appeal the judgment, which he slammed as “totally unreasonable and unbelievable”.

“Kerviel is disgusted,” he said, adding that the court had judged that the bank “was responsible for nothing, not responsible for the creature that it had created.”

“I have the feeling Jerome Kerviel is paying for an entire system,” said Mr Metzner, saying his client had not benefited financially from the fraud.

Mr Metzner had pleaded for an acquittal for the 2008 rogue trading scandal, contending that Mr Kerviel was the victim of a casino banking system that encouraged massive risk-taking, and that his superiors were fully aware of his unauthorised, hidden stock trades.

How, he had asked during the trial could a “normal boy” like Mr Kerviel “end up here”?

“How do you create (such risk-taking) if not for financial gain?” he said, referring to the bank.

Mr Kerviel had admitted consistently exceeding trading limits and logging false transactions to cover his bets, but said this was common practice among traders and that as long as you made the bank money you were left in peace.

Mr Kerviel’s former employers and the state prosecutors retorted that he was simply a compulsive liar who almost ruined his employer.

When Société Générale discovered the risky deals he had hidden in January 2008, it was forced to unwind positions worth €50bn — almost the sum total of its entire shareholder capital at the time.

While trading for the bank, he took home a salary and bonus of less than €100,000, a relatively low wage in the financial world.

The bank has admitted to lax controls, for which it was fined €4m in July 2008, but argued during the trial that Mr Kerviel’s bosses could not have tracked all the trades as he covered his digital tracks with counter trades that turned out to be fake.

Despite hearing more than 30 witnesses, the trial shed little light on the underlying question the judge posed at its outside, namely: “Who is Jérôme Kerviel?”

“That’s the only mystery the prosecution will not be able to solve,” said Philippe Bourion, the state prosecutor.