Tuesday 24 April 2018

Rogue trader Kerviel jailed and ordered to repay €5bn

Greg Keller in Paris

IT was history's biggest rogue trading scandal, and yesterday Jerome Kerviel, the man responsible for it was sentenced to three years in prison and ordered to repay €5bn.

Kerviel, looking drawn and stressed, was convicted on all counts.

The court roundly rejected defence arguments that the 33-year-old trader was a scapegoat for a financial system gone haywire with greed and the pursuit of profit at any cost.

By ordering a tough sentence for a lone trader, the ruling marked a startling departure from the general atmosphere of hostility and suspicion about big banks in an era of financial turmoil.

It was a huge victory for Kerviel's former employer, Societe Generale SA, France's second-biggest bank, which has long had a reputation for cutting-edge financial engineering and has put in place tougher risk controls since the scandal broke in 2008.

Kerviel maintained that the bank and his bosses tolerated his massive risk-taking as long as it made money -- a claim the bank strongly denied.

"I have the feeling Jerome Kerviel is paying for an entire system," said Olivier Metzner, Kerviel's lawyer, noting that his client hadn't benefited financially from the fraud.

Kerviel stood expressionless as the court convicted him and pronounced a five-year sentence with two years suspended.

Kerviel was found guilty on charges of forgery, breach of trust and unauthorised computer use for covering up bets worth nearly €50bn between late 2007 and early 2008.

He was also banned for life from working in the financial industry.

In the most stunning blow, the court ordered Kerviel to pay the bank back the €4.9bn -- a punishment nobody realistically expects him to repay.

French media calculated that -- based on his current salary of €2,300 a month as a computer consultant -- it would take Kerviel 177,536 years to pay off the damages. The sentence "is more symbolic than real" said Bradley Simon, a New York-based white collar criminal defence attorney.


Mr Simon said the decision was "breathtaking".

"One low-level individual must bear the total responsibility for the near-demise of a pillar of the French financial system," he said.

"This judgment ignores what we now know to be the real case, that Societe Generale and financial institutions throughout the world were encouraging risky trades."

Kerviel's lawyer said that he would appeal and would remain free pending that appeal. The damages are also suspended during the appeals process.

Societe Generale spokeswoman Caroline Guillaumin called the verdict "an important ruling that acknowledges the moral and financial harm done to the bank and its staff".

"The bank can now turn the page, pursue its strategy and continue to rebound," Ms Guillaumin said.

While trading for the bank, Kerviel took home a salary and bonus of less than €100,000. In 2007, he amassed €1.4bn in profits for Societe Generale, the presiding judge noted.

But in the end, the bank's loss of €4.9bn stands as the largest-ever fraud by a single trader.

Irish Independent

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