SocGen under pressure as trader released
Paris, January 29, 2008
Exchange officials warned Societe Generale about rogue trader Jerome Kerviel's deals late last year, a Paris prosecutor said, piling pressure on the French bank to explain why his trades were not discovered sooner.
The setback came as investigating judges threw out the most serious accusation put forward by prosecutors against 31-year-old Kerviel -- attempted fraud --- and set him free under judicial supervision after two days of police questioning.
The prosecutor's office said it would appeal the release.
Kerviel has been placed under formal investigation for lesser allegations concerning breach of trust, computer abuse and falsification, his lawyer said. Being placed under investigation can lead to trial, but falls short of charges.
"There is no fraud, sir. There is no fraud. The word fraud was used by Mr Bouton numerous times. Mr Bouton held this unfortunate man up for public vilification, threw him to the dogs....and there was no substance to it," said Christian Charriere-Bournazel, one of Kerviel's two lawyers.
SocGen, chaired by Daniel Bouton, and prosecutors had pressed for a fraud case against Kerviel, the junior trader accused of running up a staggering 50 billion euro ($73.63 billion) wager on European share prices. His deals resulted in a 4.9 billion euro loss when the bank closed his positions, the highest in history by a rogue trader.
SocGen, France's second-biggest bank, has said it only found out about the uncovered position 10 days ago.
After examining preliminary evidence, prosecutor Jean-Claude Marin said Kerviel had admitted hiding his activities from superiors, and had said others also played fast and loose with bank rules.
Marin revealed that Eurex, a derivatives exchange owned by Deutsche Boerse, had questioned Kerviel's trading positions in November, but that Kerviel had been able to sidestep questions from his employer.
"Eurex alerted Societe Generale in November 2007 about the positions taken by Jerome Kerviel. Questioned by the bank, he produced a fake document to justify the risk cover," Marin said.
SocGen, which in recent years has become a global leader in financial derivatives trading, has said it was completely in the dark about Kerviel's alleged illicit trades until it spotted a discrepancy on January 18, triggering an internal investigation. Eurex said its own processes and controls "functioned correctly at all levels, also in this case."
French President Nicolas Sarkozy also turned up the heat on SocGen, saying its top managers would have to accept their share of responsibility for the world's biggest trading scandal.
"When there is an event of this nature, it cannot remain without consequences as far as responsibilities are concerned," Sarkozy told reporters while on a visit to a university.
Bouton, who last week offered to leave but was asked to stay on by the board, said his resignation remained on the table, suggesting he may feel he has to go as criticism mounts of his handling of the crisis.
There is another board meeting on Wednesday.
Describing Kerviel as "very upset" and "overwhelmed by events," prosecutor Marin said the trader had told investigators he had been promised a 300,000 euro bonus for 2007.
The prosecutor said Kerviel had been sitting on a paper profit of 1.4 billion euros at the end of last year. He did not make clear whether Kerviel's employers were aware of this.
Kerviel's lawyer has hit back at suggestions that he alone masterminded the world's biggest trading scam from his desk.
In a new political twist to the scandal, Bank of France chief Christian Noyer revealed that he delayed telling the government about it for several days because he feared a leak.
"I considered that the huge size of the position meant that any risk of an involuntary leak -- involuntary of course -- should be removed bec