Fraud shakes up France's financial elite

"It is wrong to talk about an individual," says Roger Steare, corporate ethics expert at Cass Business School in London. "There are many Kerviels. The system is dysfunctional and corrupts good people; the lack of principals in financial services encourages this behavior." Nor is the worship of Kerviel warranted, he feels. People will lose jobs and homes in the SocGen aftermath. "How can there be any pride in that?" he asks.

Kerviel – and his defense team – helped dramatize his plight when he broke a two-week silence to say he was refusing to be made a "scapegoat." Now he has Facebook fan clubs, a website, T-shirts saying "I bet on Jerome," and a Wikipedia entry.

In public opinion, the bank never seemed to recover from its early portrayal of itself as victim. It didn't take long for rival bankers and pundits to question how such an august institution could be had by a single second-tier trader.

On Jan. 18 the bank's compliance officers began to suspect the scam. Five days later, after unraveling Kerviel's trades, SocGen officials broke news of an "exceptional fraud" in a press event where they simultaneously presented a solution – a 5.5 billion euro capital campaign in which Bouton's prestige factor would play a key role, thus keeping him indispensable. Unnamed bank officials hinted that day to the media that Kerviel may have suffered from some kind of family trauma. A grainy bank ID mug shot introduced to the public a glowering Kerviel that the French daily Le Monde later said made him look like a serial killer.

Perceptions changed when Kerviel gave an interview two weeks later to Agence France-Presse. He said he wasn't suicidal or depressed, adding, "I never had any personal ambition in this affair. The aim was to earn money for the bank. You lose your sense of the sums involved when you are in this kind of work."

Meanwhile, it turns out SocGen actually lost 6.3 billion euros, but Kerviel's other trades made a 1.4 billion gain, netting the 4.9 billion loss.

By early February, Bouton started facing more specific questions about bank mistakes. French prosecutors said the German derivatives exchange Eurex had raised flags about the trader the previous fall. Critics said the bank exacerbated the losses by panicking and unwinding Kerviel's trades in the midst of a three-day market free fall.

Bouton also got testier. He said he had no interest in meeting the 31-year-old. "Why would I have had the idea of meeting him? I'm not an auditor, I'm not a psychologist, I'm not a doctor.... Why devote two minutes to meeting him?"

Bouton is regarded as the "elite of the elite of the elite" in France, as one source said. Some journalists argue the Kerviel affair has shaken Paris's exclusive upper circles: If the banking elites failed to detect Kerviel's moves, they seem out of touch; if they were complicit, something SocGen disputes, they would appear dishonest. As the dust and questions settles, experts say, Kerviel and Société Générale will likely both end up the culprits, for different reasons.

Kerviel "was clearly talented," says Mr. Mesnooh. "But genius? Maybe not. There's going to be some balancing between his ability to circumvent the system, and the extent to which the bank didn't pay attention to the warning signs."

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