Paris trial of Société Générale trader: Who's responsible for $6 billion loss?
The Paris trial of Jérôme Kerviel, a young futures trader at No. 2 bank Société Générale, got under way this week. Did he make unauthorized trades without his superiors' knowledge?
So now we are finally at the Paris trial of Jérôme Kerviel, the junior futures trader and celebrity-accused who managed to lose some $6 billion of the assets of Société Générale. The basic question to be answered: who is responsible?Skip to next paragraph
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Millions of media years ago, in the Paleolithic period of January 2008 before toxic assets, Bernie Madoff, global meltdowns, sovereign debt, and the Greek bailout – back in the days when $6 billion was real money – rose “l’affaire Kerviel.”
The drama involving France’s No. 2 bank soaked headlines for months: How could a young buck not even from Paris, but provincial Breton, not an elite, who had “girlfriend trouble,” worked 23.5 hours a day, seemed slightly Tom Cruise-y, and didn’t actually profit from his artful dodging, cause the largest-ever loss of its kind, shaking global markets?
Former Société Générale chief Daniel Bouton, who resigned amid intense criticism just over a year ago, branded Kerviel “a terrorist” at the time. But Kerviel quickly became a romantic underdog – a clever anti-hero seen to be caught in the massive cogs of finance, who was only trying to do his job. T-shirts around Paris read, “I am Jerome’s girlfriend,” and he wrote a tell-all book, published last month.
At the end of week 1 of the trial, which will likely run another two weeks, the media-genic display at the ornate Palace of Justice is on script: A slightly haggard Kerviel is the victim, saying his boss encouraged him to play loose with the rules – and the boss is testifying back that he was shocked, shocked to find a trader taking risky unauthorized positions that exceeded bank limits, and that Kerviel was the only one doing so.
Kerviel told the court he started making market bets and covering losses with false transactions dating to 2005. His computer controls were “deactivated,” he said, and estimated that “70 percent” of traders in his division ignored monetary limits to complete deals.
In the more free-form French trial procedure, there has been a great deal of “You’re lying” – “no, you’re lying,” on the two sides.
One troubling smidgeon of evidence presented by the defense is a tape transcript of Kerviel chatting with one boss after he has just made $1.4 billion by bending the rules. “What you have done is a pain, but it is not serious,” Kerviel’s senior says.
Yet if ordinary folk remain convinced Kerviel was a mere pawn in the hands of executives, who are the real culprits, the French have also lost a lot of that loving feeling for “Jérôme.” As a friend here says, “The financial crisis has made people a little bit upset with anything involving large losses of money. We see Kerviel now as just a guy in the system. The money is lost … and we are now a little bit cold on him.”
Despite the scale of the loss, Kerviel is only charged with breach of trust and falsifying evidence. If convicted, he could face five years in prison with a hefty fine. Société Générale is seeking damages of $6 billion from its former employee, who now reportedly earns $3,000 a month as an IT consultant.