Jérôme Kerviel: Difference between revisions
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Société Générale characterizes Kerviel as a [[rogue trader]] and claims Kerviel worked these trades alone and without its authorization. These assertions have been met with skepticism by some of Kerviel's former colleagues and acquaintances, as well as by some members of the news media.<ref name = carvajal/><ref name= timeson/> Kerviel had told investigators that his trading behavior was widespread at the company and that getting a profit makes the hierarchy turn a blind eye.<ref>{{cite news |page=1 |title=Le trader livre sa version de l'affaire Société Générale |date=29 January 2008 |accessdate=29 January 2008 |publisher=[[Le Monde]], paper version }}</ref> Kerviel did not make a profit- he made massive losses. Kerviel published a book in May 2010, ''L'engrenage: Mémoires d’un Trader'' (Downward spiral: Memoirs of a Trader), in which he alleges that his superiors knew of his trading activities, and that the practice was very common. |
Société Générale characterizes Kerviel as a [[rogue trader]] and claims Kerviel worked these trades alone and without its authorization. These assertions have been met with skepticism by some of Kerviel's former colleagues and acquaintances, as well as by some members of the news media.<ref name = carvajal/><ref name= timeson/> Kerviel had told investigators that his trading behavior was widespread at the company and that getting a profit makes the hierarchy turn a blind eye.<ref>{{cite news |page=1 |title=Le trader livre sa version de l'affaire Société Générale |date=29 January 2008 |accessdate=29 January 2008 |publisher=[[Le Monde]], paper version }}</ref> Kerviel did not make a profit- he made massive losses. Kerviel published a book in May 2010, ''L'engrenage: Mémoires d’un Trader'' (Downward spiral: Memoirs of a Trader), in which he alleges that his superiors knew of his trading activities, and that the practice was very common. |
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== Early life == |
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In his early life, he liked to beatbox and spray graffiti. |
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Jérôme Kerviel grew up in [[Pont-l'Abbé]], [[Brittany]].<ref>{{cite news |url=http://www.nytimes.com/2008/01/25/business/worldbusiness/25trader.html |title=A Spiral of Losses by a ‘Plain Vanilla’ Trader |date=25 January 2008 |accessdate=29 January 2008 |author=Nelson D. Schwartz |publisher=''New York Times''}}</ref> His mother, Marie-Josée, is a retired hairdresser and his father, Charles, who died in 2006, was a blacksmith.<ref name=allen>{{cite news |url=http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/01/28/bcncruise128.xml |title=Phone records could be key to Kerviel case |author=Peter Allen |date=28 January 2008 |publisher=Telegraph UK |accessdate=28 January 2008 | location=London}}</ref> Kerviel has an older brother, Olivier.<ref name="martin"/> Kerviel is married, but he and his wife recently separated.<ref> |
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{{cite news |
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|first=Sudip |
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|last=Kar-Gupta |
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|title=Jerome Kerviel: "genius" or mediocre backroom boy? |
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|url=http://www.reuters.com/article/topNews/idUSL2665699520080126 |
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|publisher=Reuters |
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|date=26 January 2008 |
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|accessdate=27 January 2008 |
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}}</ref> |
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He graduated in 2000 from [[Lumière University Lyon 2|University Lumière Lyon 2]] with a [[Master of Finance]] specializing in organization and control of financial markets.<ref name=martin/> The university's financial program, which was initiated in the 1990s with the support of France's larger banks, was intended to prepare students for middle and back-office positions in the trading departments of financial institutions.<ref name = carvajal> |
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He was an underground Dubstep producer. |
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{{cite news |
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|first=Doreen |
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|last=Carvajal |
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|coauthors=Brothers, Caroline |
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|title=‘Rogue Trader’ Is Remembered as Mr. Average |
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|url=http://www.nytimes.com/2008/01/26/business/worldbusiness/26trader.html?_r=1&hp&oref=slogin |
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|publisher=''The New York Times'' |
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|date=26 January 2008 |
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|accessdate=26 January 2008 |
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}}</ref> Prior to that he received a [[bachelor's degree]] in Finance from the [[University of Nantes]].<ref name="nyt">{{cite news |
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|url=http://www.nytimes.com/2008/01/25/business/worldbusiness/25bank-web.html |
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|title=Fraud Costs French Bank {{Nowrap|$7.1 Billion}} |
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|author=Nicola Clark, David Jolly |
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|publisher=''The New York Times'' |
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|accessdate=24 January 2008 |
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| date=25 January 2008 |
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}}</ref> |
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During an interview, one of his former lecturers at Lyon, Gisèle Reynaud, stated that "He was a student just like the others, a young man, and he didn't distinguish himself from the others."<ref name="IHT"> |
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{{cite web |url=http://www.iht.com/articles/2008/01/25/business/profile.php |
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|title=''International Herald Tribune'' |
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|accessdate=25 January 2008 |
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}}</ref> In 2001, at the suggestion of Thierry Mavic, the Mayor of Pont l'Abbé, Kerviel stood for a seat on the [[Municipal council|local council]] with the [[Union for a Popular Movement]] party but was not elected.<ref name="sage0126"> |
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{{cite news |
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|url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3254619.ece |
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|title=Jerome Kerviel is not a Machiavellian genius. He’s just an average kind of guy |
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|publisher=[[Times Online]] |
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|author=Adam Sage |
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|date=26 January 2008 |
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|accessdate=28 January 2008 |
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| location=London}}</ref> |
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== Société Générale == |
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Kerviel joined the [[middle office]] of the bank Société Générale in the summer of 2000,<ref name=martin/> working in its compliance department.<ref name=gordonprofile>{{cite news |first=Gordon |last=Rayner |coauthors=Allen, Peter |title=Profile: Rogue trader Jerome Kerviel |url=http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/01/25/nsocgen325.xml |publisher=The Telegraph |date=26 January 2008 |accessdate=28 January 2008 | location=London}}</ref> In 2005 he was promoted to the bank's [[Delta One]] products team in Paris<ref name=gordonprofile/> where he was a junior trader.<ref name=reut>{{cite web |url= http://www.nationalpost.com/news/story.html?id=266900|title=French police question rogue trader Kerviel |accessdate=26 January 2008 |date=26 January 2008 |work=Reuters |publisher=National Post |archiveurl = http://web.archive.org/web/20080128055324/http://www.nationalpost.com/news/story.html?id=266900 <!-- Bot retrieved archive --> |archivedate = 28 January 2008}}</ref> Société Générale's Delta One business includes [[program trading]], [[exchange-traded fund]]s, [[Swap (finance)|swaps]], [[Stock market index future|index futures]] and [[quantitative trading]]. [[Christian Noyer]], governor of the [[Bank of France]], has described Kerviel as a "computer genius";<ref name="nyt">{{cite news |
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|url=http://www.nytimes.com/2008/01/25/business/worldbusiness/25bank-web.html |
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|title=Fraud Costs French Bank {{Nowrap|$7.1 Billion}} |
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|publisher=''The New York Times'' |
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|accessdate=24 January 2008 |
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| first1=Nicola |
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| last1=Clark |
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| first2=David |
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| last2=Jolly |
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| date=25 January 2008 |
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}}</ref> however, sources within Société Générale described Kerviel as "not a star".<ref> |
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{{cite news |
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|url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3242996.ece |
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|title=Jerome Kerviel named in €5bn bank trading fraud |
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|publisher=[[Times Online]] |
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| location=London |
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| date=24 January 2008 |
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| accessdate=6 May 2010 |
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| first1=Patrick |
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| last1=Hosking |
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| first2=Charles |
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| last2=Bremner |
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| first3=Adam |
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| last3=Sage}}</ref> Kerviel earned a bonus of [[Euro|€]]60,000 on top of a €74,000 salary in 2006, considered modest in terms of the salaries paid to traders in the financial markets. He had hoped for a €600,000 bonus for 2007 and would have received at least half that amount.<ref name=seib>{{cite news |
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|url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3407991.ece |
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|title=Societe Generale missed 75 warnings on trader Kerviel |
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|author=Christine Seib |
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|date=21 February 2008 |
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|accessdate=22 February 2008 |
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|publisher=''The Times'' |
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| location=London}}</ref> |
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===Unauthorized trading=== |
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{{main|January 2008 Société Générale trading loss incident}} |
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The bank states that Kerviel was assigned to [[arbitrage]] discrepancies between [[equity derivative]]s and cash equity prices,<ref name="lex"> |
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{{cite web |
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|url=http://www.ft.com/cms/s/1/13e0c5b0-cb28-11dc-97ff-000077b07658.html |
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|title=SocGen postmortem |
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|publisher=[[Financial Times]] |
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|date=25 January 2008 |
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|accessdate=25 January 2008 |
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}}</ref> and "began creating the fictitious trades in late 2006 and early 2007, but that these transactions were relatively small. The fake trading increased in frequency, and in size".<ref name="Bank Outlines"> |
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{{cite news |
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|url=http://www.nytimes.com/2008/01/28/business/worldbusiness/28bank.html?em&ex=1201669200&en=9787a96b4e941d12&ei=5087%0A |
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|title=Bank Outlines How Trader Hid His Activities |
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|publisher=''New York Times'' |
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|date=28 January 2008 |
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|author=ICOLA CLARK |
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|accessdate=28 January 2008 |
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}}</ref> |
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Bank officials claim that throughout 2007, Kerviel had been trading profitably in anticipation of falling market prices; however, they have accused him of exceeding his authority to engage in unauthorized trades totaling as much as €49.9 billion, a figure far higher than the bank's total market capitalization. Bank officials claim that Kerviel tried to conceal the activity by creating losing trades intentionally so as to offset his early gains.<ref>{{cite news |first=Pierre-Antoine |last=Souchard |title= Rogue French trader taken into custody |url=http://news.yahoo.com/s/ap/20080126/ap_on_re_eu/france_societe_generale |agency= Associated Press|location= Paris |date= 26 January 2008 |accessdate=26 January 2008 |archiveurl = http://web.archive.org/web/20080129060555/http://news.yahoo.com/s/ap/20080126/ap_on_re_eu/france_societe_generale <!-- Bot retrieved archive --> |archivedate = 29 January 2008}}</ref> According to the [[BBC]], Kerviel generated {{Nowrap|€1.4 billion}} in hidden profits at the beginning of 2008.<ref>{{cite news |title=Rogue trader began year in profit |url=http://news.bbc.co.uk/2/hi/business/7218380.stm |publisher=BBC News |date=30 January 2008 |accessdate=30 January 2008}}</ref> His employers say they uncovered unauthorized trading traced to Kerviel on {{Nowrap|19 January}} 2008. The bank then closed out these positions over three days of trading beginning {{Nowrap|21 January}} 2008, a period after which the market experienced a [[January 2008 stock market volatility|large drop in equity indices]], and losses attributed are estimated at {{Nowrap|€4.9 billion}} ({{Nowrap|$7 billion}}). |
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The bank claimed Kerviel "had taken massive fraudulent directional positions in 2007 and 2008 far beyond his limited authority"<ref name="nytrogue"> |
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{{cite news |
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|url=http://www.nytimes.com/2008/01/25/business/worldbusiness/25bank.html |
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|title=French Bank Says Rogue Trader Lost {{Nowrap|$7 Billion}} |
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|publisher=''New York Times'' |
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|date=25 January 2008 |
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|author=Nicola Clark and David Jolly |
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|accessdate=25 January 2008 |
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}}</ref> and that the trades involved European [[stock index futures]].<ref name="nytrogue"/> Though bank officials say Kerviel apparently worked alone, skeptics question how unauthorized trading of this magnitude could go unnoticed. Kerviel's unassuming background and position have heightened the skepticism that he worked alone.<ref name = carvajal/> Some analysts suggest that unauthorised trading of this scale may have gone unnoticed initially due to the high volume in low-risk trades normally conducted by his department.<ref name="lex"> |
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{{cite web |
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|url=http://www.ft.com/cms/s/1/13e0c5b0-cb28-11dc-97ff-000077b07658.html |
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|title=SocGen postmortem |
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|publisher=[[FT.com]] |
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|date=25 January 2008 |
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|author= |
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|accessdate=25 January 2008 |
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}}</ref> The bank said that whenever the fake trades were questioned, Kerviel would describe it as a mistake then cancel the trade, after which he would replace that trade with another transaction using a different instrument to avoid detection. Kerviel's lawyers, Elisabeth Meyer and Christian Charrière-Bournazel, said that the bank's managers "brought the loss on themselves"; accused the bank's management of wanting to "raise a smokescreen to divert public attention from far more substantial losses in the last few months"; and said that Kerviel had made the bank a profit of US$2 billion as of {{Nowrap|31 December}} 2007.<ref name="Bank Outlines"/> |
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Managers for Société Générale have described some of the means Kerviel employed to avoid the bank's internal controls and escape detection. Its Executive Chairman Daniel Bouton describes the pattern as like "a mutating virus"<ref>http://www.theregister.co.uk/2008/01/31/kerviel/</ref> in which hundreds of thousands of trades were hidden behind offsetting faked [[Hedge (finance)|hedge]] trades. Officials say Kerviel was careful to close the trades in just two or three days, just before the trades' timed controls would trigger notice from the bank's internal control system, and Kerviel would then shift those older positions to newly initiated trades.<ref name=reut/> City experts have expressed skepticism of the bank's account, saying that a pattern of closing out trades within the three day cycle alleged could not be accomplished given the immense sums involved.<ref name= timeson>{{cite news |coauthors= Matthew Campbell, John Follain |title= Rogue trader Jerome Kerviel held for a further 24 hours |url= http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3260455.ece |publisher= Times Online |location= Paris, Pont l'Abbe |date=27 January 2008 |accessdate=27 January 2008}}</ref> |
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Kerviel is not thought to have profited personally from the suspicious trades. Prosecutors say Kerviel has been cooperative with the investigation, and has told them his actions were also practiced by other traders in the company. Kerviel admits to exceeding his credit limits, but claims he was working to increase bank profits. He told authorities that the bank was happy with his previous year's performance, and was expecting to be paid a €300,000 bonus on a {{Nowrap|€60 million}} declared profit (approximately 0.5%) which illustrates the definition of "fair pay" in the French investment banks.<ref name=cnn/> Family members speaking out say the bank is using Kerviel as a [[scapegoat]] to excuse its recent heavy losses.<ref name=reut/><ref name=timeson/> |
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===Legal repercussions=== |
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In answer to the rumors that Kerviel had fled Paris following the discovery of the unauthorised trading, on {{Nowrap|24 January}} 2008 Kerviel's lawyer denied that he attempted to disappear and said he remained in Paris to face the accusations.<ref>{{cite news |first=Gregory |last=Viscusi |coauthors=Chassany, Anne-Sylvaine |title=Société Générale Reports {{Nowrap|4.9 Billion}} EU Trading Loss |url=http://www.bloomberg.com/apps/news?pid=20601087&sid=a8GBEB7UuuXc&refer=home |publisher=Bloomberg |date=24 January 2008 |accessdate=24 January 2008}}</ref> |
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Also on 24 January 2008, Société Générale filed a lawsuit against "a 31-year-old person" for creating fraudulent documents, using forged documents and making attacks on an automated system, according to Clarisse Grillon, a spokeswoman for the [[Nanterre]] prosecutor. ''[[Le Figaro]]'' reported that in addition to the Société Générale lawsuit, a group of shareholders filed a lawsuit for [[fraud]], breach of trust and forgery.<ref>{{cite news |title=Un extraordinaire talent de dissimulation |url=http://www.lefigaro.fr/societes-francaises/2008/01/25/04010-20080125ARTFIG00261-un-extraordinaire-talent-de-dissimulation-.php |publisher=Le Figaro |language=French |quote=Une deuxième plainte pour «escroquerie, abus de confiance et faux», a été déposée au nom d'un groupe d'actionnaires à Paris. ... Selon l'ampleur de l'escroquerie, Jérôme Kerviel risque de cinq ans à quinze ans de prison.|date=25 January 2008 |accessdate=26 January 2008}}</ref> |
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On the eve and afternoon of 25 January 2008, police raided the Paris headquarters of Société Générale and Kerviel's apartment in the western suburb of [[Neuilly-sur-Seine]]<ref name="sage0126"> |
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{{cite news |url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3254619.ece |
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|title=Jerome Kerviel is not a Machiavellian genius. He’s just an average kind of guy |
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|publisher=[[Times Online]] |
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|author=Adam Sage |
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|date=26 January 2008 |
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|accessdate=28 January 2008 |
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| location=London}}</ref> to seize his computer files.<ref> |
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{{cite web |
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|url=http://afp.google.com/article/ALeqM5gD0QVnXt4tdnH6g5s89mUo0u5O1Q |
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|title= Police raid HQ of bank in French rogue trader scandal |
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|publisher=[[Agence France Press|AFP]] |
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|date=26 January 2008 |
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|accessdate=26 January 2008 |
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}}</ref> On 26 January 2008, the Paris prosecutors' office stated that Kerviel "is not on the run. He will be questioned at the appropriate time, as soon as the police have analysed documents provided by Société Générale."<ref> |
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{{cite web |
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|url=http://www.france24.com/france24Public/en/news/france/20080125-societe-generale-kerviel-banking-scandal-investigation.html |
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|title= SocGen trader not on the run says prosecutors |
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|publisher=Reuters |
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|date=26 January 2008 |
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|accessdate=28 January 2008 |
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}}</ref> He was taken into police custody later that day.<ref> |
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{{cite news |url=http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3256630.ece |
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|title=Rogue trader taken into police custody |
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|author=Chris Gourlay |
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|publisher=Times Online |
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|date=26 January 2008 |
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|accessdate=28 January 2008 |
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| location=London}}</ref> |
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Kerviel's initial 24-hour detention was extended to 48 hours while French law enforcement questioned him about possible accomplices.<ref name=timeson/> The investigation later widened to encompass his personal cell phone records, and to explore possible links to other individuals working at rival banks and private investment firms who may be involved. The police were investigating whether he worked alone, and whether any investors outside of Société Générale may have been tipped off in advance. Police were interested whether others were involved either in the trades themselves or received notice of the bank's impending sell-off before the details of the scandal were publicly disclosed.<ref name=autogenerated1>{{cite news |url=http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/01/28/bcncruise128.xml |title=Phone records could be key to Kerviel case |author=Peter Allen |date=28 January 2008 |publisher=The Daily Telegraph |accessdate=28 January 2008 | location=London}}</ref> |
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Kerviel was formally charged on {{Nowrap|28 January}} 2008 with abuse of confidence and illegal access to computers.<ref name=cnn2>{{cite news |url= http://www.cnn.com/2008/WORLD/europe/01/29/rogue.trader/ |title=Fears over rogue trader 'raised 3 months ago |author=Jim Bittermann |date=29 January 2008 |accessdate=29 January 2008| publisher=CNN }}</ref> He was released from custody a short time after.<ref name=cnn>{{cite news |url=http://edition.cnn.com/2008/WORLD/europe/01/28/rogue.trader/ |title= Accused billion-dollar rogue trader charged, freed |author=Jim Bittermann and Niki Cook |date=28 January 2008 |accessdate=28 January 2008 |publisher=CNN |archiveurl = http://web.archive.org/web/20080130112119/http://edition.cnn.com/2008/WORLD/europe/01/28/rogue.trader/ <!-- Bot retrieved archive --> |archivedate = 30 January 2008}}</ref> The charges filed carry a maximum three-year prison term. On {{Nowrap|29 January}} 2008 investigating judges Renaud van Ruymbeke and Françoise Desset had rejected prosecutor Jean-Claude Marin's bid to charge Kerviel with the more serious crime of "attempted fraud" and refuse bail.<ref>{{cite news |title=Jerome Kerviel charged over $8bn bank scam |url=http://www.news.com.au/mercury/story/0,22884,23125177-923,00.html |publisher=''[[The Mercury (Hobart)|Mercury]]'' |date=29 January 2008 |accessdate=29 January 2008 }} {{Dead link|date=August 2010|bot=RjwilmsiBot}}</ref> |
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His trial began on 8 June 2010. On {{Nowrap|5 October}} 2010, he was found guilty and sentenced to five years of prison, with two years suspended, full restitution of the $6.7 billion which was lost, and a permanent ban from working in financial services.<ref name="reuters-20101005-1150">{{cite news|url=http://www.reuters.com/article/idUSLDE6941PD20101005 |title=Kerviel's fine the size of 20 Airbus A380s |publisher=Reuters |date=28 September 2010 |accessdate=5 October 2010}}</ref> Caroline Guillaumin, a spokeswoman for Société Générale, stated that the restitution was "symbolic", and that the bank had no expectation that the sum would be paid.<ref>{{cite news| url=http://www.nytimes.com/2010/10/06/business/global/06bank.html?ref=global-home | work=The New York Times | first=Nicola | last=Clark | title=Rogue Trader at Société Générale Gets 3 Years | date=5 October 2010}}</ref> Olivier Metzner, Kerviel's lawyer, described the sentence as "extraordinary" and said that Kerviel would appeal.<ref>{{cite news|url=http://www.reuters.com/article/idUSTRE6941C620101005 |title=Kerviel lawyer says to appeal court verdict |publisher=Reuters |date=5 October 2010 |accessdate=5 October 2010}}</ref> Kerviel's sentence was suspended until his appeal is completed.<ref name="reuters-20101005-1150"/> |
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== Lemaire Consultants == |
== Lemaire Consultants == |
Revision as of 16:15, 16 November 2011
![]() |
Jérôme Kerviel | |
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Born | Pont-l'Abbé, Brittany, France | 11 January 1977
Nationality | France |
Education | Master's degree in Finance |
Alma mater | Lumière University Lyon 2 University of Nantes |
Occupation(s) | Trader, consultant |
Employer(s) | Société Générale (formerly) Lemaire Consultants (currently) |
Known for | Rogue trading |
Criminal charge(s) | Abuse of confidence illegal access to computers |
Spouse | (separated) |
Parent(s) | Charles (deceased) Marie José |
Jérôme Kerviel (French pronunciation: [ʒeʁom kɛʁvjɛl]; born 11 January 1977) is a French trader who has a pending appeal of his conviction in the January 2008 Société Générale trading loss incident for breach of trust, forgery and unauthorized use of the bank's computers, resulting in losses valued at €4.9 billion.[1][2][3] Société Générale characterizes Kerviel as a rogue trader and claims Kerviel worked these trades alone and without its authorization. These assertions have been met with skepticism by some of Kerviel's former colleagues and acquaintances, as well as by some members of the news media.[4][5] Kerviel had told investigators that his trading behavior was widespread at the company and that getting a profit makes the hierarchy turn a blind eye.[6] Kerviel did not make a profit- he made massive losses. Kerviel published a book in May 2010, L'engrenage: Mémoires d’un Trader (Downward spiral: Memoirs of a Trader), in which he alleges that his superiors knew of his trading activities, and that the practice was very common.
Early life
Jérôme Kerviel grew up in Pont-l'Abbé, Brittany.[7] His mother, Marie-Josée, is a retired hairdresser and his father, Charles, who died in 2006, was a blacksmith.[8] Kerviel has an older brother, Olivier.[2] Kerviel is married, but he and his wife recently separated.[9]
He graduated in 2000 from University Lumière Lyon 2 with a Master of Finance specializing in organization and control of financial markets.[2] The university's financial program, which was initiated in the 1990s with the support of France's larger banks, was intended to prepare students for middle and back-office positions in the trading departments of financial institutions.[4] Prior to that he received a bachelor's degree in Finance from the University of Nantes.[10]
During an interview, one of his former lecturers at Lyon, Gisèle Reynaud, stated that "He was a student just like the others, a young man, and he didn't distinguish himself from the others."[11] In 2001, at the suggestion of Thierry Mavic, the Mayor of Pont l'Abbé, Kerviel stood for a seat on the local council with the Union for a Popular Movement party but was not elected.[12]
Société Générale
Kerviel joined the middle office of the bank Société Générale in the summer of 2000,[2] working in its compliance department.[13] In 2005 he was promoted to the bank's Delta One products team in Paris[13] where he was a junior trader.[14] Société Générale's Delta One business includes program trading, exchange-traded funds, swaps, index futures and quantitative trading. Christian Noyer, governor of the Bank of France, has described Kerviel as a "computer genius";[10] however, sources within Société Générale described Kerviel as "not a star".[15] Kerviel earned a bonus of €60,000 on top of a €74,000 salary in 2006, considered modest in terms of the salaries paid to traders in the financial markets. He had hoped for a €600,000 bonus for 2007 and would have received at least half that amount.[16]
Unauthorized trading
The bank states that Kerviel was assigned to arbitrage discrepancies between equity derivatives and cash equity prices,[17] and "began creating the fictitious trades in late 2006 and early 2007, but that these transactions were relatively small. The fake trading increased in frequency, and in size".[18]
Bank officials claim that throughout 2007, Kerviel had been trading profitably in anticipation of falling market prices; however, they have accused him of exceeding his authority to engage in unauthorized trades totaling as much as €49.9 billion, a figure far higher than the bank's total market capitalization. Bank officials claim that Kerviel tried to conceal the activity by creating losing trades intentionally so as to offset his early gains.[19] According to the BBC, Kerviel generated €1.4 billion in hidden profits at the beginning of 2008.[20] His employers say they uncovered unauthorized trading traced to Kerviel on 19 January 2008. The bank then closed out these positions over three days of trading beginning 21 January 2008, a period after which the market experienced a large drop in equity indices, and losses attributed are estimated at €4.9 billion ($7 billion).
The bank claimed Kerviel "had taken massive fraudulent directional positions in 2007 and 2008 far beyond his limited authority"[21] and that the trades involved European stock index futures.[21] Though bank officials say Kerviel apparently worked alone, skeptics question how unauthorized trading of this magnitude could go unnoticed. Kerviel's unassuming background and position have heightened the skepticism that he worked alone.[4] Some analysts suggest that unauthorised trading of this scale may have gone unnoticed initially due to the high volume in low-risk trades normally conducted by his department.[17] The bank said that whenever the fake trades were questioned, Kerviel would describe it as a mistake then cancel the trade, after which he would replace that trade with another transaction using a different instrument to avoid detection. Kerviel's lawyers, Elisabeth Meyer and Christian Charrière-Bournazel, said that the bank's managers "brought the loss on themselves"; accused the bank's management of wanting to "raise a smokescreen to divert public attention from far more substantial losses in the last few months"; and said that Kerviel had made the bank a profit of US$2 billion as of 31 December 2007.[18]
Managers for Société Générale have described some of the means Kerviel employed to avoid the bank's internal controls and escape detection. Its Executive Chairman Daniel Bouton describes the pattern as like "a mutating virus"[22] in which hundreds of thousands of trades were hidden behind offsetting faked hedge trades. Officials say Kerviel was careful to close the trades in just two or three days, just before the trades' timed controls would trigger notice from the bank's internal control system, and Kerviel would then shift those older positions to newly initiated trades.[14] City experts have expressed skepticism of the bank's account, saying that a pattern of closing out trades within the three day cycle alleged could not be accomplished given the immense sums involved.[5]
Kerviel is not thought to have profited personally from the suspicious trades. Prosecutors say Kerviel has been cooperative with the investigation, and has told them his actions were also practiced by other traders in the company. Kerviel admits to exceeding his credit limits, but claims he was working to increase bank profits. He told authorities that the bank was happy with his previous year's performance, and was expecting to be paid a €300,000 bonus on a €60 million declared profit (approximately 0.5%) which illustrates the definition of "fair pay" in the French investment banks.[23] Family members speaking out say the bank is using Kerviel as a scapegoat to excuse its recent heavy losses.[14][5]
Legal repercussions
In answer to the rumors that Kerviel had fled Paris following the discovery of the unauthorised trading, on 24 January 2008 Kerviel's lawyer denied that he attempted to disappear and said he remained in Paris to face the accusations.[24]
Also on 24 January 2008, Société Générale filed a lawsuit against "a 31-year-old person" for creating fraudulent documents, using forged documents and making attacks on an automated system, according to Clarisse Grillon, a spokeswoman for the Nanterre prosecutor. Le Figaro reported that in addition to the Société Générale lawsuit, a group of shareholders filed a lawsuit for fraud, breach of trust and forgery.[25]
On the eve and afternoon of 25 January 2008, police raided the Paris headquarters of Société Générale and Kerviel's apartment in the western suburb of Neuilly-sur-Seine[12] to seize his computer files.[26] On 26 January 2008, the Paris prosecutors' office stated that Kerviel "is not on the run. He will be questioned at the appropriate time, as soon as the police have analysed documents provided by Société Générale."[27] He was taken into police custody later that day.[28]
Kerviel's initial 24-hour detention was extended to 48 hours while French law enforcement questioned him about possible accomplices.[5] The investigation later widened to encompass his personal cell phone records, and to explore possible links to other individuals working at rival banks and private investment firms who may be involved. The police were investigating whether he worked alone, and whether any investors outside of Société Générale may have been tipped off in advance. Police were interested whether others were involved either in the trades themselves or received notice of the bank's impending sell-off before the details of the scandal were publicly disclosed.[29]
Kerviel was formally charged on 28 January 2008 with abuse of confidence and illegal access to computers.[3] He was released from custody a short time after.[23] The charges filed carry a maximum three-year prison term. On 29 January 2008 investigating judges Renaud van Ruymbeke and Françoise Desset had rejected prosecutor Jean-Claude Marin's bid to charge Kerviel with the more serious crime of "attempted fraud" and refuse bail.[30]
His trial began on 8 June 2010. On 5 October 2010, he was found guilty and sentenced to five years of prison, with two years suspended, full restitution of the $6.7 billion which was lost, and a permanent ban from working in financial services.[31] Caroline Guillaumin, a spokeswoman for Société Générale, stated that the restitution was "symbolic", and that the bank had no expectation that the sum would be paid.[32] Olivier Metzner, Kerviel's lawyer, described the sentence as "extraordinary" and said that Kerviel would appeal.[33] Kerviel's sentence was suspended until his appeal is completed.[31]
Lemaire Consultants
Since release, Kerviel has been hired by Lemaire Consultants & Associates, an information systems and computer security consulting firm.[34]
See also
References
- ^
Clark, Nicola (2010-10-5). "Rogue Trader at Société Générale Gets Jail Term". New York Times. Retrieved 2010-10-5.
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and|date=
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(help) - ^ a b c d
Ben Martin, Nick Allen, Peter Allen and Henry Samuel (28 January 2008). "Jerome Kerviel was 'honest, working class'". London: Telegraph UK. Retrieved 29 January 2008.
{{cite news}}
: CS1 maint: multiple names: authors list (link) - ^ a b "Fears over rogue trader 'raised 3 months ago'". CNN. 29 January 2008. Retrieved 29 January 2008. Cite error: The named reference "cnn2" was defined multiple times with different content (see the help page).
- ^ a b c
Carvajal, Doreen (26 January 2008). "'Rogue Trader' Is Remembered as Mr. Average". The New York Times. Retrieved 26 January 2008.
{{cite news}}
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(help); Unknown parameter|coauthors=
ignored (|author=
suggested) (help) - ^ a b c d "Rogue trader Jerome Kerviel held for a further 24 hours". Paris, Pont l'Abbe: Times Online. 27 January 2008. Retrieved 27 January 2008.
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ignored (|author=
suggested) (help) - ^ "Le trader livre sa version de l'affaire Société Générale". Le Monde, paper version. 29 January 2008. p. 1.
{{cite news}}
:|access-date=
requires|url=
(help) - ^ Nelson D. Schwartz (25 January 2008). "A Spiral of Losses by a 'Plain Vanilla' Trader". New York Times. Retrieved 29 January 2008.
{{cite news}}
: Italic or bold markup not allowed in:|publisher=
(help) - ^ Peter Allen (28 January 2008). "Phone records could be key to Kerviel case". London: Telegraph UK. Retrieved 28 January 2008.
- ^ Kar-Gupta, Sudip (26 January 2008). "Jerome Kerviel: "genius" or mediocre backroom boy?". Reuters. Retrieved 27 January 2008.
- ^ a b Nicola Clark, David Jolly (25 January 2008). "Fraud Costs French Bank $7.1 Billion". The New York Times. Retrieved 24 January 2008.
{{cite news}}
: Italic or bold markup not allowed in:|publisher=
(help) Cite error: The named reference "nyt" was defined multiple times with different content (see the help page). - ^ "International Herald Tribune". Retrieved 25 January 2008.
- ^ a b Adam Sage (26 January 2008). "Jerome Kerviel is not a Machiavellian genius. He's just an average kind of guy". London: Times Online. Retrieved 28 January 2008. Cite error: The named reference "sage0126" was defined multiple times with different content (see the help page).
- ^ a b Rayner, Gordon (26 January 2008). "Profile: Rogue trader Jerome Kerviel". London: The Telegraph. Retrieved 28 January 2008.
{{cite news}}
: Unknown parameter|coauthors=
ignored (|author=
suggested) (help) - ^ a b c "French police question rogue trader Kerviel". Reuters. National Post. 26 January 2008. Archived from the original on 28 January 2008. Retrieved 26 January 2008.
- ^ Hosking, Patrick; Bremner, Charles; Sage, Adam (24 January 2008). "Jerome Kerviel named in €5bn bank trading fraud". London: Times Online. Retrieved 6 May 2010.
- ^ Christine Seib (21 February 2008). "Societe Generale missed 75 warnings on trader Kerviel". London: The Times. Retrieved 22 February 2008.
{{cite news}}
: Italic or bold markup not allowed in:|publisher=
(help) - ^ a b "SocGen postmortem". Financial Times. 25 January 2008. Retrieved 25 January 2008. Cite error: The named reference "lex" was defined multiple times with different content (see the help page).
- ^ a b
ICOLA CLARK (28 January 2008). "Bank Outlines How Trader Hid His Activities". New York Times. Retrieved 28 January 2008.
{{cite news}}
: Italic or bold markup not allowed in:|publisher=
(help) - ^ Souchard, Pierre-Antoine (26 January 2008). "Rogue French trader taken into custody". Paris. Associated Press. Archived from the original on 29 January 2008. Retrieved 26 January 2008.
- ^ "Rogue trader began year in profit". BBC News. 30 January 2008. Retrieved 30 January 2008.
- ^ a b
Nicola Clark and David Jolly (25 January 2008). "French Bank Says Rogue Trader Lost $7 Billion". New York Times. Retrieved 25 January 2008.
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(help) - ^ http://www.theregister.co.uk/2008/01/31/kerviel/
- ^ a b Jim Bittermann and Niki Cook (28 January 2008). "Accused billion-dollar rogue trader charged, freed". CNN. Archived from the original on 30 January 2008. Retrieved 28 January 2008.
- ^ Viscusi, Gregory (24 January 2008). "Société Générale Reports 4.9 Billion EU Trading Loss". Bloomberg. Retrieved 24 January 2008.
{{cite news}}
: Unknown parameter|coauthors=
ignored (|author=
suggested) (help) - ^ "Un extraordinaire talent de dissimulation" (in French). Le Figaro. 25 January 2008. Retrieved 26 January 2008.
Une deuxième plainte pour «escroquerie, abus de confiance et faux», a été déposée au nom d'un groupe d'actionnaires à Paris. ... Selon l'ampleur de l'escroquerie, Jérôme Kerviel risque de cinq ans à quinze ans de prison.
- ^ "Police raid HQ of bank in French rogue trader scandal". AFP. 26 January 2008. Retrieved 26 January 2008.
- ^ "SocGen trader not on the run says prosecutors". Reuters. 26 January 2008. Retrieved 28 January 2008.
- ^ Chris Gourlay (26 January 2008). "Rogue trader taken into police custody". London: Times Online. Retrieved 28 January 2008.
- ^ Peter Allen (28 January 2008). "Phone records could be key to Kerviel case". London: The Daily Telegraph. Retrieved 28 January 2008.
- ^ "Jerome Kerviel charged over $8bn bank scam". Mercury. 29 January 2008. Retrieved 29 January 2008.
{{cite news}}
: Italic or bold markup not allowed in:|publisher=
(help) [dead link] - ^ a b "Kerviel's fine the size of 20 Airbus A380s". Reuters. 28 September 2010. Retrieved 5 October 2010.
- ^ Clark, Nicola (5 October 2010). "Rogue Trader at Société Générale Gets 3 Years". The New York Times.
- ^ "Kerviel lawyer says to appeal court verdict". Reuters. 5 October 2010. Retrieved 5 October 2010.
- ^ IHT.com Kerviel starts new job at computer consulting firm
External links
- Template:Fr Excerpts of police questioning
- Template:Worldcat id
- Jérôme Kerviel collected news and commentary at The Guardian
- Fritz-Morgenthal, S./ Rafeld, H: Breaking Down the Biggest Trading Fraud in the History of Banking, in: Risk Professional, June 2010, pp. 47–51.