French trader jailed for three years and ordered to repay bank €4.9bn

JEROME Kerviel has been sentenced to three years in prison and ordered to repay Societe Generale’s €4.9 billion trading loss by a judge who said the former trader’s actions threatened the bank’s existence.

“By his deliberate actions, he put in peril the existence of the bank that employed 140,000 people, of which he was a part, and whose future was threatened,” Judge Dominique Pauthe said in finding Kerviel guilty of breach of trust, forging documents and computer hacking.

The 2008 trading loss was the biggest ever and prompted then-chief executive officer Daniel Bouton to describe Kerviel as a “terrorist”. The court placed the blame for the loss on Kerviel alone, rejecting defence arguments that his superiors knew of his actions and that the bank’s decision to unwind the bets over three days of falling markets caused the loss.

The €4.9bn award “is obviously symbolic,” Christopher Mesnooh, a Paris-based lawyer, said. “It goes a very long way in exonerating the bank and putting responsibility for the losses, including the winding down of the positions by Societe Generale, entirely in Jerome’s court.”

Olivier Metzner, Kerviel’s lawyer, said he would appeal the ruling, and that Kerviel would “obviously not” be able to repay the loss.

Kerviel, 33, sat in court following the decision reading on his iPhone. He will remain free during the appeal.

The judge said problems with Societe Generale’s computer controls and management’s encouragement of traders to speculate wasn’t enough to absolve Kerviel.

“The lack of vigilance by the bank in monitoring the only existing limits, acting as alert signs, hardly exempted Jerome Kerviel from his duty to inform his hierarchy of the reality of his excesses or to come back to the limits imposed,” the judge said.

France’s Banking Commission fined Societe Generale €4 million in 2008 for “serious shortcomings” in its risk controls.

Jean Veil, representing Societe Generale, said he was satisfied by the guilty verdict and award, which the bank had requested.

The award “confirms what Societe Generale has always told its shareholders and employees”.

In response to questions on how Kerviel might repay the bank, Mr Veil said, “Bill Gates became rich, he could become rich with the internet.”

Kerviel was charged after he amassed €50bn in unauthorised bets on futures, using faked hedges to make the risk appear minimised.

Prosecutors argued he was driven to boost his bonus, while Kerviel said his sole motivation was to make money for the bank. He was never accused of taking money for himself.