Police protection for trader as bank probe spreads to US

A trader accused of causing huge losses at French bank Societe Generale is under police protection, the country’s finance minister said today, while the bank’s legal troubles have expanded to the United States.

A trader accused of causing huge losses at French bank Societe Generale is under police protection, the country’s finance minister said today, while the bank’s legal troubles have expanded to the United States.

Jerome Kerviel is under police protection because of pressure from “all the people who want to obtain his secrets”, Finance Minister Christine Lagarde said on RTL radio. “It is natural that he would be protected.”

Societe Generale announced on January 24 that it had lost €4.82bn in cleaning up unauthorised transactions by Kerviel. It was harsh news for the bank – one of France’s biggest – and for a financial world already rocked by the sub-prime mortgage crisis.

Investigating judges have filed preliminary charges against Kerviel for breach of trust, forgery and unauthorised computer activity.

Two investigating judges questioned him for eight hours yesterday about the case, a judicial official said today. The official gave no details about the questioning, and spoke on condition of anonymity because the investigation is ongoing.

Several investigations are under way into how the bank’s controls failed to spot the suspicious trading activity and how it disclosed the losses. The bank is also facing questions about its future, amid speculation it could be bought out or broken up.

The inquiries have now spread to the US.

Societe Generale’s New York branch was contacted on January 25 by the US Attorney’s Office for the Eastern District of New York, bank spokeswoman Laura Schalk said.

She said the bank was co-operating fully with the US investigation into the trading losses, but would not elaborate on the focus of the probe.

Separately, the US Securities and Exchange Commission reportedly opened an investigation into stock sales by American investor Robert Day, a Societe Generale board member, in the days before the losses were made public. Ms Schalk would not comment on the report, published in the Wall Street journal.

French market regulators are already investigating stock trades by Day.

Day, an investment manager with US-based Trust Company of the West (TCW), and his family’s trusts and foundations sold shares worth €140m in January, before the trading losses were announced.

Societe Generale maintains that Day had no inside information about the unauthorised activity by Kerviel and that Day sold the shares during a limited window when board members are authorised to sell stock.

The bank’s shares have seesawed since the announcement of the trading losses, and were down 2% to €81.90 this afternoon.

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