The Bank Always Wins: Justice Is Done In France

Wolf Richter's picture

Wolf Richter

On October 24, a French appeals court threw the book at former junior trader Jérôme Kerviel who, in 2008, had been hung out to dry by his employer, French mega-bank Société Générale, for having—so alleged the bank—blown €4.9 billion of its money in just about no time. He’d risked up to €50 billion with trades the Banking Commission later called “simple,” far beyond his limit of €125 million. Kerviel never denied that. And he’d done so without its knowledge, the bank alleged, using trick and device to conceal these gigantic trades for years. The crux of the case. And a lie, according to Kerviel.

The French mainstream media have been solidly on the side of the bank on which they depend for funding, and which they can’t afford to antagonize. So they gloated when the court affirmed the 2010 conviction: a five-year prison sentence—three in the hoosegow and two suspended—and €4.9 billion in damages. But now, Kerviel and his lawyer, Me David Koubbi, showed up on France 2 TV and lambasted the proceedings that had been rigged, they claimed, from the outset.

Even the loss of €4.9 billion is uncertain. “No one knows anything,” Koubbi said. Two successive courts accepted Société Générale’s number without even a cursory glance from an outside expert. An “unprecedented dysfunction,” he said. But as new evidence piled up after the first trial, it became clear, Koubbi asserted, that “Société Générale had willfully aggravated the loss by adding the losses of other traders.”

It was early 2008. The financial crisis was wreaking havoc. Banks around the world were forced to write off their elegant instruments, and they dug up skeletons, and markets crashed—but Société Générale’s only sin was a junior rogue trader.

From 2005 through 2007, Kerviel made increasingly large trades, and as his profits rose, he became more confident. It was “intoxicating,” he said. At the end of every day, his direct supervisor came by and asked how much he’d made and encouraged him. And the hierarchy set his ever growing objectives based on profits from the prior year. In 2007, he made €55 million for the bank, which became the basis for his 2008 objective. He was so successful that the hierarchy suggested in an email that the bank “adopt the system Kerviel.”

In the trading room of about 100 traders, word of the magnitude and profits of his positions “circulated.” Société Générale traders in Asia called Kerviel the “fat one” (le gros) because of his positions. His boss in the trading room knew that he was risking up to €50 billion; emails between his supervisors and “control services” have emerged that discussed his outsized trades—one of them for €17 billion. But none of this was accepted by the court. “Incomprehensible,” Kerviel groaned.

On the plaintiff’s side, it was the opposite. Its “witnesses came and lied,” Koubbi said; and when challenged, the judge said that plaintiff’s witnesses had “a right to lie.” When Koubbi asked one of Kerviel’s supervisors what he knew about his trades, he replied: “I cannot answer that question because if I answered that question, I’d have to pay back the money I already received.” He’d signed a contract with the bank that prevented him from talking about the case. And the judge let it go.

During the initial investigation, much of the evidence had been sealed. But the appeals court authorized Kerviel and his new lawyer to see some of it, including a CD. On January 19, 2008, before the affair blew into the open, the bank had interviewed Kerviel for twelve hours to obtain a confession and recorded it without his knowledge. But only six hours remained on the CD, and only those six hours had been transcribed and introduced as evidence. When Koubbi hired experts to examine the CD, they discovered that segments of the interview had been cut out, that the evidence had in fact been “doctored.” [For how Kerviel struck out against the bank’s “manipulation of justice,” read.... David and Société Générale].

Other new elements have emerged as well. For example, witnesses said that they’d been asked by the bank to erase emails. And the trades that were attributed to Kerviel were not closed out how and when the bank said they were. Mystery after mystery.

Yet Kerviel was still optimistic. He’d appeal to France’s highest court, the Cour de Cassation. Hard to imagine, given the prior proceedings, that the sentence would be overturned. So one of the guests on the show asked where the moolah was. “Good question,” Koubbi said. “The court never asked that question.”

As the French government flails about amid morose economic trends, “competitiveness” has become the catchword—alas, it’s an explosive mix. Read.... Competitiveness Cacophony: Attack On France’s Sacred Cow.

And here is my book about Japanese love hotels, Korean roommates, unspoken rules, isolation, a girl, and not a happy end. “A funny as hell nonfiction book about wanderlust and traveling abroad,” a reader tweeted. BIG LIKE: CASCADE INTO AN ODYSSEY. Read the first few chapters for free on Amazon.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Questan1913's picture

Eerily remenisicient of the "trial" of Joan of Arc.  Every institution in countries like France, England, the US and most other Western countries is presently rotten to the core.  This kind of sham takes place in Federal courts here in the US every day.  It's tolerated and encouraged by its future victims.  Come on now let's hear it, again..........  a rousing rendition of "nothing new here".


zarjad's picture

Nothing new here. That's what socialism is, just think. Kabal of judicial, executive and legislative with military, fiancial and media support added. We're getting there fast, in the name of social justice and other causes.

Big Ben's picture

If what the bank claims is true, then bank management should be sacked for not having safeguards in place to enforce the position limits of its traders. The possibilities for abuse are immense. For example a trader could have a friend buy out of the money put or call options in a particular security, then the trader could use the bank's money to cause a sudden surge or plunge in the value of the security, causing the value of the options to skyrocket.

Maybe many of these flash crashes and fat-finger events that we have been seeing are due to this type of activity.

If bank managers cannot control the activities of their traders, the managers should be immediately replaced.

buzzsaw99's picture

I'm sure he was plenty smug in 2007. No tears for Mr. K

Alecto's picture

Strange way to conduct a trial - deny the accused the ability to see the evidence against him, deny the accused the opportunity to challenge witnesses, don't tell the accused he is being taped and therefore forcing him to be a witness against himself?  France denies him the rights any civilized society grants to those accused of wrongdoing.  This stinks more than Epoisses.

Salt's picture

He's been Dreyfus'd. Viva la France!

Alecto's picture

And make no mistake, by "civilized" I absolutely mean "American"!

disabledvet's picture

Actually once he realized he had "become the bank itself!" he should have asked for transfer to Connecticut "to connect with like minded contrarians."

Heyoka Bianco's picture

That last bit's one of my questions: Where do all these "losses" end up? Doesn't the money just move to the hands of another bastard banker? Can't they just settle up over drinking champagne from the bike rack of nude prostitutes at Davos or wherever? We sure as fuck know none of that money is making it out our way.

silverserfer's picture

how did the bank win? They lost a shit ton of money :)

throwing 1 grunt trader in jail for it is not winning.

Joebloinvestor's picture

Watch the Kubrick classic "Paths of Glory" to get an idea of how France thinks.

Kerviel was the "guy" till it all blew up.

The bank was just trying to pin it all on one guy.


Tic tock's picture

Y'know, some of us non-masons have gifts too, but mostly, we don't go displaying our privileges in the noses of the weak, the needy, the uneducated. On the other hand, you have these. A wanton display of Free Money, created for them in the thousands of Billions - because they cannot undertake Structural Reform - despite the fact that technological advance far, far outstrips Methods of Production and in the face of of a Farming (and Water, I might add) Crisis. A Wanton disregard for the applicable Laws of Nations - a pass to be judged only by those who are even more tightly bound to those same crucifixes - all for the love of what? Education, are the next generation going to want to believe in Anyhing that comes from the mouths of the Establishment? Is salaried non-bank-employment now obviously different from a loosely-bound debt-Slavery? What good is Enlightment if these are the companions; greedy, uncompassionate, venal, without some respects it does seem that their playbook harkens back to the time of the Dinosaurs. How does one look upon this and see them as bunch of Thugs?

Widowmaker's picture

Your precious enllightenment has been monetized and rebranded as Fascism.


Widowmaker's picture

When money talks and shit walks, justice is just a meaningles word - facts are moot.

bank guy in Brussels's picture

This is shocking stuff in this French case, like in the Italian case of prison sentences for the seismologists and their 'failure' to adequately warn of the earthquake

But it is still worth noting that such cases in Europe are still very rare - The very few cases like this, high-profile political railroadings, do exist, but we do not have that kind of mass-jailing of millions like in the USA

Plus we do not have all the US-type court extortions, the lawyers and bribed judges stealing money from divorced people, small businesses, and the MF-Global type robberies of customer bank funds

There is still almost no one in jail in Western Europe, and it is actually very hard to go to jail here.

And here, prison sentences are quite short, in general, versus America ... and we only have 1 out of 1000 people in prison in much of Europe ...

Versus 1 out of 140 Americans already in jail in the 2.3 million prisoner US gulag ... where prison sentences are hugely long and many people die in prison under these 20-year, 30-year, 100-year sentences ... doing slave labour in US prison factories ... and providing profit for America's prison companies owned by US oligarch families

There is no excuse for this kind of French or Italian court mis-conduct, nonetheless  ... one of the scary things about such cases, for us, is that this kind of court misconduct is a very American and Anglo kind of disease, the mis-use of the courts for political purposes

Hopefully in both this case and the Italian case, the European appeals courts will have some common sense

God save us from having American-type courts and jailing of millions of people

YuropeanImbecille's picture

let me rape and torture your mother and your eventual daughter, then we can meet up for a coffe after they release me from prison in about 2-3 weeks.


Then we can talk politics you fucking idiot.

sudzee's picture

Courts and banksters need a good old "trial by fire".

kikk's picture

Surely everyone knows by now, no matter what CRIMINAL ACTIVITIES the banks get caught doing it is always a rogue trader or two at a desk on the 8th floor. No-one else knows anything about any wrong doing EVER.

If you must work for a bank, make sure you're high enough up that ladder to be able to deny any knowledge of what actually goes on

Zero Govt's picture

"..mystery after mystery.."

nothing mysterious about a corrupt Court (Judge)

The Law: weapon of the State/elite against the People.. sorry no time for the 'justice' bit. The End.

Peter Pan's picture

How hard can it be for financial institutions to be forced into having a compulsory "black box" system through which every transaction must pass and be recorded?

Don't bother answering me. We all know why it has not been done.




Number 156's picture

Does anyone remember when Airbus swapped the flight data recorder after their A320-100 plane crashed at an air show so they can hang blame on the pilots? France sucks.

indio007's picture

You mean like the Flight 77 (allegedly hit pentagon) Flight Data Recorder?

samcontrol's picture

exactly at least the french fraud was a plane and not a missile.

otto skorzeny's picture

If you think corruption and duplicity is rampant in the US-the French make us look like amateurs, New Orleans is probably the most corrupt city in the US and that goes all the way back to its french roots. Also-it's nice to read some posts about something other than the immensely boring hurricane coverage about the self-annointed/serving center of the universe-NYC.

Joe A's picture

No, the most corrupt city in the US is Washington DC which has a direct link to a certain street in Manhattan.

Number 156's picture

More on wonderful france:

Three executives of France's largest oil corporation have been charged in Paris over claims that they funnelled millions of dollars through a Swiss company in order to bribe officials to gain oil deals in Iraq and Russia.

The disclosure will embarrass President Jacques Chirac as it follows on from claims last week by the Iraq Survey Group that Saddam indirectly paid French politicians and individuals to gain support for lifting UN sanctions and influencing French policy. The ISG's claims were dismissed by Chirac as politically motivated.

The french are easily embarrassed, but only when they get caught.

Bunch of snobs.

samcontrol's picture

you gotta be a stupid plump pudding to hate the French like that.

otto skorzeny's picture

Awesome-Americans die so that the Euro-pussies don't have to shed any blood for oil. That is why anyone that signs up for the US military has to be retarded to fight for the NWO. At least if you fought in the 'Nam you could get some good dope and pontang.

Ghordius's picture

"At least if you fought in the 'Nam..." have you forgot that Vietnam was a French satellite? Who do you think is that keen in portraiting France the way it is, in America? Look how fast the Capitol mensa in DC changed "French Fries" to "Freedom Fries" because France dared to be against an intervention in Iraq.

Your use of "Euro-pussies" with "blood for oil" and NWO is a bit confusing: are you for or against foreign interventions? If you are against, why should France be for them? If you are for "NWO interventions", what is your beef with europe? It's the American Industrial-Military Complex that wants a bigger and bigger share of this pie since decades. Half of the "defence" spending of this world is done by Washington - meanwhile if you take GDP as a measure the US accounts for one quarter of the world's.

btw it's the same constantly growing and morphing complex that is selling all the "Fear articles" like guns, prepping material, security equipments, including Airport Security and so on, including the Private Prison Industry. One quarter of all prisoners of this world are in the US, a country that holds 5% of the world's population.

Denigrating allies is ok, but get your point a bit straight...

LawsofPhysics's picture

Like most in the world today, I think he is struggling with cognitive dissonance.  He "hates" the very same things he loves benefitting from. 

falak pema's picture

to keeps things in perspective; the French statist cum Oligarchy MATRIX is very neo-colonial wherever it hits the world , since 1973 made it totally foreign oil dependent; like the rest of first world. It is deadly in West Africa. 

But the Pax Americana MATRIX is the mother of all matrices; as the ME/SE Asian wars have shown. 

So what happened in the JErome Kerviel case is the statist matrix absolving the bank to punish the trader; in a way that dates back to France's legacy of the Inquisition; still the statist and obscurantist knee-jerk of french top down atavism since Crusader days. 

But just compare this injustice with the US legal system, which has made Tarp and all that has followed as the dominant US state cum Oligarchy power culture.

Wolf, loves to bark up the french tree and forgets the forest of US Oligarchy hegemony that lets the Corzines scot free. 

Vince Clortho's picture

Is there any possibility the courts can decide to hang all parties involved?

Widowmaker's picture

Only the indigent and disenfranchised get blanket judgements.

Justice is fucking irrelevent in the incorporated world.  You are a number no one saw coming so culpability goes away.

What do you mean you're not a member at the country club -- hold still while officer abortion frisks you.

otto skorzeny's picture

seriously,dude? who do you think puts the judges in position? you don't think they're put into their positions by "the people" do you? it is all a part of one huge rotten corrupt system that will eventually crumble upon its rotten foundation of greed and gluttony(and a few more of the 7 Deadly Sins for good measure). Karma-it's a bitch.

LawsofPhysics's picture

Correct.  Nothing changes until there are real consequences for bad behavior at all levels of society.

Fraud is the status quo.  Changing that would require those in power to indict themselves.

It isn't going to happen and history is very clear on how this all turns out.

hedge accordingly.

Skateboarder's picture

+9000, LoP. I think that one statement sums up everything quite well... "fraud is the status quo."

samcontrol's picture

history is clear the future is not...

or should we buy stocks now because history says so?