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SocGen Bosses Knew 'Rogue Trader' Kerviel Was Taking Massive Risks

Tyler Durden's picture




 

Bosses at French banking giant Societe Generale were aware of the activities of "rogue trader" Jerome Kerviel, a top detective working on the case reportedly told an investigating judge, according to France24. The French investigative news website, Mediapart, quoted Nathalie Le Roy as telling judge Roger Le Loire she was "certain" that Kerviel's superiors "could not have been unaware" he was taking wildly risky bets on derivatives. However, as Bloomberg reports, SocGen, in a statement released on Monday, that several judicial decisions have assigned exclusive criminal responsibility to Kerviel, adding "it’s just the opinion of a person and not based on the discovery of new documents."

 

 

Having been hung out to dry by his bank after Jerome Kerviel allegedly brought Societe Generale to its knees in 2008 with losses of nearly five billion euros ($5.7 billion) from unwinding his trades of up to 50 billion euros ($57 billion). As we explained previously, something did not add up abiout his single-handed scapegoating...

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.

And now, as France24 reports, bosses at French banking giant Societe Generale were aware of the activities of "rogue trader" Jerome Kerviel, a top detective working on the case reportedly told an investigating judge, according to Mediapart.

The French investigative news website quoted Nathalie Le Roy as telling judge Roger Le Loire she was "certain" that Kerviel's superiors "could not have been unaware" he was taking wildly risky bets on derivatives.

 

...

 

"From different hearings and different documents that I've seen, I had the feeling, then I was certain, that Jerome Kerviel's bosses could not be unaware of the positions he was taking," Mediapart cited Le Roy as saying during her hearing.

 

She cited interviews she herself had carried out with an employee in the operational risk department of Societe Generale, who told her that "Jerome Kerviel's activities were known."

Societe Generale said in a statement it was "surprised" by the report.

"The case surrounding the fraudulent activities of Jerome Kerviel go back now more than seven years and there have been several court decisions which have always shown the sole criminal responsibility of Jerome Kerviel," the bank said.

 

"Societe Generale is surprised by the declarations apparently made by a police officer to a judge in charge of a case brought by Jerome Kerviel given that he (Kerviel) himself told detectives questioning him in 2008 that he had acted alone and without his superiors' knowledge," added the statement.

 

The bank also stressed that it did not have access to the legal documents from which these declarations were taken.

*  *  *
As Bloomberg concludes, managers missed at least 1,071 bogus trades, a special committee of the bank’s board found seven years ago. His supervisors failed to react to the size of his trading gains, cash flows and brokerage expenses, and overlooked warnings from Eurex AG, Europe’s biggest futures exchange, as the former trader amassed his positions, the committee found.

Kerviel has argued at every trial that Societe Generale stealthily sold unprofitable subprime mortgage investments as it liquidated his positions, exaggerating the losses.

 

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Tue, 05/19/2015 - 02:32 | 6108703 burocracy
burocracy's picture

Blinding Flash of the Obvious !!  MY EYES !!!   I CANNOT SEE ANY MORE !!!!!

 

Seriously, years after Barings, people would still think that you can pull a stunt playing futures on daily margin reconciliation? I NEED to meet their pushers.

Tue, 05/19/2015 - 03:34 | 6108749 myne
myne's picture

Of course they knew. But he was winning. It wasn't until he started losing that they "discovered" it and panic sold. 

That'lllook good on their resume. "I managed a guy who lost billions but I had no idea he was doing it, honest!"  

Tue, 05/19/2015 - 06:50 | 6108894 unrulian
unrulian's picture

Evil Kerviel

Tue, 05/19/2015 - 07:43 | 6108995 GMadScientist
GMadScientist's picture

Didn't quite make it across the canyon.

Tue, 05/19/2015 - 08:17 | 6109117 MonetaryApostate
MonetaryApostate's picture

Another pin the tail on the donkey game?  *Sigh*

Tue, 05/19/2015 - 07:42 | 6108993 GMadScientist
GMadScientist's picture

You've got just the skills we need for oversight and regulation. Fill out this application for formality's sake.

Tue, 05/19/2015 - 07:53 | 6109021 junction
junction's picture

It is almost always one person responsible, except in cases like the Boston bombing, where there were two. If there were more people shown to be involved, top people, they would also be at risk to suffer the consequences.  So you have a "lone wolf" responsible.  Otherwise, if many people were involved, that would show the entire banking system is rotten to the core.  To keep up this myth of how awesome everything is, you have to silence insiders who know the truth.  In comes the "Murder Inc." type killers on the government payroll, to exterminate any potential leaks.  Nail guns, ropes, high falls, helicopter crashes.    

Tue, 05/19/2015 - 06:14 | 6108844 doctor10
doctor10's picture

Next we're all gonna hear, yet again, the USA debt is all "Bush's Fault"

Tue, 05/19/2015 - 02:43 | 6108709 ohaitieaqui
ohaitieaqui's picture

Indeed seems there was no accounting of margins necessary to gamble, casino are certainly better run than some banks, at least that what SG would like everyone outside trading future believing as 99% of population worldwide does n't have a clue it might work again.

Tue, 05/19/2015 - 03:56 | 6108762 winchester
winchester's picture

of course they knew, a bank would not know a single clic guy playin a 5 fucking billion euro game ...?

banker chairmans really take the masse for idiots....

Tue, 05/19/2015 - 04:01 | 6108770 SmedleyButlersGhost
SmedleyButlersGhost's picture

.......and It seems to be working so far.

Tue, 05/19/2015 - 04:19 | 6108784 artytom
artytom's picture

In dealing with French authorities no amount of brazen lying is too much. Morals or the law have no place in their society. Documents are the only things that they hold as real and they will do anything they can to interpret documents in their own favor. A sick and nasty society.

Tue, 05/19/2015 - 11:57 | 6109904 Analyse2
Analyse2's picture

@artytom

Where in heaven do you get your information from?  By emitting these kinds of racist comments, you are discrediting yourself.  You should travel a bit more ...

Tue, 05/19/2015 - 04:51 | 6108797 Arius.
Arius.'s picture

shocker ...

Tue, 05/19/2015 - 06:28 | 6108858 RaceToTheBottom
RaceToTheBottom's picture

Cronyism has a facade of Libertarianism to disquise its real motives.

It is personal responsibility as long as the law is involved, but when he was making outlandish profits, that was fine with the firm.  I guess they thought his friends sister was working a half hour on the interenets.....

Tue, 05/19/2015 - 07:43 | 6109000 GMadScientist
GMadScientist's picture

Le Systeme Duh

Tue, 05/19/2015 - 07:56 | 6109031 WTFUD
WTFUD's picture

He's no patsy himself but it appears they've assigned him the hanging judge.

Tue, 05/19/2015 - 09:46 | 6109440 Toolshed
Toolshed's picture

I think the evidence clearly indicates he is being PAID to take the fall. What else would you expect from a bank?

Tue, 05/19/2015 - 07:59 | 6109046 Bangin7GramRocks
Bangin7GramRocks's picture

15 years hard labor for that douchey beard alone!

Tue, 05/19/2015 - 08:58 | 6109269 yellowsub
yellowsub's picture

These firms should have their internal compliance teams to reconcile trades every day, they would have seen this way before the losses...

Tue, 05/19/2015 - 09:17 | 6109333 ATM
ATM's picture

Of course they saw it. They saw it and didn't care because they are too big to fail. And if the trades did fail there would be a simple explanantion - rogue trader.....

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