Jérôme Kerviel, the former Société Générale trader who lost
EUR 4.9 billion in unauthorized trading in 2008 was sentenced to three years in
prison today and ordered to repay the bank the entire amount of his losses.
From the
FT:
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,” Mr Pauthe said.
Gasps echoed round the courtroom in
Paris’ medieval Palais de Justice when Judge Pauthe ordered Mr Kerviel to repay
€4.9bn in damages, the amount the bank had lost in unwinding Mr Kerviel’s €50bn
of uncovered bets in January 2008 – roughly equivalent to SocGen’s market value
at the time – on three futures markets.
As I argued in a series of posts here during the trial this
past summer, Jérôme Kerviel is not the “pawn for profit” that his lawyers
contend, nor should he escape blame.
He lost nearly EUR 5 billion at Société Générale and concealed those
losses through a series of fake trades, lies, and forged documents. But Soc Gen, rather than being the
victim of fraud, as it has claimed in court, is actually complicit in that fraud.
Kerviel’s lawyers admit that he will never be able to repay
the money. But the decision is
symbolic. Unfortunately, the
ruling, by laying all the blame for the events of 2008 solely on Kerviel,
allows SocGen to avoid the reputational hit it deserves for facilitating
Kerviel’s actions.
HT: Lawrence Baxter
Image source: FT
Related Posts:
When
$61bn Seemed Like Real Money
Denial: It Ain’t Just A River In Egypt
It’s The Stupid Culture
It’s The Culture, Stupid
Kerviel’s Fake Trades: Genius Or Copy Cat?
Kerviel’s Fake Trades: The Anatomy of A
Cover-Up
On Warning Signs II: Follow The Money
On Warning Signs: You Can’t Get There From
Here
Rogues Versus Scapegoats
Kerviel Trial Opens to Fanfare
Société Générale: Back In The Saddle Again
Jérôme Kerviel to Société Générale: Stand By
Your Man
Kim–two thoughts..the market gave SocGen a huge reputational hit and the French banking commission fine in 2008 certainly signalled a major fault in controls that the bank then invested millions of euros in fixing..r
Thanks, Roger. Yes, and they admit to faulty controls, but that's not enough. My point is that the evidence suggests they purposely turned a blind eye to his trading violations, so long as they made money. To require Kerviel to repay the entire amount of his loss to SocGen implies that he alone was responsible, and that SocGen is a victim deserving of compensation. This, IMHO, misunderstands the facts and by-passes an opportunity to make a statement about the type of oversight we expect financial institutions to exercise over trading operations. To be clear, I don't suggest that Kerviel should go free — he is culpable as well. My objection is to the compensation ordered to SocGen.