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En 2008, il aurait pris jusqu’à 50 milliards d’euros de positions spéculatives hors mandat et à l’insu de sa hiérarchie, en déjouant tous les contrôles grâce à des opérations fictives et à des fausses écritures.
In 2008, he would have taken 63.5 billion US $ in speculative placements out of mandate and without his hierarchy’s approval, escaping all controls due to fictitious operations and misleading and false entries
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50 billion Euros. huh … 63.5 billion dollars? DUH?
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The guy managed to HIDE 63.5 B? Did he get a Nobel prize in either Economy or Boisterous Humour for that ? Cuz he shoulda? Seriously?
I may be alone in thinking this but if you are besides your business enough that an employee can steal/divert/lose that much cash from you, you should be fired and never allowed near finances again! Ever!
I’m gonna take a wild guess here and assume that most of my readers are not in a position to misplace even a ten thousandth of that or 6.35 million US $
I dont care how fat you are, you just cannot wipe your bottom with hundred dollar bills over thirty years to the tune of 6M day. Which is what it represents.
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OK, rant passed! Let’s enquire. All links ( save blue one ) in this section are the UK’s Guardian, being in English, respectable and neutral.
Jérome Kerviel worked as a junior trader for the Société Générale. In January 2008, the bank calls the police and sues him for having caused a 5 billion Euros loss.
http://www.guardian.co.uk/business/2008/jan/24/creditcrunch.banking
That first piece contains many phrases that can be surprising to the eye of the normal people such as us. For instance the bank calling his field “plain vanilla” and minimizing the trader’s importance.
It also contains others but they’ll be kept for our conclusive viewpoint.
Immediatly, the public in France, having caught on the ridiculous situation implied, sides with Jérome Kerviel while the voice of logic already puts the facts in situation to the state of things.
As to be expected in such a case, shareholders began to ponder a lawsuit. In that very interesting piece, we learn that the Société Générale’s defence sees Kerviel as “a one-off fraudster of genius who eluded its risk-control processes through elaborate fictitious trading, building up a huge exposure.” We also hear the Eurex, the Euro Derivatives exchange had warned the bank in November. And that the bank finds the suggestion that it may have delayed actions regarding the case to include ongoing sub-primes losses to the bill ludicrous.
At that early point, the Guardian’s writers asked the same question I did at the beginning, 50 Billions?
Around September, Jérome Kerviel’s defence lawyers without surprise announced that they would argue bank involvment. And his lawyer mentioned the French banking commission having found the Société Générale having “… weaknesses brought to light in particular the deficiencies in hierarchical controls, carried on over a long period, throughout 2007, without being detected or rectified by the internal control systems,”.
Then in June 2010, Jerome Kerviel’s first trial began. He was found guilty and sentenced to a five years prison term three of them fully served and fined 4.9 billion Euros.
And on October 24th 2012, he lost his Appeal Court case with the same verdict.
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As you can guess, he has lodged a last appeal. His last.
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A week ago, Jérome Kerviel showed up on a late night TV show in France. A show that mixes serious and fun with politics and social news and interviews followed by more consensual cultural invitees.
Here is the link although it is in French : On n’est pas couché.
I will give you the essentials in simple English prose though.
** Kerviel explains that : from 2005 to 2008 his gains got up and that his objectives were raised accordingly alongside. So that as average traders dealt for 3 to 5 millions Euros of benefits a year, says his lawyer, Kerviel was at 55 millions. That later, while nearly 2000 financial operators brought in 2.8 billions in trade, Kerviel did 2.5B alone. That arbitration, exposure limits of 125 millions were raised to the 50 billions that are at the head of this post! His job is a rare one shared by about 1,400 traders at that level.
One of the show’s journalists mentions his salary : 2,300 Euros per month and being junior trder not indexed on his performance so that in 2007 he got a bonus of 30K bringing yearly revenues of about 65-75 thousand Euros, less than 100K US $. And thus made no profit whatsoever on his “shady” deals.
Interestingly, the trader confirms that e-mails from control authority ( Eurex in November for instance ) came to his superiors mentioning up to 17 billions in “fictitious deals” stated in them in writing.
His lawyer reminds the panel that the Banking Commission had not found his client’s operations showing “no particular complexity”. The same Banking Commission in the link earlier that did however find the Société Générale to have exhibited “malfunctions in its controls”.
One person present worthy of note is Charles Beigbeder, a well liked French politician that experienced that kind of job and operations as a boss and mentions at least daily reports on the market transactions to be made available to the brass so that the bank cannot ignore the existence of such a situation as Kerviel’s.
Kerviel adds that “e-mails had been sent as early as April 2007 with nominals stating up to 17 billion of his operations to be fictitious deals” so not knowing just cannot be true.
The most interesting part being when Jérome Kerviel gives his timeline at departure from the bank. “On the 18th of January, the provisional amount of 1.5 billion Euros that I had set for the year was spent, effectively bringing me back to zero. The boss taped my shoulder and they fired me.” But later in precision to an explanation by Mr Beigbeder submits that some of the losses in the previous weeks may have been provoked by the bank itself.
The interview also contains a few moments of more human and emotional considerations that although interesting and showing a Jérome Kerviel that has no wanton for the kind of man he was and the environment that was his then.
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Now the fun part. Indeed, the last call by our “rogue trader” is interesting. It is found in many of the links from the Guardian if not outright then in transparency. All timelines I found pertaining to the affair begin on the 24th of January. In fact, the timeline begins much earlier. You see, on that day of the revelation by the Société Générale, a Thursday, and following hours the bank lost 4% in share value but had already lost 16% since the beginning of the month as mentioned in our original Guardian article to which I promised to refer again :
Trading in the bank’s shares was briefly suspended on the Paris market
this morning. When dealing resumed, they fell just over 4% to €75.87,
taking their loss since the start of the year to more than 20%.
And when Kerviel was fired on the preceding Friday, one other nice conspiration theory snippet came to be known : that an American boardmember had sold for 40 millions in shares that same day! http://www.guardian.co.uk/business/2008/feb/04/europeanbanks.banking1
The calls of warning from Eurex had come in November, that’s 2 whole months before. The sub-primes essential losses had previously run from June 2007 to November 2007, that November! And other big French bank BNP Paribas was barely recovering from the 2007 sub-prime quake.
The previous call had been in 1995 with the Barings/Leeson case reported very early by Ruth Sunderland in The Observer/Guardian link way up there ( or here again ). An almost identical situation that apparently the banks did not learn from.
The guy was betting on the CAC 40, Dax and EuroStoxx 50 to rise and was doing fine as long as they did so that when the bank started having a problem with those predictions it should have tightened the monetary leash. Instead, in their own explanation of the events :
The French bank conceded that the size of the trades on Monday, Tuesday and Wednesday last week may have had some impact on the sudden and dramatic falls in Europe’s stockmarkets.
And that :
He had tested out his system in late 2007 but the series of trades that caused him to come unstuck began to be taken out only on January 7.
http://www.guardian.co.uk/business/2008/jan/28/banking.europeanbanks
Is that not interesting that the biggest day of non-related loss for the bank was on the 10th? After finding out? As were the three days following Kerviel’s eviction but before the charges were pressed on Thursday?
Is it not interesting that “not particularly complex operations” to the Banking Commission were then seen as both “plain vanilla” and “… a scheme of elaborate fictitious transactions,” the bank said.”?
Société Générale could spare neither the Banking Commission’s rebuke nor the trial since both their mistakes and the crime had to have happened for them to pass those amounts as exceptional financial losses that can be accounted for ( lowering next year’s income tax for instance or getting insurance money ).
The French state is out of trouble if there’s a culprit.
And Jérome Kerviel won’t pay back the 5 billions of course, technical law arrangements cover that. He will have to go to prison though if his last attempt in Cour de Cassation does not overrule.
To think that in our original January 24th Guardian article the Société Générale’s chairman and chief executive had explained it so simply : “… the rogue trader was acting alone and does not appear to have gained personally from the unauthorised trading””
7 others ended up being sacked, no prison. and the rest of the gang remained in place.
63.5 billion US dollars inattention at the bank , LOL
And a trader dropping a 5 billion Euro wad of bills as he pays at the coffee shop?
What strange world these people live in! I suggest that my readers to whom such a mishap could just not happen at all count their blessings. 😀
Good day all, Tay.
Find below a timetable in English from french media and links in French covering the same issue :
http://lci.tf1.fr/france/justice/affaire-kerviel-la-chronologie-7601210.html
http://www.lefigaro.fr/economie/affaire-kerviel.php
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P.S. Here is a perfect quote also mentioned in Ruth Sunderland’s piece :
“Roger Steare, professor of organisational ethics at Cass Business School in London said the SocGen scandal was further evidence of a “systemic deficit in ethical values” in the banking industry.”
Definitive Lapse of Reason 
TY Anna! I read your blog and wanted to wish you the best. Tay. 😀
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