Jérôme Kerviel, the rogue trader accused of losing his bank €5 billion (£3.9 billion) in one of the financial world's biggest scandals, has hit upon a new money-making scheme — he is to sue his former employer for unfair dismissal.

In the latest twist to the scandal, which won Mr Kerviel a legion of fans in France, the rogue trader has launched court proceedings against Société Générale to contest his sacking for gross misconduct, The Times has learnt.

The 31-year-old operator was released on bail last month after 37 days in prison on charges of breach of trust, fabricating documents and illegally accessing computers. In a sign that he intends to fight the allegations made by SocGen, Mr Kerviel claims his dismissal is unlawful because the bank has failed to prove he did anything wrong.

Mr Kerviel and his lawyers are basing their case on two points. The first is that Mr Kerviel’s massive gambles on markets were actually in the black when his bosses stepped in. The losses only occurred when SocGen sought to unwind his gambles. The second relates to a legal technicality. French labour laws force employers to hold face-to-face meetings with employees to outline the case for terminating their work contract. But, as Mr Kerviel’s lawyers point out, the meeting is impossible because Mr Kerviel’s bail conditions forbid him from entering into contact with SocGen staff.

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Jerome Kerviel's lawyer claims executives at the French bank benefited from the successful investments of the rogue trader

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Multimedia

• Full coverage of the SocGen scandal

• Blog: Charles Bremner on SocGen

• Video: Patrick Hosking on the impact of fraud

BACKGROUND

• Who Knew What and When?

• SocGen director probed over €100m share sale

• Ex-SocGen risk auditor calls systems a sham

Related Links

• SocGen rogue trader Jerome Kerviel released

• 'Colleagues watched' Socgen trader Jerome Kerviel betting

• SocGen missed 75 warnings on trader Kerviel

Lawyers have filed papers arguing that the dismissal process should be cancelled, according to a source in Paris. If Mr Kerviel won the case, SocGen could be forced to make him a compensation offer.

The trader does not envisage a return to his old job as a derivatives operator at SocGen, The Times understands.

The scandal erupted in January, when the bank announced it had incurred a loss of €4.82 billion after unwinding Mr Kerviel's unauthorised positions. Daniel Bouton, SocGen's chairman, denounced the trader as a "cheat, fraud, terrorist" who had masked his activities through fake documents and fictitious deals. The bank says that the team with which Mr Kerviel was working was barred from taking total positions of more than €125 million. Mr Kerviel alone staked €50 billion on European futures markets, according to the bank.

Mr Kerviel’s lawyers say that SocGen failed to enforce a limit on traders in an environment where they were encouraged to take risks in the search for profits. They also claim that Mr Kerviel’s superiors knew of his huge stakes and never tried to rein him in.

A report into the scandal, commissioned by SocGen, found that the bank had failed to follow up 75 separate alerts about his trading activities

Mr Kerviel’s counsel also point out that he was often successful when betting the bank’s money on the stock market and was €1.4 billion up at the end of last year. They argue that SocGen was responsible for the €4.82 billion loss after executives took the decision to unwind Mr Kerviel’s positions as shares were tumbling on the world’s markets in January.

The 144-year-old institution was forced into a €5.5 billion capital increase to shore up its finances after its profits slumped by 82 per cent as a result of the loss, and of writedowns linked to the subprime crisis.

SocGen declined to comment on Mr Kerviel’s decision to challenge his dismissal last night.

How scandal unfolded

2007: Kerviel starts building up large positions. As his losses mount he tries to cover up

January 19, 2008: SocGen’s investigation team calculates the total exposure is €50bn (£35bn)

January 21: The bank begins unwinding Mr Kerviel’s positions, resulting in losses of €4.82bn. European markets suffer biggest falls since September 11, 2001

January 23: Sell-off completed. The next day losses revealed

January 25: Mr Kerviel “confirmed as rogue trader”. He is taken into police custody the next day

February 21: SocGen confirms a record fourth-quarter loss of €3.35bn. An independent report finds that the bank missed 75 warning signs on Mr Kerviel's activities.

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