It seems quaint now, but when a financial institution lost €5 billion,
it used to mean something. It drove down stock markets and rattled central
banks. It even made people angry, in those innocent days before losses and
bail-outs had to hit a hundred billion to move the needle.
But that was February 2008, an eternity ago, when a banking scandal could
still be laid at the feet of a single trader. It was before the collapse of
Bear Stearns and Lehman Brothers, before the bailing-out of AIG, RBS and
HBOS, and before Bernie Madoff redefined the Ponzi scheme. It was before we
learnt once and for all that the financial edifice erected over the past two
decades was rotten at the core.
Jérôme Kerviel, a former trader with Société Générale, has been called many
names since then: “terrorist”, “hacker”, “psychologically unstable”, a
brilliant fraudster whose deceptions spread like a “mutating virus” through
the bank.
What he should have been called was a symptom.
In the afternoon of Sunday, January 20, Maxime Kahn, the 37-year-old star of
Société Générale’s European options trading floor, was told to come straight
to the bank’s headquarters in La Défense in western Paris. Kahn had made his
reputation, and a personal fortune, juggling seven- or eight-figure trades
involving multiple securities and indices. Nobody at the bank had a better
feel for the pulse and mood of the markets. But never in his career had he
received an assignment like this.
The bank had set up an office for him away from the main trading floor so
nobody could see him. It was equipped with all the screens and computers he
needed, as well as a pager linked directly to the head of trading. It was
the most secure form of communication they could find, safer than telephone
or e-mail.
He was told that the bank had taken a set of positions on behalf of a client
that it now needed to unwind as quickly as possible. The positions were
enormous: €30 billion on the Euro Stoxx index, €18 billion on
the German Dax, and €2 billion on the UK’s FTSE. The most problematic
would likely be the 140,000 Dax futures contracts, equivalent to roughly an
entire day’s worth of trading on the German futures exchange.
Kahn could not simply dump the positions, as that would prompt a crash in the
markets. And there was one other condition: his sales should at no point
exceed 10% of the daily transactions in any given market. This would be
especially hard as Monday was Martin Luther King Day in the United States, a
bank holiday. A third of the market for Kahn’s positions would be taking the
day off.
It was like having to tiptoe through a starving crowd, surreptitiously
dropping bags of food and hoping nobody noticed until you were gone.
If Kahn could pull this off and the markets remained stable, there was a
chance that the positions could be disposed of at a small loss, or even a
profit. If Kahn’s activities were spotted, or the markets crashed, it could
be a disaster.
The only lie Kahn was told was about the positions belonging to a client.
There was no client. But his bosses did not want to add to his stress. They
did not want him to know that this was the bank’s money, its very future,
that had been put at risk. It was down to him to save them.
Overnight, the markets turned. By the time Kahn began to trade, the Asian
exchanges were falling. Hong Kong’s Hang Seng was down 5.4%. A similar fall
on the European indices would mean nearly ¤3 billion in losses immediately.
It turned out to be even worse.
The early tremors of the credit crisis were being felt, harbingers of the
convulsions that would occur later in the year. That Monday morning, the US
Federal Reserve responded to the falling markets by cutting interest rates,
a measure intended to make it easier for businesses and individuals to
borrow. The markets bounced a little, but not enough for Kahn. Despite
Société Générale’s efforts to unwind its positions quietly, traders around
the world noticed a big seller on the market. Soc Gen’s activities were far
too big to hide. By the close of trading on Monday, the French Cac 40 and
the German Dax 30 were both down 7% and London’s FTSE 100 5.5%.
It took until Wednesday evening for Kahn to relay the message that he was
nearly done. He would not close out the positions until Friday morning, but
the worst was over. The losses came to €6.4 billion.
At 7.58 the next morning, long before most French journalists stirred, a flash
appeared on the Agence France-Presse wire. Société Générale would be holding
a press conference at 11.30 to announce “an exceptional fraud in a
subsection of its market activities”. Staff were told over the internal
radio system on no account to talk to the press. All morning a team of
security guards was posted at the bank’s entrance to the bank to corral the
media and fend off angry shareholders.
At 11.30am the CEO, Daniel Bouton, appeared before the press. His face was
grey, his hands trembling and he was stumbling over his words. Nobody had
ever seen him like this. His overweening intellect and ruthlessness had
earned him the nickname the “intelligent bulldozer”. But today he was a
wreck. He said that the bank’s 2,000-employee-strong risk-and-security
division had been outfoxed by a string of fiendish deceptions. Philippe
Citerne, Bouton’s deputy, said an unnamed trader had developed “an intimate
and malicious” knowledge of the bank’s security systems, which he had used
to deceive, without apparently seeking to enrich himself.
The journalists in the room were as livid as if they were the ones who had
been deceived. They seemed gripped by a kind of revolutionary horror, as if
grasping for the first time the amounts of money the men sitting before them
could make and lose. They screamed their questions at the bank’s
discombobulated officers. Who is this trader? Why hasn’t he been arrested?
Politicians reacted hyperbolically to the news. Laurent Fabius, a leading
socialist and former prime minister, called it “Chernobyl crossed with mad
cow”. An immediate online poll found that 50% of French people blamed the
bank for the losses and only 13% blamed the trader. This prompted one of the
bank’s lawyers to remark: “It’s the old story of a woman who is raped and
she is told it’s her fault because her skirt was too short.”
In the evening, Bouton gathered his 300 senior managers and, appearing to hold
back tears, said Société Générale had succumbed to the equivalent of a huge
industrial accident. But, he said, “the bank is still profitable and the
adventure continues!”
That evening, Kerviel’s name leaked out.
Société Générale may be best known as one of France’s largest high-street
banks, but mention it to anyone in finance and another image comes to mind:
its trading desks, populated by mathematically brilliant Frenchmen, capable
of spinning gold out of the very raw cloth of algorithms and financial
models. For the past 15 years, Soc Gen has been to French banking what
Goldman Sachs has been to Wall Street — a moneymaking machine with a
reputation for both mystery and arrogance. Bouton was the embodiment of his
bank, a brilliant man given to lecturing his peers from atop his staggering
profits.
While other banks noodled around offering advisory services and retail
banking, Société Générale was off in the financial stratosphere, recruiting
the cleverest graduates and letting them loose with the firm’s own capital.
Their activities were so recondite, even their bosses, let alone regulators,
struggled to understand them.
In this crowd, Kerviel was “un Rastignac”, the pushy rube trying to make it in
Paris in Balzac’s Comédie Humaine. He had not come from one of the Parisian
“grandes écoles”, the universities that typically supplied the French
financial and political elite. Rather, he had scraped his way up from
Pont-l’Abbé, a small town on the tip of Brittany, where there are a couple
of bars and a museum devoted to the local Bigouden culture, which appears to
consist mostly of tall embroidered hats. It is a town swaddled in Breton
silence and mystery.
Kerviel was born here in January 1977. His mother ran a hairdressing salon
while his father was a metalworker. Both were Catholics. At school, Kerviel
and his brother enjoyed mathematics and economics. As a teenager he began to
read the financial press and even took a stab at Adam Smith’s Wealth of
Nations. He adopted a uniform of dark jacket over white T-shirt, inspired by
Tom Cruise in Risky Business, and often carried a leather portfolio holding
his school notes.
After completing his baccalauréat, he spent four years studying for a
bachelor’s degree in economics, first in Quimper in Brittany, then Nantes.
With each stage of his education he was orbiting ever further from
Pont-l’Abbé. Finally he obtained his master’s in “back and middle office
management for market operations” at the Université Lumière Lyon 2, with the
unremarkable grade of “assez bien”. In September 2000 he began work at
Société Générale, one of the few in his class to make it to a big French
bank.
His career there bore a closer resemblance to The Office than Wall Street. His
first job was making sure that whatever appeared in the firm’s computer
system tallied with what was happening on the trading floor. Two years
later, he was promoted to assistant on the trading floor, a kind of
secre-tary to a group of traders, communicating with the middle-office and
risk-management divisions. In 2004 he was given responsibility for making
sure the traders had enough cash on hand to do their work. He sat at the
same desk, alerting them if they hit their trading limits. He was always
among the first to arrive and the last to leave each day, eager to be
promoted to the rank of trader. “Little by little, I became more and more
involved in the actual trading, and they let me oversee a monitor,” he told
investigators after his arrest. Finally, at the beginning of 2005, he was
made a trader. His base salary was ¤35,000, laughable by financial-services
standards.
“That didn’t matter to me though, because I was doing what I wanted to do,” he
said. He was 28. Kerviel sat deep inside Société Générale’s trading
division, the most important and profitable arm of the bank. It was divided
into five subdivisions: Europe Volatility; Exotic Trading; Asia & Global
Volatility Co-ordinator; Arbitrages; and Americas. Kerviel was on the Delta
One desk within the equity-finance division of arbitrages, surrounded by
desks named Fundamental, Quantitative, Tourmaline and Turquoise. He was a
market maker for German turbo warrants, a financial instrument resembling a
stock option. Kerviel was given a sum of money and instructed to buy and
sell these warrants to keep the market for them ticking over. He might make
a small profit or loss, but nobody much cared. His job was to keep the
market liquid enough to entice investors, whose trades generate revenue for
the bank. It was mechanical, unremunerative and frustrating, especially as
within feet of him, traders were making tens of millions of euros for the
bank and for themselves. So, in the middle of 2005, Kerviel began to trade
with the bank’s money, unhedged and without authorisation.
His first bet was a short position of ¤10m on the German banking and insurance
firm Allianz. Shortly afterwards, on July 7, the market, and Allianz’s share
price, fell following the terrorist attacks in London. Kerviel had made
¤500,000. To cover up both his profits and the fact that he had not hedged
out his risk, Kerviel entered fake, money-losing transactions scheduled for
future dates into the computer system. These would appear for a few days as
“pending” while they were entered into the database along with Kerviel’s
profitable trades. But before they were executed, Kerviel cancelled them.
According to Société Générale’s reports, Kerviel’s then manager reprimanded
him for the unauthorised trade. But the culture of the trading floor,
Kerviel felt, encouraged such risk-taking, with advice and ideas flowing
freely among traders.
In 2006, Kerviel’s confidence grew, and before long he had built up unhedged
positions worth ¤135m. This did not mean he had spent ¤135m of the bank’s
money. One of the privileges afforded big banks is to assemble positions
with little coll-ateral, similar to mortgages with almost nothing down.
Kerviel would have only had to put up a few hundred thousand to buy the
positions. A move of less than 1% in the right direction and he would have
been able to close out his positions at a profit.
His extreme leverage and gutsy trades drew the attention of the trading floor.
He was nicknamed “the cash machine” and, as Kerviel explained after he was
caught, “there was a snowball effect”.
For 2006 his pay was increased to ¤95,000, still a derisory sum by the
standards of his peers. He applied for a job at Société Générale’s rival,
BNP Paribas, but was turned down.
In early 2007, his father died, and for the entire year, Kerviel followed
Bigouden tradition and wore a dark suit and tie. Soon afterwards his desk
manager resigned and for the first 2Å months of 2007, Kerviel was allowed to
sign off on his own trading activities. Nobody was monitoring the cash-flow
statements on Delta One, which were starting to show massive inflows and
outflows to Kerviel’s account. The snowball was fast turning into an
avalanche. “I began to see signs of overheating in Asia,” he told
investigators, “and that turned out to be true. At first my position was in
the red as the market climbed. The fake deal went unnoticed because there
was no coherent control system at Société Générale in January. Finally, in
mid-February, there was a mini-crash in Asia and I cut my position. At the
end of February I was out completely. I had made ¤28m. I was more than proud
and satisfied.”
So satisfied, in fact, that he began rebuilding his position immediately. He
had noticed the growing sub-prime crisis in the US and decided to place
another big bet on a fall in the market. By the end of March, his capital at
risk was ¤5.5 billion — far beyond the ¤125m net risk limit prescribed for
Delta One. By creating fake hedge trades, however, he had duped the firm’s
risk-management system into thinking his positions netted out at zero.
The markets kept climbing, and even as he saw the losses on his short position
mount, Kerviel kept doubling down, until by July 19 he had acquired ¤30
billion worth of Dax futures. Finally, at the end of the month, he was
proved right.
The markets buckled as the extent of the sub-prime losses became clear.
Kerviel unwound his positions. He had made ¤500m for the bank without
authorisation. “I was very scared by the sum of 500m and didn’t know how to
make it known between July and the end of September,” he said.
For the next few months, he restricted himself to day-trading individual
stocks, and by the end of the year his profits had risen to ¤1.4 billion,
half the total for the entire trading division. Had he been running his own
private hedge fund, Kerviel would have been beating off investors wanting
him to manage their money.
Instead, he was terrified of being found out and the only person with whom he
could share his story was his closest friend, a broker named Moussa Bakir.
In mid-December they exchanged text messages. “You really need to take some
holiday,” wrote Bakir. “In jail,” replied Kerviel. “Doesn’t matter,” said
Bakir. “What have you done wrong? You haven’t raped anyone. You’ve done
nothing illegal in the eyes of the law.” “I’ve made a shitload of cash,
that’s all,” said Kerviel. Bakir: “I’d go to prison every day if I were
making money legally.” Kerviel: “Shut your face.” Bakir: “Bitch.” Kerviel:
“We’ll show them the power of Kerviel.” Bakir: “Or the lack of awareness.
Simple, discreet boy, didn’t look like much. Made a shitload of cash. And
never given his due.”
“I didn’t know how to handle it,” Kerviel said later to the police. “I was
happy, proud of myself, but didn’t know how to explain it. So I decided not
to tell the bank but rather to hide it by creating fake trades the other
way.”
On December 31 he created eight fictitious forward transactions worth ¤30
billion, the losses on which would cancel out all but ¤55m of the 1.4
billion he had made in 2007. With this ¤55m profit in hand, he requested a
bonus of ¤600,000. The firm offered him 300,000 on the grounds that he was
not senior enough for anything more. Soon, however, the bonus discussion
became moot.
At 9.14am, Friday, January 18, Kerviel texted Bakir: “I’m dead. Haven’t
slept.” “The market’s up to 4,300,” wrote Bakir. “I’m going to get out of
Paris,” replied Kerviel. “You should cut your position,” said Bakir. “I wish
I could every day,” said Kerviel. But by then it was too late. Three days
earlier, Kerviel’s professional life had begun to unravel. Société
Générale’s internal investigators were onto him. Something was wrong with
his trading positions: something he could no longer explain or conceal in
the computer records.
The bank was in the midst of its annual reporting period, when all the profits
and losses for the previous year were being tallied. Auditors were ensuring
the bank was adhering to international banking regulations regarding its
exposure to financial risk. Up and down the bank, managers were being
pestered for their numbers in order to calculate the Cooke ratio, a crucial
figure measuring the ratio of bank capital to assets — or the extent to
which it was borrowing to fund its activities. The Cooke ratio is a kind of
electro-cardiogram of a bank’s health, an easy way for management to see
that it is functioning properly.
The team that calculated the Cooke ratio reported directly to Daniel Bouton,
the CEO, who in turn was required to assure the board later in January that
everything was in order. This year their numbers weren’t working, and the
harder they looked, the more it seemed the problem lay with a single trader
on the Delta One desk.
On January 8, two risk managers had contacted Kerviel to ask him about the
forward transactions he had entered on the last day of 2007. He replied in
writing: “This materialises the give up of puts made late; I owe money to
the counterparty. It will be rebooked asap.” It was gibberish to buy time.
In a later interview, the agent who accepted Kerviel’s explanation admitted
to not understanding it.
The following day, Kerviel cancelled the fake forward transactions and asked
his assistant to file a “flux de provision”, a discretionary amendment to
his accounts to hide the ¤1.4 billion profit. It was like trying to hide an
elephant with a postage stamp. The flux de provision was meant to be used
only to smooth out minor errors owing to financial modelling or timing
discrepancies, for accounting purposes. It was a quick fix, but it bought
Kerviel another five days.
The following Tuesday, however, the Cooke- ratio team went back to the risk
department about the accounts on Delta One. Over the next two days, Kerviel
was pestered by the accounting and regulatory departments. They were
struggling to comprehend the scale of his transactions and the identity of
his counterparties. For the fake forward transactions in question, Kerviel
had claimed his counterparty was a mid-size German bank, Baader. Under
pressure, he said that in fact the counterparty was Deutsche Bank, a far
bigger bank posing less risk to Société Générale.
By this time, several internal investigators were onto him. His evasions were
starting to stink. “I’m f***ed,” he wrote in a text to Bakir. But it did not
stop him buying. On Thursday he bought futures contracts worth ¤8.15
billion.
On Friday morning, Kerviel arrived as usual at 7am. He faked an e-mail
purporting to be from Deutsche Bank in New York confirming the fictitious
trades and re-entered them into the bank’s system, marking them as
“pending”. He hoped that just as he had so many times in the past, he would
be able to cancel them before they were checked.
He stepped outside to smoke and text Bakir. “I am in deep shit.” “Chin up,
buddy,” replied Bakir. “Your buddy is dead,” said Kerviel. He then bought
another ¤3.09 billion worth of contracts.
hat evening, Jean-Pierre Mustier, the intimidating head of Société Générale’s
investment-banking operations, was being driven home to his mansion in the
16th arrondissement when his mobile rang. There was a problem with some
positions held abroad, he was told. He instructed his driver to turn around
and return to La Défense. Saturday would be his 47th birthday and the start
of the worst few days of his career.
Mustier was all that Kerviel aspired to be. The son of a doctor and pharmacist
in the Puy-de Dôme department in central France, he had attended one of the
grandes écoles and then joined Société Générale. He had worked as a trader
in Paris, New York, London, Tokyo and Hong Kong, helping turn the bank into
one of the most profitable in the world. He was reputed to be the
highest-paid person at the bank, earning three or four times as much as the
CEO. In 2002 he had been appointed head of investment banking and had
introduced a policy called Turbo Growth Ventures, or TGV, an echo of
France’s train à grande vitesse. The aim was to offer clients many different
high-growth opportunities, whether the markets were rising or falling. The
plan worked. Three years later, revenue was up 80%.
That Friday night, he struggled to understand why Kerviel had created a loss
of ¤1.4 billion. Kerviel himself had travelled up to Normandy to celebrate
his birthday and was not answering his phone. Early on Saturday afternoon,
Mustier and his team were finally able to get hold of someone at Deutsche
Bank. They said they had never heard of Jérôme Kerviel and were certainly
not the counterparty to his trades.
When Kerviel called in that afternoon, in response to ever more frantic
messages, he was patched straight through to a conference call. Mustier
spoke first: “We contacted Deutsche Bank, the supposed counterparty on your
forward trade. They found nothing. What does it mean? Is this a fake
transaction?” Kerviel replied: “Yes, that’s right, it’s fake. But I made up
this trade so as to hide the ¤1.4 billion euros I made in 2007. I wanted to
surprise you. I found a martingale on Dax futures contracts.” A martingale
is one of the riskiest betting strategies, named after the eccentric
inhabitants of Martigues, a town near Marseilles. The theory is that in any
game where the chance of winning is 50-50, at one point the gambler will be
lucky. In which case, the best thing to do is to keep doubling your stake
after each loss to ensure that when you do win, you win back everything you
have lost up to then in addition to any profit. If you bet a pound and lose
it, you bet two pounds in the next round. If you lose that, you bet four and
so on. Eventually you will win. The only thing that will break you is if you
run out of money before you win, which for anyone playing with finite
resources is a serious issue.
To Mustier and his team, who used advanced mathematical models to exploit
fleeting opportunities in the financial markets, Kerviel may as well have
said he had put the money on the 3.10 at Pontefract on a tip from a lad in
the stables. Who cares if the horse won? The risk was crazy.
Great traders understand that the pain of a loss is twice as intense as the
pleasure of a gain. So they guard against the natural inclination to sustain
mounting losses in the hope of getting back to profit by having “stop-loss
rules”, unbreakable limits at which they must get out of a losing position.
Kerviel had no such rule. He had simply bet and bet and bet until the
markets turned his way, jeopardising the bank in the process.
When Kerviel walked into Soc Gen’s headquarters at 6.30pm, he was taken
straight up to a meeting room on the seventh floor where Mustier was
waiting. The interview was recorded and broadcast to a team of investigators
occupying Kerviel’s position on the trading floor, who could check his
answers immediately. “I don’t think there was any financial motive,” Mustier
said later. “I just think he had no sense of financial reality and had no
idea of the scale of what he had done.”
The questioning continued until 3am, when a doctor recommended Kerviel be sent
home to get some sleep. At dawn, Mustier went out to buy croissants.
Kerviel, as far as he knew, had made ¤1.4 billion without being authorised.
Not the worst kind of problem to have.
His relief, however, was short-lived.
When Kerviel returned, Mustier asked him if he had made any trades so far in
2008. They were less than three weeks into the year. “Yes, but they were
nothing — “trois fois rien — just a little long position,” Kerviel said.
By noon, the investigators found that Kerviel’s positions were worth ¤50
billion — 1& times the value of the entire bank: 30 billion on the
Euro Stoxx index, 18 billion on the German Dax, and 2 billion on the UK’s
FTSE. He had bet the value of the whole bank, and then some, that the market
was bottoming out and would recover by the end of March when his contracts
matured.
When Daniel Bouton was told of this, he said the image that came to mind was
that of an aircraft carrier listing in the ocean while its crew scrambled
for safety. He could either be completely transparent and hope his rivals
did not abuse Société Générale’s weakness to attack its positions and drive
it into bankruptcy, or he could try to sell off the positions before making
an announcement. “A major bank does not have the right to hold a speculative
position of this size. We had to sell, to liquidate this position while
respecting the market conditions and not exceeding 10% of the trading
volume,” he told Paris Match. “We also had to do this without the rest of
our employees knowing.”
As a matter of form, he called the governor of the bank of France and the head
of the financial markets authority. Both promised to keep the situation a
secret until it was resolved. One person Bouton did not tell was Nicolas
Sarkozy. He did not trust the garrulous president and his team not to try to
stage some operatic intervention.
It was at this point that the call was made to Maxime Kahn.
The first photograph of Kerviel to emerge was his bank ID photo, in which he
looked unshaven and shifty, very much the “Bin Laden of the Bourse” as
bloggers had dubbed him. In his flat in Neuilly-sur-Seine, police found a
box of Montecristo cigars, the latest issue of Investir magazine with the
headline “50 ways to get rich in 2008”, and a copy of the Koran. Kerviel’s
then girlfriend was a Moroccan-born Muslim.
Kerviel was taken on as a client by a prominent lawyer, Elisabeth Meyer, who
saw to it that the attacks orchestrated by Société Générale were met. She
made it clear that Kerviel had made a large profit for the bank in 2007 and
the ¤6.4 billion loss incurred by dumping his positions was their decision,
not his.
Kerviel became an online sensation, a modern Meursault, Camus’ antiheroic
Outsider, who had exposed the world’s hypocrisy with a magnificent
self-destructive act.
Transcripts of Kerviel’s first interviews with the financial police show that
his story has not changed in the months since his arrest. He had yearned to
be a trader. Yes, he had gone far beyond his limits, but he believed his
actions were always either explicitly or implicitly condoned. His primary
motivation, he said, “was always to make money for the bank”. He longed to
prove that despite his education, he was an “exceptional trader”. He had
received frequent inquiries and reprimands about his actions, but none he
could not easily satisfy or sidestep. “The techniques I used weren’t at all
sophisticated… There was no Machiavellianism on my part.”
Kerviel has said all along that he knew what he did was not right.
But it was up to the bank to stop him. And they did not. He wasn’t doing
anything especially complicated or devious. And he took their failure to
intervene as permission to continue.
In 2007 alone, there were 74 alerts about Kerviel’s activities, including two
from the European derivatives exchange, Eurex, and each time he emerged
unscathed. Kerviel’s lawyers have pressed for a far broader investigation of
the extent to which his colleagues knew of his actions. Soc Gen denies that
there was any approval, either explicit or tacit, of Kerviel’s actions. The
bank claims he successfully hid his transactions until the moment he was
discovered — at which point the bank did the right thing by dumping his
positions, albeit at great cost.
Guillaume Selnet, a chain-smoking young lawyer with a lucrative corporate
practice, was part of Kerviel’s original legal team and spent weeks with him
in the wake of his discovery. “When he first came in, he always spoke in
terms of contracts. ‘I bought 7,000 contracts’ or ‘10,000 contracts,’
I told him, ‘You have to talk in terms of money.’ Then he’d stop and calculate
the final figure. This is approximately ¤2 billion. These traders are
disconnected to the actual value of things. They work on computers. It’s
like a kid playing Second Life.”
But Selnet disputes the idea that Kerviel was a criminal mastermind. “He could
have been a crook. He could have gone to the bank and said, ‘I’ve violated
all your rules to make €1.5 billion. Give me €100m and you
will never hear from me again.’ A crook would have done that!”
On January 26, nearly a year after news of Kerviel first broke, the
investigating magistrates finally closed their investigation, the first step
towards a trial that is unlikely to be held until 2010. Should Kerviel be
found guilty of the charges of breach of trust, fabricating documents and
illegally accessing computers, he will face five years in prison and
¤375,000 in fines.
Three days earlier, Le Parisien newspaper published an interview with Kerviel,
in which he described the last five months of 2007: “I win every day. That
creates a sort of addiction. A good day for a normal trader is a profit of
€30,000 to €40,000. For me, a €1m day is rubbish. I take crazy risks. And I
make astronomic profits which sometimes give me an orgasmic pleasure.”
Kerviel claimed the comments were from a private conversation and taken out
of context. Le Parisien, however, maintained they emerged from six
on-the-record interviews.
Every indication shows that the magistrates have not looked kindly on
Kerviel’s defence. In their written responses to his lawyers, they have
blamed Kerviel for running rings around Société Générale’s internal control
system and lying to managers and investigators to conceal his trades. The
bank had a control system, they said, but Kerviel abused it.
But if you set aside the legal arguments, all Kerviel is saying is this: when
he did what he did, clever people saw but did not care. Given all we now
know about the financial system in which he thrived, is this really so hard
to believe?
