Société Générale knew Jérôme Kerviel was using fictitious trades several months before it lost €4.9bn ($7.6bn) as a result of the former employee’s positions, according to a court document seen by the Financial Times.
One of the bank’s internal accounting committees raised concerns about Mr Kerviel’s use of fake transactions in April last year but no action was taken. Lawyers for both sides are likely to use the situation to debate the difference between a “virtual trade”, some of which were allegedly tolerated, and an illegal fake trade.
SocGen has acknowledged that there were management and risk control failures that enabled Mr Kerviel to build up his positions undetected until January 18 this year. But it has claimed Mr Kerviel concealed his unhedged transactions using lies. Vincent Guyot, one of SocGen’s financial controllers, told the police that anomalies discovered in March 2007 indicated that some of Mr Kerviel’s operations amounted to “real fake trades which had no economic significance”.
Guillaume Selnet, one of Mr Kerviel’s lawyers, claims Mr Guyot’s testimony proved the bank knew about and tolerated his actions.
“From the moment when an accountant says, ‘We have detected fictitious trades,’ this becomes more than negligence. It looks like complicity.”
The former boss of Jérôme Kerviel, the trader whose hidden bets cost Société Générale nearly 5 billion euros or $7.2 billion, suggested Wednesday that the bank should not have put him in that supervisory job because he was not qualified, The New York Times said.
Eric Cordelle was Mr. Kerviel’s manager on the Delta One derivatives trading desk from April 2007 to January this year. In his first published interview since being fired on May 23, Mr. Cordelle told the French daily, Le Figaro, that his expertise was mainly as a financial engineer, and that he lacked the experience needed to pick up on warning signals that would have flagged Mr. Kerviel’s fraudulent trading.
PARIS: Two French judges investigating nearly 5 billion (more than $7 billion) in losses at Societe Generale visited the bank’s trading floor Tuesday, studying the scene where Jerome Kerviel is accused of having carried out massive, unauthorized trades.
Societe Generale said it had invited judges Renaud van Ruymbeke and Francoise Desset to visit its headquarters in La Defense, on Paris’ western edge. The company gave no further information.
No lawyers were present for the visit, during which the judges were receiving a demonstration on the bank’s computer system to understand how it worked, according to one of Kerviel’s lawyers, Guillaume Selnet…