Ex-SocGen boss blames Kerviel for trading 'catastrophe'

22nd June 2010, Comments 0 comments

The former boss of French bank Societe Generale said its 2008 trading scandal was a "catastrophe" caused by Jerome Kerviel's "lies", at the alleged rogue trader's trial on Tuesday.

"Regardless of the losses or the amounts, it was a catastrophe in itself ... because confidence was lost," Daniel Bouton told a Paris court in a keenly awaited testimony, the last of the three-week trial.

Standing just feet away from Kerviel, he slammed the ex-trader's "capacity for lies, his capacity for concealment" of his risky trades, which the bank says caused it to lose 4.9 billion euros (7.1 billion dollars at the time).

Bouton recounted the bank's efforts to get to the bottom of the risky positions it discovered in January 2008 and accused Kerviel of continuing his gambles to try to cover his tracks, pushing the bank close to collapse.

"On the one hand he was sending text messages to his broker and friend saying 'I am in trouble,' and on the other he was continuing to increase the position that was potentially fatal for his employer," Bouton said.

In 2008 he branded the young trader a "terrorist" and a "crook", but others see Kerviel as a scapegoat.

Kerviel faces up to five years in jail and a fine of 375,000 euros if convicted of breach of trust, forgery and entering false data into computers.

Societe Generale said it suffered the heavy losses when it was forced to unravel 50 billion euros -- nearly all of the bank's nominal worth -- in allegedly unauthorised trades made by Kerviel.

Kerviel has admitted regularly exceeding trading limits and logging false transactions to cover his gambles, but says this was common practice and that his bosses turned a blind eye as long as earnings were high.

"I admit I made mistakes," Kerviel responded to Bouton's testimony on Tuesday. "I am aware people may have suffered, but I do not agree that these actions were invisible" to the bosses.

The bank has admitted failings in its controls, for which it was fined four million euros in July 2008, but it insisted at the trial that managers could not have tracked all Kerviel's trades when he logged false data to cover them.

Bouton, 60, helped build Societe Generale into one of the world's biggest banks but left in April 2009, in the wake of the Kerviel affair and a scandal over directors' bonuses.

On Tuesday the senior trader who oversaw the operation to disentangle Kerviel's off-the-book trades, Maxime Kahn, 39, told the court Kerviel's positions had to be unwound "because the bank was facing potential collapse."

Kerviel earned tens of thousands of euros in bonuses at the bank but maintains he did not profit personally by ramping up his bets to the level he did.

Bouton urged him to reply to the question that the trial, now in its third and final week, has done little to answer.

"Mr Kerviel owes his former colleagues an explanation" for his actions, which could have sparked "catastrophic social consequences" for Societe Generale employees, Bouton said.

"Try to be honest for 10 seconds ... and tell us why you did this?"

The trial is set to end on Friday and the court is expected to deliberate for several weeks before handing down a verdict.

After Bouton's testimony Kerviel was given his last chance to speak before the prosecutors and lawyers make their final statements in the coming days.

He repeated his claim that he was "someone who had tried to do his job in the interests of the bank."

"There is no Kerviel mystery," he said.

Societe Generale is demanding 4.9 billion euros to compensate it for its losses -- an amount Kerviel is unlikely to be able to pay.

Before closing the day's hearings, presiding judge Dominique Pauthe asked Kerviel if he thought he was cut out to be a trader.

Kerviel stood at the microphone with his head bowed and mumbled: "Probably not."

© 2010 AFP

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