Ex-boss brands Kerviel liar at fraud trial

9th June 2010, Comments 0 comments

Jerome Kerviel took risks "no bank in the world could take" and lied to hide billions lost in risky deals, one of his former bosses from Societe Generale said Wednesday at the ex-trader's trial.

The bank alleges Kerviel gambled away 4.9 billion euros (7.1 billion dollars at the time) in risky stock market trades, in a case seen as a symbol of the banking excesses blamed for the financial crisis.

Jean-Pierre Mustier, the former head of Societe Generale's investment division in which Kerviel worked on the "Delta One" trading desk, stood inches away from the accused and reproached him for his "inhuman" risk-taking.

"You lied to me," Mustier told Kerviel in a passionate testimony, accusing him of taking "risks that no bank in the world could take", running up 50 billion dollars' worth of trades that Societe Generale rushed to unwind.

"I still don't understand why Jerome Kerviel did it... and he has never said sorry," he added. "How can he say he did it for the good of Societe Generale, to earn it money? He is lying, like he has always lied."

Societe Generale, one of Europe's biggest banks, said it suffered the heavy losses when it was forced to unravel 50 billion euros of unauthorised trades when it discovered the fraud in January 2008.

Kerviel says his bosses encouraged him to take risks and turned a blind eye to excesses as long as earnings were rolling in.

The 33-year-old admitted that he frequently passed trading limits and logged fake transactions to cover his gambles, accusing the bank of tolerating such breaches of trading limits.

"It was a common practice," Kerviel told the court. "Every morning we got an email informing us of limits being exceeded," he said, but there was "never a reprimand".

Mustier insisted: "Traders are informed of their limits."

Mustier stepped down as head of investment banking in May 2008 in the wake of the Kerviel scandal and left the bank altogether last year.

He was subject to an insider-trading investigation by the French market regulator AMF, which has yet to rule on his case.

The former executive told the court he had comforted Kerviel when the trader became anxious and apparently suicidal at an early stage in the bank's investigation of his dealings.

"I even accompanied him to the toilet. I don't often accompany young men to the toilet, but I was afraid he would commit suicide. I was extremely worried," he said.

At Tuesday's hearing the ex-trader presented himself as an ordinary, hard-working man, now a computer consultant earning 2,300 euros per month -- a big mark-down from the tens of thousands he earned as a trader.

Kerviel risks a maximum sentence of five years in prison and a fine of 375,000 euros if convicted on charges of breach of trust, falsifying and using fake documents and entering false data into company computers.

Branded a crook by his ex-employer but seen by others as a scapegoat, Kerviel faces criminal charges along with civil suits by the bank and other plaintiffs, including employees and shareholders.

The court questioned its first witness Jean-Francois Lepetit, former head of the French market authority AMF, on the technicalities of trading limits, after Kerviel's lawyers argued the bosses must have known they were being broken.

"It happens that limits get exceeded, but when that happens, transparency is always strictly required," Lepetit said.

Trial hearings are set to end on June 25 and the court is expected to deliberate for several weeks before giving a verdict.

© 2010 AFP

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