French police detain SocGen employee, search offices
Investors in the US filed a class-action lawsuit against Societe Generale, and its chairman, Daniel Bouton, claiming they were misled over the bank's exposure.
PARIS, March 12, 2008 - French police on Wednesday detained a second
Societe Generale employee for questioning over the multi-billion dollar rogue
trader scandal at the French banking giant.
The man worked on Societe Generale's trading floor and had contacts with
rogue trader Jerome Kerviel, a bank spokesman said, adding that police had
searched his desk at the bank's offices near Paris.
A judicial source had earlier told AFP that a broker working for a Societe
Generale branch called SG Securities had been detained.
Police from the financial brigade are seeking to establish whether the
detained employee may have helped Kerviel place more than 50 billion euros
(77.4 billion dollars) in unauthorised deals, according to the source.
Investigators examining Kerviel's phone records found numerous calls made
by him to the SG Securities employee, a source close to the investigation
The employee can be held for 48 hours after which he must be presented to
investigating judges for possible charges or released.
Kerviel, 31, has been charged with breach of trust, fabricating documents
and illegally accessing computers in the scandal that cost Societe Generale
4.82 billion euros in losses.
He is currently being held in a Paris prison and is due to appear in court
on Friday to seek release from custody.
Meanwhile, investors in the United States filed a class-action lawsuit
Wednesday against Societe Generale, and its chairman, Daniel Bouton, claiming they were misled over the bank's exposure to the subprime mortgage markets, and that Societe Generale failed to act on warnings over Kerviel's trades.
The bank's management "ignored or failed to act upon numerous alerts which
should have led to the uncovering of Jerome Kerviel's massive irregular
trading activity from 2005 through early 2008," according to a copy with the
"It is apparent that SocGen did in fact authorize a culture of risk to
flourish, with the resulting detrimental impact to its shareholders," said
Steven Toll, managing partner at law firm Cohen Milstein Hausfeld & Toll which
filed the suit in federal court in New York.
French judges have questioned a broker who worked at Societe Generale
subsidiary Fimat, the only other person suspected of having had a hand in the
rogue trading scandal, but he has not been charged.
The Fimat broker has been named as an assisted witness in the case and has
been twice questioned by judges about his relationship with Kerviel.
While Kerviel has insisted he acted alone, he has suggested that his bosses
at Societe Generale knew that he was dealing with huge sums of money but
turned a blind eye as long as he was making a profit.
An internal bank inquiry found that Kerviel's allegedly unauthorised
trading had not been detected because of his sophisticated techniques, but it
also pointed the finger at internal audit and risk control failures.
In an exclusive interview with AFP last month, Kerviel said he refused to
be made a scapegoat for the biggest rogue trading scandal in history.
"I was designated (as solely responsible) by Societe Generale. I accept my
share of responsibility but I will not be made a scapegoat for Societe
Generale," he said during the interview at this lawyer's Paris offices.
"I never had any personal ambition in this affair. The aim was to earn
money for the bank," he said.
"You lose your sense of the sums involved when you are in this kind of
work. It's disembodied. You get a bit carried away."
Kerviel admitted during questioning to falsifying company e-mails to cover
his tracks after he started making unauthorised deals in 2005, according to
leaked records of his deposition.
The scandal had left Societe Generale, France's third biggest bank,
vulnerable to a takeover bid, but on Tuesday the bank announced that demand
for the new shares issued as part of a capital increase were almost twice the
amount on offer.