Police extend rogue trader detention as bank reveals 73 bln dlr gamble

28th January 2008, Comments 0 comments

Kerviel, 31, turned himself in to police on Saturday, two days after Societe Generale said it had lost a staggering 4.9 billion euros

   PARIS, January 27, 2008 - French investigators on Sunday extended the
detention of accused rogue trader Jerome Kerviel over a seven billion dollar
fraud as Societe Generale revealed he had been gambling with more than 73
billion dollars in deals when caught.
   Kerviel, 31, turned himself in to police on Saturday, two days after
Societe Generale said it had lost a staggering 4.9 billion euros (7.15 billion
dollars), the biggest in investment banking history.
   Prosecutors extended his detention for questioning for another 24 hours.
They must now decide on Monday whether to release Kerviel or place him under
formal investigation.
   "It's going well. The investigation led by the experts from the financial
brigade is extremely fruitful," said Jean-Michel Aldebert, head of the Paris
prosecutor's office financial division.
   Aldebert said Kerviel was providing "very interesting" facts and that he
told investigators he was feeling fine.
   In a statement, Societe Generale said that the trader had held positions
worth about 50 billion euros (73 billion dollars) when he was caught -- a
figure well in excess of the bank's market value of 35.9 billion euros.
   Quick action was taken to liquidate the deals, limiting losses to 4.9
billion euros, the bank said.
   The trader had bought futures in three European indices -- the Eurostoxx,
the DAX in Frankfurt and the Footsie in London -- effectively betting on the
future direction of the stock market.
   Kerviel was taken into custody on Saturday to explain his role in the
scandal, which has raised international questions over how one person could
have caused such big losses without getting caught earlier.
   The case dwarfs that of Nick Leeson, who lost 1.5 billion dollars as a
Singapore-based trader at Barings, causing the collapse of the venerable
British bank in 1995.
   Investigators were seeking to establish the trader's motives, how he
allegedly managed to elude detection and whether he acted alone, said a source
close to the case.
   They were also examining whether he hacked into the bank's computer system.
   Police searched the bank's headquarters near Paris on Friday, seizing
computer discs from Kerviel's office and on Saturday raided Kerviel's
apartment in the wealthy Paris suburb of Neuilly-sur-Seine.
   For the past few days, Kerviel had been staying with friends in the Paris
region. Police confirmed that he had not been on the run and had agreed to
cooperate with investigators.
   Societe Generale has filed a criminal complaint against Kerviel, alleging
the use of falsified documents and unauthorised computer access.
   Kerviel joined Societe Generale's investment banking department in 2000 and
moved five years later from the back offices to the front office where he
began trading in futures.
   Societe Generale chairman and chief executive Daniel Bouton has described
Kerviel as a "crook, fraudster and terrorist" but colleagues quoted in the
press have portrayed him as a shy, unassuming young man.
   Kerviel's family from the small town of Pont L'Abbe in Brittany defended
the young man, with his aunt suggesting he is being made the scapegoat for
mismanagement or other wrongdoing at the bank.
   "Jerome is not capable of doing such a thing," said his aunt Sylviane Le
Goff in an interview with RTL radio.
   "You have to look around in his entourage, his superiors and management (to
find the culprits). Jerome is an honest and serious boy who is close to his
family," she said.
   Bouton denied in an interview to Le Figaro daily that the bank had tried to
hide losses from other bad deals in the Kerviel case.
   "What happened at Societe Generale is certainly not a disaster that
resulted from our strategy. It is more like an accidental fire which destroys
a large factory at an industrial plant," Bouton said.
   Bouton has denied suggestions by analysts that the bank might have put
losses from other bad deals into the case, which has stunned international
markets already reeling from the US subprime mortgage crisis.
   Societe Generale has said it also lost two billion euros in subprime deals.


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