SocGen bosses testify in rogue trader's trial

22nd June 2010, Comments 0 comments

Societe General managers said Tuesday that rogue trader Jerome Kerviel had pushed the French bank to the brink of collapse, as his trial prepared to hear testimony from its former chief executive.

Daniel Bouton, who headed SocGen during the 2008 scandal, branded the young trader a "terrorist" after the bank lost 4.9 billion euros (7.1 billion dollars at the time) due to risky deals that it says Kerviel made secretly.

Now he is to face Kerviel in court as the 33-year old ex-trader's nearly three-week trial nears its close.

Branded a crook by his ex-employer but seen by others 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.

On Tuesday the senior trader who oversaw the operation to disentangle Kerviel's off-the-book trades, Maxime Kahn, 39, told the court the bank had faced collapse due to the "astronomic" bets Kerviel had taken.

The 50 billion euros of trades was "10 times the total risks taken by Societe Generale's 2,500 (traders) and 25,000 times the average risk that a trader takes," Kahn told the court.

He said Kerviel had exceeded the bank's trading limits by a factor of 50,000.

Kerviel has claimed he could have made good on the trades and that the unwinding was carried out at a bad moment, as markets were falling in the week after his excesses came to light.

Kahn said the positions had to be unwound "because the bank was facing potential collapse."

The next star witness, Bouton, helped build Societe Generale into one of the world's biggest banks during his 11 years as chief executive, but left in April 2009 in the wake of the Kerviel affair and a scandal over directors' bonuses.

Neither the bank nor the defence had called Bouton to be questioned by the court to bolster their claims, but lawyers for several civil plaintiffs including bank employees and shareholders demanded that he testify.

One of the lawyers for the plaintiffs, Daniel Richard, told AFP he would question Bouton on what "values" traders were taught under his leadership.

"Without Bouton, would there have been a Kerviel?" he said.

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.

But his former supervisors told the court Monday they were completely unaware of the alleged rogue trades.

"I did not see the orders he was placing," said Eric Cordelle, who was Kerviel's immediate supervisor on the "Delta One" trading desk.

"To check every one of the operations, you had to suspect fraud," he testified, adding that at the time "no one talked about fraud."

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

© 2010 AFP

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