Societe Generale chairman's letter on fraud

24th January 2008, Comments 0 comments

Text of letter by Societe Generale chairman Daniel Bouton to French clients announcing a 4.9 billion dollar euro fraud by a single trader:

   PARIS, January 24, 2008
   "Sir, Madam
   "I have the duty to inform you that the management of Societe Generale has
discovered an internal fraud of a considerable scope, carried out by a member
of staff in its financing and investment division.
   "The individual involved has been dismissed and legal action will be taken
against him.
   "The board of directors approved my decision to terminate the mandates of
the executives, including leaders, responsible for the supervision and
controls on the operations concerned.
   "The transactions which involved the fraud were simple -- taking a position
on shares rising -- but hidden using extremely sophisticated and varied
   "I naturally informed the governor of the Bank of France and the secretary
general of the (French) Financial Markets Authority as soon as the situation
was brought to my intention on Sunday, January 20.
   "The loss suffered is very big. All measures were quickly taken to contain
this. The failure of control procedures has been identified and corrected to
avoid any new risk of a comparable nature.
   "However, neither this exceptional loss, nor the provisions sought to cover
the eventual depreciation of assets linked to the crisis affecting the capital
markets since last summer, will stop the bank from registering a net profit
for 2007. In reality, most of its areas, in France and abroad, have continued
to give good and sometimes excellent operating results.
   "In order to support capital adequacy levels and maintain its external
ratings at the highest international standards, Societe Generale will launch a
capital increase in coming days which will more than compensate for the loss
due to the fraud. This increase in capital was completely underwritten by
Wednesday January 23.
   "Now, with the confirmation of its financial solidity, the capacity of
Groupe Societe Generale to bounce back and resume the profitable growth which
it has experienced for long years, is intact. I see there, with the support of
our shareholders and the engagement of our staff, a profound reason for
   "In the resolution of this sad and regrettable affair, my first concern has
been to preserve the interests of our clients and continue to deserve their
   Daniel Bouton"

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