French Trader Says Bosses Turned Blind Eye

PARIS, Jan. 29 -- The 31-year-old trader accused of causing $7.1 billion in losses at France's Societe Generale bank told police investigators that his financial deals were so big that his bosses had to know about them, according to transcripts published Tuesday on two French Web sites.

During two days of interrogation over the weekend, Jerome Kerviel said that his bosses turned "a blind eye" to his dealings because "under normal activity, a trader may not generate as much cash" as he did, the transcripts say. The Paris prosecutor's office confirmed their authenticity, according to the Associated Press.

The trader's account appeared to cast new doubt on the explanation offered by the bank, France's second-largest, that Kerviel was a "rogue" who acted alone and employed fraud, forgery and other deceit to hide massive, high-risk bets on European stock futures. Many bank analysts have questioned how a lone trader could have put the bank so far out on a limb without anyone realizing it.

Calls for the bank's chairman, Daniel Bouton, to resign continued to grow Tuesday. French President Nicolas Sarkozy hinted of possible changes in the bank's leadership. "When someone is very highly paid, even when it's probably justified, you can't avoid responsibility when there's a major problem,'' Sarkozy told reporters, in response to a question about Bouton.

Coming on top of a $2.1 billion loss the bank suffered from exposure to the U.S. sub-prime loan crisis, the crisis has driven the bank's stock down in past days and raised the institution's vulnerability to a takeover bid. Its stock rose Tuesday, however, on rumors that BNP Paribas, France's largest bank, was considering an offer.

Prime Minister Francois Fillon said that the government was determined that Societe Generale would remain "a great French bank" and would not become "the object of hostile raids from other banks."

The bank's shareholders have filed several lawsuits, one questioning the bank's decision to keep the scandal quiet while unwinding Kerviel's deals and amassing $7.1 billion in losses. France's financial market regulator, Autorite des Marches Financiers, or AMF, announced Tuesday that it had opened an investigation of the bank.

The Associated Press said that five routine declarations published by the AMF showed that Societe Generale board member Robert Day and his family's trusts and charitable foundations sold bank shares worth a total of $206 million on Jan. 9, 10 and 18 -- the day the bank says it launched an emergency in-house investigation related to the Kerviel transactions.

Societe Generale said Tuesday that Day sold the shares during a limited window when board members are authorized to sell stock. "No inside information was used in any way," it said in a statement. "Mr. Day, like the other board members, was not advised of Mr. Kerviel's trading losses." Authorities have not alleged wrongdoing.

Judges released Kerviel on bail late Monday after placing him under formal investigation for breach of trust, falsifying and using false documents, and unauthorized computer activities. The judges rejected a request from prosecutors to open a more serious fraud case against him.

Kerviel remains out of sight. The police transcripts offer the first detailed public account of his side of the story.

In his statements, Kerviel in essence claimed it would have been impossible to generate as much money as he did in his deals while staying within the trading limits of the bank's regulations, and that his superiors had to know that. He said that at the end of 2007, he had accumulated more than $2 billion in profits.