French trader jailed, told to pay $6.7 billion

By Lionel Laurent
Wednesday, October 6, 2010

PARIS - Former Societe Generale trader Jerome Kerviel was sentenced to three years in prison by a Paris court Tuesday for his role in a trading scandal and ordered to pay the French bank $6.7 billion.

The verdict came as a victory for SocGen, which had maintained that Kerviel acted alone, without the sanction of his managers at the bank. It had sought payment of damages for the money it lost unwinding the trader's risky market bets in 2008.

Kerviel's lawyer said he would immediately appeal the verdict, which he said was "senseless" and cleared the bank of all blame.

"Jerome is outraged . . . that the people who created him have been totally exonerated," Olivier Metzner told journalists outside the courtroom in the Palais de Justice. Kerviel was given a total prison sentence of five years, including two suspended. The public prosecutor had recommended Kerviel serve at least four years behind bars, with a fifth year suspended.

The payment to SocGen, meanwhile, equals 3.2 percent of France's government deficit for 2010 or 16 percent of the French bank's market value. Kerviel's monthly salary as a technology consultant is roughly $1,670.

The verdict was tougher than some observers had expected, though the sentence was suspended until after the appeal.

"The sentence is extremely harsh, especially as there was no personal enrichment on Kerviel's part," Paris-based lawyer Mabrouk Sassi said.

He added that SocGen would now avoid having to repay 1.7 billion euros in tax on its losses as all responsibility had been put on the former trader.

Kerviel, 33, who sat in court staring at the floor with his arms folded as the judgment was read, was ordered to his feet to hear the verdict: guilty of breach of trust, computer abuse and forgery.

Kerviel had not been given even tacit authorization from his bosses to speculate excessively and SocGen's own shortcomings did not exonerate him from his duties as a professional trader, presiding judge Dominique Pauthe told the court.

'Hidden strategy'

Pauthe added that Kerviel knew what he was doing in overstepping his bounds as a trader and that he sought to hide his trading positions.

The Paris court's 73-page ruling declared Kerviel's actions were the result of a "hidden strategy attributable only and exclusively attributable to himself."

SocGen's lawyer, Jean Veil, told reporters the verdict recognized that the bank was not covering up Kerviel's "fraudulent" system and that it had no role in the creation of his "lies, mechanisms, forged writings."

Kerviel did not deny he took risky bets and lied to cover them up but said that his superiors knew what he was doing. During his three-week trial in June his lawyers cast him as an innocent pawn, corrupted and goaded by a bank that was hooked on risk.


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