Rogue French trader loses appeal, faces prison, colossal damages
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PARIS -- A French appeals court Wednesday upheld the conviction of former bank trader Jerome Kerviel for committing one of the biggest financial frauds in history.
Kerviel, 35, was ordered to spend three years in prison and to pay back his former employer, French bank Societe Generale, a whopping $6.4 billion in damages to cover its costs from his trades.
During a four-week hearing in June, Kerviel, described by the public prosecutor as a ‘perverse manipulator,’ had asked the Paris appeal court to overturn his conviction in October 2010 for breach of trust, forgery and entering false data. On Wednesday, the court rejected his appeal.
The former trader did not profit personally from making unauthorized bets on the futures markets to the tune of nearly $65 billion, and he is not believed to have the means to pay the damages. He has always maintained that his bosses knew what he was doing and that they turned a blind eye to his trading as long as he was making money.
However, the appeals court threw out his defense and decided Kerviel was ‘the sole creator, inventor and user of a fraudulent system that caused these damages to Societe Generale.’
After the appeal hearing, Kerviel’s lawyer David Koubbi said his client may take his case to the Cour de Cassation, the highest appeals court in France. [Updated at 9:40 a.m. Oct. 24: The attorney later announced that Kerviel would appeal the decision.]
Koubbi described the court’s decision as a ‘lamentable injustice.’
‘I admit we have failed,’ he said.
Societe Generale has said it will not demand full payment of the damages, but the bank’s laywer added that it would be ‘indecent’ if Kerviel was allowed to keep money made from his actions through any book or film rights.
In 2010, Kerviel published a book, ‘Downward Spiral: Memoirs of a Trader,’ in which he claimed his superiors knew of his massive trading bets and that the practice was widespread among his peers.
[Updated at 10:15 a.m. Oct. 24: Societe Generale said it would be “examining Mr. Kerviel’s [financial] situation with his lawyers.” It is expected that Kerviel will have to pay a portion of any future salary to the bank or face the possibility of a civil legal case to seize any property he owns.]
After the scandal, the bank was fined $5.2 million by French financial regulators for the failure of its risk-control systems.
-- Kim Willsher