Major French bank confirms investigation into alleged money
(APW_ENG_20020405.0255)
1) Societe Generale SA confirmed Friday that one of its local managers in Paris has been placed under formal investigation in connection with an alleged money laundering scheme between France and China.
2) French judicial authorities placed the manager, the commercial director for eastern Paris, under investigation at the end of last January, the bank said.
3) Societe Generale, one of France's largest banks, is already facing an inquiry into alleged involvement in a separate money laundering ring between France and Israel.
4) According to a report in French newspaper Le Monde, judicial authorities suspect Societe Generale of taking part in recycling some 200 million euros (dlrs 175 million) in suspect funds.
5) A spokesman for Societe Generale said the probe involves three accounts opened by the French bank.
6) He said suspicions harbored by the bank about the accounts had been communicated to the authorities, but the accounts were kept open to allow further investigation.
7) ``We retain complete confidence in our colleague and will guarantee the costs of his defense,'' said the spokesman, who asked not to be named.
Union officials: Societe Generale trader suffered
(APW_ENG_20080124.1218)
1) Trader Jerome Kerviel, who racked up euro4.9 billion (US$7.14 billion) in fraud-related losses for Societe Generale bank, has been suffering from "family problems," according to three union officials briefed Thursday by management.
2) An official close to the bank, France's second-largest, confirmed that Kerviel, a Frenchman in his 30s, is at the center of the fraud case uncovered last weekend.
3) Union officials representing employees at the bank -- Michel Marchet of CGT, Alain Treviglio of CFDT and Pascal Colin of CFTC -- said managers who briefed them Thursday about the case told them that the trader was having "family problems."
4) Treviglio said the trader "might have lost his mind a bit."
5) One of his former teachers, Gisele Reynaud, described Kerviel as a "brilliant" student. She taught him at a university in Lyon, where he graduated in 2000 after an intensive year-long course in how to track, monitor and keep account of the type of trades that he went on to do at Societe Generale.
6) She said the course was very technical and intense, and included accounting, information technology and law.
7) "He was a nice guy," Reynaud said. "He was brilliant."
8) The trader had worked for the bank since 2000 and earned a salary and bonus of less than euro100,000 (US$145,700), executives said. The bank said he netted no personal financial gains from his operations.
9) Marchet of the CGT said his union was concerned that Kerviel may have been trying to get spectacular results as a way to boost his bonus, and he said the system of bonuses for traders is "something we want to talk about with management."
10) "It's possible that he took positions with exaggerated risks, and when he had losses he tried to hide them -- but with the stock market crisis, and an error that he seems to have committed, he was found out," Marchet said.
11) Kerviel has a page on the Internet site Facebook but no public photo posted.
12) Outside the Societe Generale offices at Paris' La Defense business district, employees expressed shock, and several who had shares in the company said they were worried about their investments.
13) Treviglio, of the CFDT, said staff were baffled as to how a lone trader with relatively little experience could have committed such large-scale fraud.
14) Since the bank insisted that Kerviel did not profit personally, Treviglio struggled to understand his motives: "Was it to hurt the company?" he wondered.
A look at some major trading frauds
(APW_ENG_20080124.1224)
1) The futures trader who allegedly bilked French bank Societe Generale out of euro4.9 billion (US$7.14 billion) is the latest in a list of rogue traders credited with billions of dollars in fraudulent dealings. Here is a glance of some major cases:
2) -- 2008: French bank Societe Generale uncovers an alleged euro4.9 billion (US$7.14 billion) fraud by a futures trader, Jerome Kerviel, who fooled regulators and overstepped his authority.
3) -- 2002: Former currency trader John Rusnak accused of hiding US$691 million in losses at Allfirst bank of Baltimore, at the time under parent Allied Irish Bank, pleads guilty to one of the largest bank fraud cases in U.S. history.
4) -- 1996: Sumitomo, a global metals trader, discovered $2.6 billion in losses from unauthorized trades in September 1996, and traced them to unauthorized trades made by one of its own traders, Yasuo Hamanaka. After the announcement, copper prices plunged.
5) -- 1995: Collapse of Britain's Barings Bank after a trader in Singapore, Nick Leeson, lost 860 million pounds (then worth US$1.38 billion) on futures trades. The fraud prompted banks worldwide to tighten internal checks.
6) -- 1991: Bank of Credit and Commerce International (BCCI), operating in nearly 70 countries, is seized by bank regulators, acting on auditors' reports of huge losses from illegal loans to corporate insiders and from trading transactions. Some 250,000 depositors left without funds. Claims exceeded US$10 billion.
Societe Generale uncovers massive fraud by futures trader
(APW_ENG_20080125.0198)
1) In what appears to be the largest trading fraud ever carried out by a single person, a futures trader at French bank Societe Generale is accused of making unauthorized transactions that cost the bank euro4.9 billion (US$7.18 billion) after a bad bet that markets would rise.
2) The discovery, made as markets began to plunge, places the young Frenchman at the pinnacle of the rogue trader pantheon in a case with an intriguing wrinkle: The bank, France's second-largest, said he appears to have netted no personal gain from the scheme.
3) Undetected by the bank's multilayered security systems, Jerome Kerviel, a 31-year old junior trader, had for over a year been fraudulently using the company's funds to bet on European stock markets, Societe Generale said.
4) The bank said it learned of the fraud last weekend. The timing could not have been worse: Money markets suffered their blackest day since the Sept. 11, 2001, terror attacks on Monday, meaning Societe Generale was forced to sell the contracts built up by the rogue trader just as stocks were plunging. It took the bank three days to unload them.
5) The losses, Societe Generale announced Thursday, amounted to euro4.9 billion (US$7.18 billion) -- making Kerviel one of history's biggest banking frauds and prompting immediate calls for tighter regulation of the industry.
6) The trader was compared to Nick Leeson, who in 1995 bankrupted British bank Barings. Barings collapsed after Leeson, the bank's Singapore general manager of futures trading, lost 860 million pounds -- then worth US$1.38 billion -- on Asian futures markets, wiping out the bank's cash reserves. The company had been in business for more than 230 years.
7) Though the losses at Societe Generale are greater than at Barings, Chief Executive Daniel Bouton insisted that the bank is still financially sound.
8) The company said it expects to post a net profit of euro600 million to euro800 million (US$874 million to US$1.16 billion) for all of 2007 -- even after the fraud and another euro2.05 billion (US$2.99 billion) lost in the subprime mortgage crisis that has also roiled markets.
9) As a result, the bank said it would be forced to raise euro5.5 billion (US$8.02 billion) in new capital.
10) Moody's Investors Service late Thursday downgraded Societe Generale's bank financial strength rating to "B-" from "B" and assigned a "negative" outlook to the rating, which means the rating could be cut later. Moody's also downgraded the bank's long-term debt and deposit ratings to "Aa2" from "Aa1" but kept those ratings' outlooks "stable."
11) The downgrade was primarily driven by the fraud losses but also follows Societe Generale's announcement of the credit-related write-downs, Moody's said.
12) Among the many questions where how and why Kerviel perpetrated what the bank described as fraud "exceptional in its size and nature."
13) Bouton said the trader's motivations were "totally irrational," netting him no personal financial gains. It remains unclear whether he was acting out of malevolence, ambition or some other reason.
14) Three union officials representing Societe Generale employees said managers at the bank who briefed them about the fraud told them Kerviel was having "family problems."
15) One of the labor leaders, Alain Treviglio of CFDT union, said the trader "might have lost his mind a bit."
16) Employed by Societe General since 2000, Kerviel worked his way up from a supporting role in an office that monitors trades to a job on the more glamorous futures desk where he invested the bank's own money by hedging on European equity market indices. That means he made bets on how the markets would perform at a future date.
17) Futures trading -- which began with selling commodities like sugar or oil to be delivered at a specified date in the future -- has expanded enormously in recent years to include many kinds of extremely complex financial instruments.
18) Kerviel, however, was involved in "plain vanilla" or the more basic forms of hedging with what the bank described as "limited authority." He took home a relatively modest salary and bonus of less than euro100,000 (US$145,700).
19) Going beyond his role, Kerviel took "massive fraudulent directional positions" in various futures contracts, the bank said, betting at the start of this year that markets would rise.
20) Using his knowledge of Societe Generale's control systems, gleaned in his former monitoring role, he escaped detection. Most of his positions went unnoticed by colleagues and superiors as Kerviel covered his tracks with what the bank described as a "scheme of elaborate fictitious transactions."
21) He got caught when markets dropped, exposing him in contracts where he had bet on a rise.
22) Kerviel, described as a "brilliant" student by one of his former university teachers, both shocked and impressed executives with the complexity and scale of his trades. Bouton called the fraud "extraordinarily sophisticated."
23) Jean-Pierre Mustier, chief executive of the bank's corporate and investment banking, who interviewed Kerviel when the fraud was uncovered, said he is convinced the trader acted alone.
24) Analysts were stunned to hear of fraud at the award-winning bank. In 2007, Societe Generale's corporate and investment banking unit won the Equity Derivatives House of the Year award by The Banker magazine -- for the fifth year in a row.
25) Axel Pierron, a senior analyst with Celent, said it was "astonishing" that 13 years "after the Barings Bank collapse, something similar has happened again."
26) "The situation reveals that banks, despite the implementation of sophisticated risk management solutions, are still under the threat that an employee with a good understanding of the risk management processes can getting round them to hide his losses."
27) After admitting to the fraud, Kerviel was dismissed along with his superiors, Societe General said. Bouton's offer to resign was rejected by the board.
28) Societe Generale filed a legal complaint Thursday accusing the trader of fraudulent falsification of banking records, use of such records and computer fraud.
29) Elisabeth Meyer, Kerviel's lawyer, said on French television network BFM that he "is not fleeing" and is "available for judicial authorities," without specifying where he was.
30) According to the lawyer, Kerviel said he had been suspended on Sunday, and was awaiting the written notification of that suspension.
31) The Bank of France, the country's central bank, said it was immediately informed of the fraud and was investigating. Its governor, Christian Noyer, said the trader had an abnormal knowledge of Societe Generale's trading systems, and measures would have to be taken to prevent this happening again.
32) Traders are usually kept to tight spending limits, told "you may trade this much and no more," said Robert Kolb, a professor of finance at Loyola University Chicago and co-author of "Futures, Options, and Swaps" and other books.
33) But those controls apparently failed in this case.
34) The trader's actions were "like Bill Gates putting a giant chunk of his personal fortune at risk," Kolb said. "This guy was in this 30s, so even if he was a hotshot young trader, there's just no way that he could have had real permission to put that much at risk."
35) He said he expected "a lot of soul searching" in the industry about how the trader got away with it. He predicted that one upshot of the scandal might be new measures to prevent people who have previously monitored traders later becoming traders themselves -- as was the case here.
36) "It shows that we are in a very troubled period for banks, and I think that it's in such troubled periods that difficult things happen," said Gilles Glicenstein, president of asset management at rival French bank BNP Paribas -- France's largest.
37) "This is not good news for Societe Generale, but also for banks in general. It can create doubt, but at the same time in this period, we are making efforts to be transparent in order to give confidence back," he said, speaking at the World Economic Forum in Davos, Switzerland, the annual gathering of chief executives from all over the world.
38) Societe Generale's shares, which have lost nearly half their value over the past six months, were suspended on the Paris bourse Thursday morning. Trading resumed midday, with shares dropping 4.13 percent to close at euro75.81 (US$111.16).
39) Founded in 1864 after a decree signed by Napolean III, Societe Generale is now present in 77 countries and employs 120,000 people.
40) The fraud was not as big as the 1991 scandal that led to the demise of the Bank of Credit and Commerce International. Claims by depositors and creditors there exceeded US$10 billion at the time.
41) International bank regulators seized BCCI, which had headquarters in Luxembourg, London and the Cayman Islands, on July 5, 1991. They acted on auditors' reports that described huge losses from illegal loans to corporate insiders and from trading transactions.
Police raid home of rogue trader described as poised, calm, thoughtful
(APW_ENG_20080125.1329)
1) Dapper and disciplined, Jerome Kerviel taught kids judo, held the door for his elderly neighbors in a posh Paris suburb -- and appears to have committed one of the biggest bank frauds in history.
2) An emerging portrait of the 31-year-old futures trader filled out details of how he lived and worked but failed to explain why he overstepped his authority at the France's Societe Generale to bet as much as euro50 billion (US$73.3 billion) of the bank's money.
3) In an apparent hunt for clues, four plainclothes police officers, trailed by a locksmith, searched Kerviel's apartment in a chic Paris suburb Friday evening. The officers used a ladder to search a false ceiling just outside the door of his apartment. They emerged more than two hours later with two cases, but did not talk to reporters.
4) Meanwhile, skeptics from his neighbors to France's prime minister questioned whether Kerviel could have manipulated such unfathomable sums -- comparable to a small country's annual economy -- all alone.
5) The bank insists he was a lone operator.
6) "When we interviewed him during the night Saturday and Sunday he imagined that he had discovered methods able to win money on the markets," said Jean-Pierre Mustier, chief executive of the bank's corporate and investment banking arm.
7) Family and acquaintances described Kerviel as poised and trustworthy, unusually reserved and discreet. His whereabouts were unknown, though his lawyer said he was not fleeing.
8) There was no reply Friday at the apartment in the wealthy suburb of Neuilly-sur-Seine, and a note to reporters had been scotch-taped to a row of mail boxes in the entrance hall of the modest four-story building. One mailbox still bore Kerviel's name.
9) "Don't search here. He has been seeking refuge elsewhere probably for some time now," said the handwritten note.
10) Police ignored the plea, showing up after nightfall to search his apartment.
11) A preliminary investigation is under way in the case following a complaint by Societe Generale accusing the trader of fraud and two complaints by minority shareholders.
12) It was unclear if and when Kerviel could be questioned in the case, which could eventually lead to prison term or fines.
13) In the Brittany town of Pont l'Abbe where Kerviel grew up, his former judo teacher remembered him as a serious, helpful teenager.
14) "He came in to train two or three times a week, and he also helped out with classes for kids," said Philippe Orhant, who has not seen his former student in about 10 years. "I liked him a lot, and I had total confidence in him."
15) Kerviel's family said he was unmarried. His father died two years ago, an aunt, Raymonde Kerviel, said. Three union officials at the bank said managers told them Kerviel had suffered from recent family problems that appeared to have deeply affected him.
16) Kerviel's mother traveled to the Paris area on Thursday, when the bank revealed the scandal, to see her son, "because he wasn't doing well," said another aunt, Sylviane Kerviel.
17) "Jerome has done nothing wrong," she said. "He was a reserved, serious child. He didn't pocket a cent, I'm sure of it."
18) The town's mayor described him as a "poised, calm, thoughtful young man." Kerviel had supported his election campaign in 2001.
19) "I'm bowled over," Mayor Thierry Mavic told a local newspaper, Le Telegramme. The mayor said Kerviel's father had worked as a teacher and that his mother had run a hair salon.
20) In Neuilly, one of France's richest towns, the apartment building was surprisingly modest for a trader on the glamorous futures trading desk of the award-winning bank. Societe Generale said Kerviel was involved in "plain vanilla" trading -- the more basic forms -- and had "limited authority." He took home a relatively modest salary and bonus of less than euro100,000 (US$145,700).
21) He lived in a former maid's chambers converted into studios on the top floor of the walk-up, said Collette Thomas, 79, who has lived in the building for 30 years and whose apartment is one floor down from Kerviel's.
22) "He was very young, handsome, a beautiful one ... but he was not at all talkative," she said. "He didn't talk, he petted my dog, whom he adored."
23) Her daughter, Isabelle, a nurse, said she would see him about once a week. "But he didn't talk, he climbed the stairs four at a time and disappeared," she said.
24) Both said he never smiled, but held the door for them.
25) "He was physically seductive, always elegantly dressed. But he was always alone," said Anne Gillier, who works in a nearby real estate agency and saw him regularly -- until recently. "I never saw him with a woman, or even with another man, I always saw him alone."
26) No one picked up at what was believed to be Kerviel's mobile telephone number. "Hello, you have reached Jerome's mobile, I'm not available at the moment," said an even and steady man's voice in the recorded message.
27) Employed by Societe General since 2000, Kerviel worked his way up from a supporting role in an office that monitors trades to a job on the futures desk where he invested the bank's money by hedging on European equity market indices.
28) Going beyond his role, Kerviel took "massive fraudulent directional positions" in various futures contracts, the bank said, betting at the start of this year that markets would rise. The bank says his actions cost it euro4.9 billion (US$7.18 billion).
29) It has not explained his motivations and said the transactions didn't earn him any money. Executives said he seemed to be irrational.
30) He escaped detection by using his knowledge of Societe Generale's control systems, gleaned in his former monitoring role, he escaped detection. He got caught when markets dropped, exposing him in contracts where he had bet on a rise.
31) Kerviel, described as a "brilliant" student by one of his former university teachers, both shocked and impressed executives with the complexity and scale of his trades. The bank's CEO called the fraud "extraordinarily sophisticated."
Prosecutor in French bank fraud case calls questioning of trader ' fruitful '
(APW_ENG_20080127.0664)
1) The head of the financial section of the Paris prosecutor's office said Sunday the questioning of a trader implicated in a massive bank fraud case was proving "extremely fruitful"
2) Jean-Michel Aldebert said the questioning of trader Jerome Kerviel was "going very well and the investigation led by the specialists of the financial police is extremely fruitful," he said. Kerviel, who was taken in for questioning on Saturday, can be kept in custody until Monday afternoon.
Societe Generale says trader used multiple fraud techniques
(APW_ENG_20080127.0876)
1) Societe Generale detailed Sunday how a trader evaded all its controls to bet euro50 billion (US$73.5 billion) -- more than the French bank's market worth -- on European markets, saying he hacked computers and "combined several fraudulent methods" to cover his tracks, causing billions in losses.
2) The bank says the trader, Jerome Kerviel, did not appear to have profited personally from the transactions and seemingly worked alone -- a version reiterated Sunday by Jean-Pierre Mustier, chief executive of the bank's corporate and investment banking arm.
3) But, in a conference call with reporters, Mustier added: "I cannot guarantee to you 100 percent that there was no complicity."
4) Officials said Kerviel was cooperating with police, who held him for a second day of questioning Sunday, seeking answers to what, if confirmed, would be the biggest-ever trading fraud by a single person.
5) The questioning was "going very well and the investigation led by the specialists of the financial police is extremely fruitful," said Jean-Michel Aldebert, head of the financial section of the Paris prosecutor's office.
6) Kerviel was giving "very interesting" explanations, Aldebert added. "From what he told me, he was fine psychologically." He refused to say whether Kerviel might face preliminary charges.
7) Kerviel, 31, was taken into custody Saturday afternoon. He has not been seen in public since the bank's bombshell revelation Thursday that his unauthorized trades lost it euro4.9 billion (US$7.14 billion).
8) One of his lawyers said Sunday that the accusations of wrongdoing against Kerviel were being used to hide bad U.S. mortgage investments by the bank.
9) "He didn't steal anything, take anything, he didn't take any profit for himself," the lawyer, Christian Charriere-Bournazel, told The Associated Press by telephone. "The suspicion on Kerviel allows the considerable losses that the bank made on subprimes to be hidden."
10) The lawyer said Kerviel had made money for the bank through 2007 and he protested that the young trader had since been "thrown to the wolves of public opinion."
11) "He made profits for the bank until December 31. From January 1, he took risky positions like all traders," said the lawyer, who is also president of the Paris bar.
12) Even before his allegedly massive fraud came to light, Kerviel had apparently triggered occasional alarms at Societe Generale -- France's second-largest bank -- with his trading, but not to a degree that led managers to investigate further.
13) "Our controls basically identified from time to time problems with this trader's portfolio," said Mustier.
14) But Kerviel explained away the red flags as trading mistakes, added Mustier.
15) "The trade was canceled, there was no specific follow-up to do," he said. "From our understanding today, the number of mistakes was not higher than (for) any other trader, so from our understanding that was not a reason to ring a bell."
16) In a five-page statement Sunday, the bank said Kerviel used its money to build massive positions in futures contracts tied to the performance of baskets of stocks traded on exchanges in London, Paris, Frankfurt and other European markets.
17) Since those bets greatly exceeded the amount of capital he was allowed to put at risk, Kerviel entered fictitious and offsetting trades in Societe Generale's computer system that appeared to minimize the odds of big losses, the bank said. The trades were purposely chosen to avoid detection because they did not require cash contributions or be subject to margin calls, which would require putting up more money if the fictitious bet soured, it said.
18) The bank said he plowed euro30 billion ($44.12 billion) into the Eurostoxx index, another euro18 billion ($26.47 billion) on the DAX in Germany and euro2 billion on the FTSE in London. The combined value of those positions, euro50 billion (US$73.5 billion), is far more than the bank's market capitalization of euro35.9 billion (US$52.6 billion), and close to the annual GDP of countries such as Slovakia, Qatar or Libya.
19) Societe Generale took three days last week to sell or offset with hedges his contracts that amounted to bets on whether market indexes would rise or fall. But the bank sought Sunday to counter suggestions that its sell-off had caused already falling markets to plummet further than they otherwise might have done. The bank said it unwound Kerviel's positions in "a controlled fashion."
20) "Our impact on the market was quite minimal," said Mustier.
21) Societe Generale said Kerviel misappropriated other people's computer access codes, falsified documents and employed other methods to cover his tracks -- helped by his previous years of experience when he worked in other offices at the bank that monitor traders. Acquaintances described Kerviel as reserved and considerate, a young man who once taught children judo and held the door for elderly neighbors.
22) Kerviel's downfall started in the days before Friday, Jan. 18, when Societe Generale tightened lending restrictions on one of its customers, an unnamed large bank. He had apparently used that bank's name for one or more of his fictitious trades, and it led to what Societe Generale described as having "additional controls" put in place.
23) Kerviel's superiors in Societe Generale's equity trading division reviewed that day an e-mail from the large bank supposedly confirming trades he had booked. But they were suspicious about where the e-mail came from and launched an emergency investigation.
24) A day later on Saturday Kerviel was called to Societe Generale to explain; in the meantime bank investigators confirmed that the large bank did not know about the trades.
25) After first not providing a clear explanation, Kerviel eventually confirmed that he had entered fictitious trades, the bank said. It then took a bank team throughout the night and into Sunday the 20th to identify all the exposure. Societe Generale's chief executive, Daniel Bouton, notified the governor of the Bank of France that day, and a decision was made to unwind the trades as quickly and as quietly as possible.
26) A complicating factor was that the bank was finishing work that Sunday on details of a separate announcement about the size of the multi-billion-dollar charge it would take for bad bets on mortgage-related investments in the United States. News of that misstep was delayed.
27) Societe Generale traders began unwinding Kerviel's losing bets at the beginning of European trading on Monday, just as Asian markets were in a free-fall and European shares were poised to plummet after a big drop in U.S. markets on the previous Friday. It took until Wednesday to finally close the books on Kerviel's adventures, the bank said.
28) Kerviel's lawyer cast suspicion on the way Societe Generale unwound the position, saying it did so in "totally unusual conditions."
29) "This decision was driven by other motives," he claimed, without elaborating.
30) Some experts have suggested Societe Generale may have exacerbated the market falls and indirectly led to the U.S. Federal Reserve's subsequent decision to cut rates.
31) But in its explanatory note released on Sunday, the bank defended itself by saying the trades represented no more than 8.1 percent of the volume in futures trading each day on the Eurostoxx, DAX and FTSE.
32) Mustier said Kerviel's motivations were still unclear. "We don't know, we don't understand" what drove him to do it, he said.
33) "This event is a massive shock for us," he said.
34) The bank said Kerviel built up two portfolios of investments -- but that one of them consisted of "fictional operations," leaving the bank hugely exposed.
35) "In order to ensure that these fictitious operations were not immediately identified, the trader used his years of experience in processing and controlling market operations to successively circumvent all the controls which allow the bank to check the characteristics of the operations carried out by its traders," said the bank's statement.
36) "He had a very good understanding of all of Societe Generale's processing and control procedures."
37) It was the bank's most detailed explanation yet of the debacle that has further rattled the banking industry -- already reeling from the subprime mortgage crisis in the United States. Some observers have said the crisis could also leave the bank vulnerable to a takeover.
38) An aide to French President Nicolas Sarkozy suggested the state could step in to prevent any possible hostile bids.
39) "I think the state will not stand idly by if any predator attempts to take advantage of the situation," Henri Guaino told RTL radio on Sunday.
40) It has prompted calls for tighter regulation -- 13 years after trader Nick Leeson, whose illegal speculation bankrupted British bank Barings, first highlighted the potential risks from rogue traders operating without proper oversight.
French finance minister says Societe Generale trader appeared to act alone
(APW_ENG_20080128.0351)
1) France's finance minister said Monday that it appears the trader allegedly behind huge losses at French bank Societe Generale acted alone.
2) Christine Lagarde backed up comments from the bank, which accuses trader Jerome Kerviel of evading its controls to bet euro50 billion (US$73.5 billion) on European markets. "There is no reason in the current state to think that it was anything other than that it was -- a single trader," she told France-2 TV.
Societe Generale CEO revises down slightly estimated loss attributed to rogue trader
(APW_ENG_20080128.0372)
1) The chief executive of Societe Generale said Monday the French bank had revised downward the estimated loss caused by actions of an alleged rogue trader.
2) Daniel Bouton, speaking on Europe-1 radio, said the loss attributed to actions by futures trader Jerome Kerviel -- originally believed to be euro4.9 billion -- was "just over" euro4.82 billion (US$7.09 billion). Bouton also said the bank, which some believe could be vulnerable to a takeover, has not been approached by any possible suitor.
Lawyer says he expects alleged rogue trader to face preliminary charges
(APW_ENG_20080128.0431)
1) A lawyer for Jerome Kerviel said the alleged rogue trader accused by Societe Generale of causing billions of euros in losses will probably face preliminary charges later on Monday.
2) Police took Kerviel into custody on Saturday, and were expected to present him later Monday to a judge who must decide whether there is sufficient evidence of possible wrongdoing to warrant preliminary charges. Lawyer Christian Charriere-Bournazel said such charges were probable.
3) But the lawyer, who was speaking to Europe-1 radio, also said he was "convinced" that Kerviel will not be kept in prison while the judicial probe continues.
4) The lawyer reiterated what the bank also says -- that Kerviel did not appear to have profited personally. Charriere-Bournazel claimed that Kerviel had done well for the bank last year, making a profit of euro1.5 billion (US$2.21 billion) with his trades by end 2007.
5) "The expression 'fraudster' is totally misplaced," the lawyer said, adding that Kerviel "didn't embezzle a single centime."
Societe Generale trader could face multiple preliminary charges of fraud, forgery
(APW_ENG_20080129.0045)
1) Investigating judges have filed preliminary charges against a trader accused of causing billions of euros (dollars) in losses for France's second-largest bank. He was released from custody while the thorny investigation continues.
2) Preliminary charges of "breach of trust" and unauthorized computer activity were filed Monday against Jerome Kerviel, his lawyer, Christian Charriere-Bournazel, told reporters. The judges did not pursue a fraud charge sought by the prosecutor's office, or even continue to hold him as the prosecutor wanted for fear he might flee.
3) The Paris prosecutor's office said it was appealing the decision to free Kerviel, who had been held since Saturday.
4) The lighter-than-expected charges came as Paris prosecutor Jean-Claude Marin gave a glimpse for the first time of what motivated the 31-year-old futures trader: not tremendous greed but simply the adrenaline rush of trading, and perhaps the promise of a better-than-average bonus.
5) The bank and prosecutors have said Kerviel did not appear to have profited from his unauthorized dealings, and his lawyers described him as a "modest boy" who got in over his head.
6) Still, Monday's charges, filed after questioning Kerviel for 48 hours, could bring him up to seven years in prison and hefty fines.
7) The banking world was stunned when Societe Generale announced a "massive fraud" last week that had cost it euro4.82 billion (US$7.09 billion). The news overshadowed the bank's substantial losses linked to the crisis in subprime mortgages.
8) Pressure on Societe Generale mounted, with stock shares faltering, an insider trading claim and questions about how the bank failed to notice a young trader's parallel trading activity -- despite alerts.
9) The Paris prosecutor said Kerviel acted alone and had begun his deception in late 2005. His speculation eventually triggered "a certain number of alerts" from the middle office, accounting or risk services, the prosecutor said. They received falsified responses from Kerviel.
10) In November 2007, Eurex "became concerned" by a position taken by Kerviel. However, Kerviel was able to wiggle out, the prosecutor said.
11) The bank would not comment on the Eurex or other "alerts."
12) Kerviel told investigators his actions were in line with what other traders did, but on a larger scale, the prosecutor said.
13) "If his positions were more massive than others, other traders acted like him, on a lesser level...," Marin said. "He considered simply that for a long time he had generated winning positions. He seemed to benefit from a certain tolerance."
14) Kerviel told investigators, "I exploded my line of credit," Marin said.
15) "Societe Generale is a victim at this stage," the prosecutor said -- noting, however, that the complex investigation was just getting under way.
16) A lawyer for a group of Societe Generale shareholders, Frederik Canoy, said they had filed a legal complaint Monday asking investigators to look into possible insider trading.
17) France's market watchdog said in a routine disclosure that a member of Societe Generale's board, Robert A. Day, sold euro85.75 million ($126.1 million) worth of shares in the bank on Jan. 9 -- two weeks before the fraud announcement and well before bank management says it discovered the problem. Day is an investment manager with U.S.-based Trust Company of the West, or TCW.
18) Two foundations linked to Day, the Robert A. Day Foundation and the Kelly Day Foundation, also sold a total of euro9.59 million ($14.1 million) worth of shares one day later, on Jan. 10, the market watchdog reported. Regulators made no allegation of wrongdoing.
19) Josh Pekarsky, a spokesman for Day, said all required government disclosures were made. Day has pledged his cooperation in any inquiries.
20) "No inside information was used in any way with respect to these sales," Pekarsky said.
21) Meanwhile, Kerviel's lawyer said he had been released Monday, but did not disclose his whereabouts. Kerviel was ordered to stay in France and not to talk to employees of Societe Generale -- except those at his bank branch.
22) "The judges understood that, in reality, he is a boy who wanted to work with the justice system, and that he has no desire to flee, contrary to what has been claimed, nor hide anything," Charriere-Bournazel told France-2 television.
23) Another lawyer for the trader, Elisabeth Meyer, called the lighter charges a "victory."
24) Under French law, filing preliminary charges means an investigating magistrate has determined there is strong evidence to suggest involvement in a crime. It gives the investigator time to pursue the probe before deciding whether to send the suspect for trial or drop the case.
25) Earlier Monday, prosecutor Marin said Kerviel had not sought to despoil the bank but wanted to be "an exceptional trader" and earn performance bonuses.
26) "It's always a bit for money, I'm not sure that was his prime motive," said the prosecutor. "It functions a bit like a drug, it's an addiction ... there's a sort of spiral you can't get out of."
27) The prosecutor said Kerviel was expecting a euro300,000 (US$441,000) bonus for 2007 -- a larger-than-usual sum for the trader but nothing near the billions the bank says it lost trying to undo his actions.
28) CEO Daniel Bouton said Societe Generale, thought by some experts to be vulnerable to a takeover, has not been approached by any suitor.
29) Bouton rejected suggestions from Kerviel's lawyers that Societe Generale was using Kerviel to hide big losses linked to the U.S. subprime mortgage crisis.
30) Meyer, one of Kerviel's defense lawyers, disputed Societe Generale's claims that her client had committed fraud, saying he was in the black with his trades as of Dec. 31.
31) Lawyer Charriere-Bournazel, said on Europe-1 radio that Kerviel was making a "profit" for the bank of euro1.5 billion ($2.2 billion) before his bets went sour. The prosecutor concurred but said the trader only "virtually" made a profit for the bank.
32) The prosecutor, based on Kerviel's account to investigators, confirmed Societe Generale's contention that the trader used other people's computer access codes, falsified documents and used other methods to cover his tracks -- helped by his previous experience in other offices at the bank that monitor traders. The bank says he bet some euro50 billion ($73.53 billion) -- more that the bank's market worth -- on European markets.
33) Societe Generale shares dropped nearly 7 percent Monday before closing down 3.8 percent at euro71.05 ($104.48) in a French market trading only slightly down.
How the Societe Generale trading scandal unfurled
(APW_ENG_20080129.0549)
1) A look at how Societe General's trading scandal occurred:
2) -- 2000: Jerome Kerviel joins Societe Generale, working in offices that monitor trades.
3) -- 2005: Kerviel promoted to more glamorous arbitrage trading desk, where his job consisted of making profits from small differences in prices between different markets.
4) -- Jan. 18, 2008: Bank launches an emergency in-house investigation after Kerviel's transactions begin raising red flags.
5) -- Jan. 19: Kerviel called to Societe Generale to explain. Bank says he first doesn't provide clear explanation but then confirms that he entered fictitious trades.
6) -- Jan. 20: Bank team works overnight to identify the exposure. CEO Daniel Bouton notifies Bank of France.
7) -- Jan. 21: Bank starts quickly and quietly unwinding positions in European markets.
8) -- Jan. 23: Position closed or hedged.
9) -- Jan. 24: Societe Generale alleges the "massive" fraud cost euro4.82 billion (US$7.09 billion).
10) -- Jan. 25: Bank apologizes to shareholders in newspaper ads. Police search Kerviel's apartment.
11) -- Jan. 26: Police take Kerviel into custody.
12) -- Jan. 27: The bank says Kerviel "combined several fraudulent methods" to cover his tracks, such as falsifying documents and swiping computer access codes. It says he bet euro50 billion (US$73.8 billion) -- more than the bank's net worth -- on futures contracts at three European equity indices. His lawyers fight back, suggesting bank is making scapegoat of Kerviel to hide losses on U.S. mortgages.
13) -- Jan. 28: Judges file lighter-than-expected preliminary charges of breach of trust, forgery and unauthorized computer activity against Kerviel and release him from custody while the thorny investigation continues.
Elusive trader in French bank scandal gives world media the slip
(APW_ENG_20080129.0772)
1) PARIS -- "It's his ear!" a photographer shouted gleefully, reviewing pictures he snapped of a police-escorted van thought to be carrying the alleged rogue trader in the scandal shaking French bank Societe Generale.
2) If it was Jerome Kerviel's ear, that is pretty much the best glimpse anyone has gotten of the elusive 31-year-old trader, who has given the slip to media from around the world pursuing the story of history's biggest trading misadventure.
3) Kerviel shot from anonymity to international celebrity last week when Societe Generale said he was behind a "massive fraud" that had cost it euro4.82 billion (US$7.09 billion). Internet search engines now turn up hundreds of thousands of entries bearing his name.
4) Although his photograph -- a grainy mug shot culled from the bank's Web site -- made the front page of papers around the world, Kerviel has managed to remain invisible. He has not spoken a word to the press and has kept journalists guessing about his whereabouts. No fresh photos of Kerviel have been published since the scandal broke.
5) After police held him for nearly 48 hours, judges Monday filed preliminary charges against Kerviel -- and then ordered him released while the probe continues. Although hundreds of reporters were staking out the judges' offices he still managed to slip away unnoticed.
6) "It's like the Wild West, and Kerviel is an outlaw with 'Wanted' signs all over the place," said French paparazzo Pascal Rostain, one of a small army of photographers searching for Kerviel.
7) "It's enormous, every paper in the world is after his photo."
8) Within hours of the bank's announcement last Thursday, reporters and photographers had staked out his apartment in a tony Paris suburb. By Friday, they had set up camp in front of his elder brother's Paris apartment and in the Kerviel family's hometown, in the northwestern region of Brittany.
9) Photo agencies and publications that use paparazzi photos won't speculate about what a shot of Kerviel would be worth -- for fear of driving prices up. A staffer at one agency, who declined to be identified, said only that an image of Kerviel would fetch "lots and lots of money."
New twist in French bank scandal: Trader says his bosses turned blind eye
(APW_ENG_20080129.1332)
1) Terror bombs hit London, financial markets wobbled, and Jerome Kerviel was hooked.
2) The trader at the center of a massive banking scandal in France told investigators that his spiral of trades that ended in a loss of nearly euro5 billion (US$7.38 billion) for his bank, Societe Generale, started with a 2005 bet that markets would fall -- and that he was proved right after the London bombings that July.
3) More damaging for Societe Generale, Kerviel also claimed to investigators that his bosses at France's second-largest bank must have been aware of his massive risk-taking on markets but turned a blind eye as long as he earned money for the institution.
4) Kerviel was questioned by police from Saturday through Monday and then presented to judges who lodged preliminary charges of breach of trust, forgery and unauthorized computer activity against him. If tried and convicted on those charges, he faces up to three years in prison and hefty fines. Such charges mean judges have decided that further investigation is needed; they do not indicate guilt.
5) The respected daily newspaper Le Monde and a French Internet news site, MediaPart, published extracts Tuesday from Kerviel's police questioning. A spokeswoman for the Paris prosecutor's office, Isabelle Montagne, confirmed to The Associated Press that the remarks were Kerviel's.
6) "I can't believe that my superiors were not aware of the amounts I was committing, it's impossible to generate such profits with small positions, which leads me to say that when I'm in the black, my superiors close their eyes about the methods and volumes committed," he said, according to the extracts.
7) A lawyer for the bank, Jean Veil, accused Kerviel of lying, telling RTL radio: "When you are questioned by police or judges, you have the right to lie."
8) He said the bank was "a victim of someone who lied, who cheated."
9) Nevertheless, Kerviel's claims that managers looked the other way were likely to increase pressure on the bank, which has struggled to explain how its layers of checks failed to detect that Kerviel had bet euro50 billion ($73.78 billion) -- more than Societe Generale's market worth -- on European markets.
10) CEO Daniel Bouton says his offer to resign, already rejected by the board, is still on the table. He found some support Tuesday from French Finance Minister Christine Lagarde, who told senators: "I am not convinced that it is wise to change the captain when the ship lists a little."
11) Prime Minister Francois Fillon said his government will seek to fend off any hostile takeover of Societe Generale.
12) France's financial market regulator said Tuesday it has opened an investigation into Societe Generale, but did not give details. Les Echos newspaper reported that the regulator has been examining trading in the bank's shares in the days before it stunned the industry with its Jan. 24 announcement that "massive" fraud by Kerviel cost it euro4.82 billion (US$7.09 billion) as it unwound his trades.
13) According to five routine declarations published this week by the market watchdog, board member Robert Day and his family's trusts and charitable foundations sold shares in Societe Generale on Jan. 9, Jan. 10 and Jan. 18 -- the day the bank says it launched an emergency in-house investigation after Kerviel's transactions begin raising red flags.
14) The sales totaled euro140 million (US$206 million). Regulators made no allegation of wrongdoing. A lawyer for a group of Societe Generale shareholders has filed a legal complaint asking investigators to look into possible insider trading.
15) The bank, in a statement Tuesday, said Day sold the shares during a limited window when board members are authorized to sell stock.
16) "No inside information was used in any way," the statement said. "Mr. Day, like the other board members, was not advised of Mr. Kerviel's trading losses."
17) The 31-year-old junior trader told investigators of efforts to mask his massive transactions, but said his bank must nonetheless have noticed something suspicious, according to the excerpts of his police testimony confirmed by Montagne.
18) "Since I was generating cash, the signs were not that worrisome ... As long as we are winning and it isn't too obvious, and it's convenient, nobody says anything."
19) Kerviel said he had sought a 2007 bonus of euro600,000 (US$886,380), but was told by a supervisor that he couldn't expect more than a euro300,000 (US$443,190).
20) He insisted that his No. 1 concern was "earning money for my bank" -- not personal enrichment. The bank and prosecutors also say he did not appear to have pocketed money from the massive positions he built up in futures on European markets.
21) Kerviel said the mere fact that he only took four vacation days in 2007 should have been a glaring sign to the bank that he was unwilling to let another trader step in for him.
22) "The techniques I used were not at all sophisticated, and in my opinion, any correctly conducted check should be able to detect these operations," he said, according to the testimony in Le Monde.
23) The bank has acknowledged that Kerviel triggered alarms with his transactions "from time to time" but also said that he explained away the red flags as trading errors, and that his mistakes did not outnumber those of other traders.
24) But Kerviel told police that other traders and managers concealed some of their trading practices from the bank, according to MediaPart's account of his testimony, which Montagne also confirmed. Kerviel claimed that "several alerts (were) sent to my superiors" in 2007, which he said were e-mail queries about his transactions.
25) "If you are not spotted, you are not caught. If you are caught, you are hung out to dry," Kerviel said, according to the account.
26) Kerviel acknowledged that he purposely deceived his bank to hide his trades. He said he forged e-mails and used colleagues' computer log-ins. He claimed he was euro1.4 billion ($2.07 billion) in the black by the end of 2007 but didn't know how to explain the huge sum to his bosses -- so he hid it with an equal amount of fictional losses.
27) "I didn't know how to manage it. I am happy, proud of myself, but I don't know how to justify it. So I decided not to declare it to the bank," he said. "I admit to having taken big positions, which could be qualified as beyond the limits of my role, that I masked with a fictitious operation."
28) According to the testimony, Kerviel told investigators that his pattern of hidden trades started with the bet in 2005 on Allianz, apparently referring to the German insurance and banking group. He did not specify which market he bet on, or exactly when it fell. London's FTSE share index dipped in the immediate aftermath of the bomb attacks.
29) "I took a position on Allianz, betting the markets would fall. It just so happened that a little while later, the market fell after the London bombings and it's the jackpot, euro500,000," Kerviel claimed. "It makes you want to continue, there's a snowball effect."
French bank Societe Generale ' s board keeps CEO, orders probe of trading losses
(APW_ENG_20080130.1276)
1) French bank Societe Generale kept its embattled CEO and promised a thorough probe of huge trading losses blamed on a single trader, while the country's central bank chief on Wednesday questioned why "malfunctions" at the company went ignored.
2) The board unanimously asked Chief Executive Daniel Bouton and co-chief executive officer Philippe Citerne to continue in their posts, and "confirms its confidence" in them, board member Jean-Martin Folz told reporters afterward.
3) Folz, former CEO of PSA Peugeot Citroen, was named to head a committee that the Societe Generale board is setting up to investigate billions of euros (dollars) in losses that the bank announced last week, stunning an already shaky banking world.
4) The committee has asked auditing firm PricewaterhouseCoopers to help in the probe, the bank said in a statement. It will examine the causes and sizes of the trading losses and look into whether the bank accurately communicated information about the scandal.
5) The statement gave no timetable for the committee's report.
6) Bouton offered to resign as the trading crisis unfolded last week and the bank said it had lost euro4.82 billion (US$7.09 billion) in unwinding trades by 31-year-old futures trader Jerome Kerviel. The board refused his offer.
7) Questions have mounted about how Kerviel could have been allowed to fool his superiors, and how the bank handled the discovery of Kerviel's unauthorized transactions.
8) "We must focus on the reasons why the anomalies, the malfunctions, were not spotted, analyzed, or passed upward to a high-enough level, dealt with and followed up .... That is going to be at the heart of our investigation," Bank of France chief Christian Noyer said at a hearing before the French Senate.
9) The trader told investigators that his bosses turned a blind eye to his questionable deals as long as he brought in money for the bank, according to excerpts published by two media organizations Tuesday. The bank's lawyer said he was lying.
10) Noyer was questioned in the Senate along with the head of France's financial market regulator, Michel Prada.
11) Prada said the market watchdog left it up to Bouton to undo his trades and that he "acted well."
12) He said the watchdog did not authorize or intervene in the bank's decision to unwind its positions. "We simply said that we would apply the law to allow him to handle a major problem in an extraordinarily short time, three days," he said.
13) The board meeting was followed by a gathering of bank employees, worried about their jobs and the fate of one of Europe's most respected banks.
14) Several hundred bank employees defended Bouton in an impromptu demonstration Wednesday, saying his departure would only make things worse.
15) Despite rumors that a gem of France's banking industry is vulnerable to takeover, "The subject was not raised" at the board meeting, bank spokeswoman Laura Schalk said.
16) Amid concerns that a gem of France's banking industry is in jeopardy and vulnerable, Prime Minister Francois Fillon has said his government will seek to block any hostile bid for the bank.
17) Such prospects raised eyebrows in Brussels, where the EU internal markets commissioner cautioned France on Wednesday to treat potential bidders for Societe Generale equally and without regard to national interests.
18) "The same rules apply as in other takeover situations under free movement of capital rules. Potential bidders are to be treated in an undiscriminatory manner," Charlie McCreevy said in a statement through his spokesman.
19) Analysts are also speculating about the dismantling of Societe Generale, with its units being divided up among other leading banks.
20) Analysts say France's largest bank and Societe Generale's chief competitor, BNP Paribas, would be the most likely buyer of all or part of the struggling bank. Other names mentioned include French rival Credit Agricole, Britain's HSBC Holdings, Germany's Deutsche Bank AG, Spain's Banco Santander SA and Italy's UniCredit SpA.
21) BNP chief financial officer Philippe Bordenave, speaking as the bank announced a drop in fourth-quarter profits for 2007 on Wednesday, refused to comment on Societe Generale's future.
22) Despite the disappointing results, Celent analyst Axel Pierron said the bank's relatively limited exposure to the subprime market and its strategy of diversification were some good news out of the BNP report.
23) Pierron said that results could drive a fresh round of market speculation that BNP may be mulling an acquisition of Societe Generale.
24) Shares of Societe Generale were up more than 5 percent Wednesday afternoon at euro82.51 ($121.89) on the Paris stock exchange. The stock, which has lost half its value since the middle of last year, has bobbed up and down since the announcement of the trading loss Jan. 24.
25) Meanwhile, French radio and television reported that police searched the Paris apartment of Kerviel's older brother, Olivier Kerviel. Jerome Kerviel was released from police custody on Monday but barred from leaving France, and his whereabouts were unknown.
French trader ' s computer seized in probe into losses at Societe Generale
(APW_ENG_20080131.1319)
1) Investigators questioned an executive at France's Societe Generale on Thursday and have seized the personal computer of the futures trader the bank blames for enormous trading losses, judicial officials said.
2) The computer was seized at the apartment of Jerome Kerviel's brother, Olivier, during a search Wednesday night, a judicial official said. Another judicial official said Societe Generale has given investigators records of Jerome Kerviel's computer operations at the bank and e-mails sent to his superiors.
3) The officials spoke on condition of anonymity because they were not authorized to speak publicly about the continuing probe.
4) Societe Generale stunned the banking world when it announced last week that it lost euro4.82 billion (US$7.09 billion) in cleaning up for unauthorized trades by Kerviel. Investigating judges have filed preliminary charges against Kerviel for forgery, breach of trust and unauthorized computer activity.
5) During questioning by investigators Saturday through Monday, Kerviel said his superiors had turned a blind eye to his actions as long as he was making money for the bank. The bank's lawyer, Jean Veil, says the claim is false.
6) On Thursday, one of the investigating judges questioned Christian Schricke, senior executive vice president and corporate secretary of the bank, Veil said. Societe Generale is a complainant in the probe.
7) Schricke explained to the judge the work flow of the department where Kerviel worked, and explained Kerviel's responsibilities as a futures trader practicing arbitrage, Veil said.
8) Kerviel is accused of overstepping his authority and betting euro50 billion (US$73 billion) -- more than the bank's market value -- on futures in European equity markets.
9) The judges released Kerviel from custody during the investigation, but prosecutors appealed that decision. Judicial officials said a ruling on the appeal could be made next week though no date has been set. Kerviel's whereabouts were not publicly known, though he has been ordered to stay in France.
10) Amateur video of Kerviel's questioning, obtained by Associated Press Television News, shows the trader studying documents beneath a bright table lamp, then signing them. Dressed in a dark shirt and jeans, Kerviel then leans back in his chair, stands up and walks to another room, smiling.
11) The video, among the first images seen of the elusive Kerviel since the announcement of the trading losses last week, was shot before his release late Sunday night from a building across the street.
12) Societe Generale's announcement of the massive losses prompted renewed speculation of a takeover or dismantling of the bank, one of Europe's most respected and a leading world player in derivatives.
13) The bank's cross-town rival BNP Paribas SA said Thursday it is considering a bid for Societe Generale.
14) "We are only thinking about SocGen because all European banks are thinking about it," BNP Paribas spokeswoman Christelle Maldague said.
15) BNP Paribas shares fell 3.2 percent to euro64.66 ($96.15) in Paris trading, while Societe Generale shares -- which have fluctuated broadly since last week's announcement -- were calmer Thursday, trading up 1.6 percent to euro83.18 ($123.69) in afternoon.
16) Kerviel's brother, Olivier, worked for a BNP Paribas subsidiary before quitting last year following a bad trade, his lawyer said Thursday.
17) Lawyer Felix de Belloy denied allegations in French and international media that his client had left the subsidiary, B. Capital, after pocketing unauthorized profits.
18) He said Olivier Kerviel quit the company in March 2007 after a transaction that caused losses to a client. "Kerviel immediately recognized his error and fully reimbursed the sums transferred during the operation," Belloy said in a statement. He said the company did not seek Kerviel's departure.
French finance minister says Societe Generale controls failed before trading loss
(APW_ENG_20080204.1026)
1) Controls at French banking icon Societe Generale missed or ignored suspicious activity by a trader whose dealings led to billions of euros (dollars) in losses, the finance minister said Monday.
2) Meanwhile, repercussions of the affair may have reached the United States: the U.S. Securities and Exchange Commission has opened an investigation into stock sales by an America Societe Generale board member in the days before the losses were made public, the Wall Street Journal reported.
3) French Finance Minister Christine Lagarde largely took the bank's side in a careful 11-page report, submitted Monday to the prime minister, on a trading scandal that has embarrassed and unsettled the banking sector.
4) The report backs embattled CEO Daniel Bouton and the way he handled the discovery that the trader had overstepped his authority, evaded computer controls and bet more than the bank's worth on futures in European equity markets.
5) It also seeks to absolve the government by saying the bank took too long to report the suspicious activity to government officials. With speculation swirling that the bank could be sold off or broken up, Lagarde insisted Societe Generale didn't need propping up -- but conceded that the government would favor a friendly takeover if the private bank can no longer stand on its own.
6) The loss wiped out the bulk of SocGen's net profit for 2007, and came as the bank is already suffering from the crisis on U.S. subprime mortgage markets. The bank's shares, which have fluctuated wildly since the announcement, closed down 4.7 percent at euro83.61 (US$123.74) in Paris trading Monday.
7) Lagarde's strictest comments concerned the bank's own controls.
8) "Very clearly, certain mechanisms of internal controls of Societe Generale did not function, and those that functioned were not always followed by appropriate modifications," Lagarde told reporters after submitting her report.
9) The bank says it lost euro4.82 billion (US$7.09 billion) in cleaning up unauthorized transactions by trader Jerome Kerviel.
10) Lagarde's report said the Finance Ministry had no reason to question the bank's assertion that Kerviel acted alone, and that the bank followed market rules in unwinding the trader's transactions.
11) Her report suggested other banks could be susceptible to similar problems and urged greater controls on banks in France and worldwide.
12) The bank says the losses were so staggering because of bad timing. Just as it discovered Kerviel's activity and started closing his positions, world financial markets fell. Some have speculated the bank's actions in liquidating Kerviel's moves may have helped send stock markets down.
13) Lagarde said Societe Generale's management of the transactions was "in conformity with the existing regulations."
14) "The unwinding of the positions at the source of the loss on Jan. 21, 22 and 23 was done in a professional way in difficult market conditions that could not be attributed to Societe Generale," Lagarde said.
15) Lagarde urged closer study of trading risks linked to human error or fraud and suggested tighter and more consistent European and international banking controls.
16) Among problems the report cited at Societe Generale were cracks in the wall separating the trading floor and the "back" and "middle" offices, where trades are controlled; problems with computer passwords and other security measures; and "atypical behavior" that went unnoticed such as Kerviel not taking vacation days.
17) Investigating judges have filed preliminary charges against Kerviel for forgery, breach of trust and unauthorized computer activity. Such preliminary charges allow the magistrates time to further investigate and decide whether to send the case to trial.
18) French market regulators are investigating stock trades by U.S. investor Robert Day, a member of the Societe Generale board. Day, an investment manager with U.S.-based Trust Company of the West, or TCW, and his family's trusts and foundations sold euro140 million ($206 million) worth of shares in January, before the trading losses were announced.
19) Societe Generale would not comment on the report of the U.S. probe into Day's trades. The bank maintains that Day had no inside information about the unauthorized activity by Kerviel and that Day sold the shares during a limited window when board members are authorized to sell stock.
20) A spokesman for Day, Josh Pekarsky, said in an e-mailed statement: "Mr. Day and his family's trusts and charitable foundations sold Societe Generale shares in December and January, which was a window of time where such trades were permitted under Societe Generale's trading policies. All required government disclosures were made. No inside information was used in any way with respect to these sales. Mr. Day has pledged his cooperation into any inquiries of this matter."
French police question second trader over massive losses at Societe Generale
(APW_ENG_20080208.0632)
1) French police were holding a second person for questioning Friday in a probe of massive losses at bank Societe Generale, a judicial official said.
2) The person, from a brokerage part-owned by Societe Generale, was taken into custody on Thursday and was still being held Friday, said the official, who refused to be identified discussing the sensitive case. The official gave no other details. Police refused to comment.
3) The daily Le Monde said the broker was being questioned about his relationship with Jerome Kerviel, the futures trader accused by Societe Generale of massive unauthorized bets on European markets that the bank said cost nearly euro5 billion (more than $7 billion) to unwind.
4) Le Monde said police suspect the new trader being held was aware of Kerviel's activities. It said the broker was taken into custody after a search of his company offices on Thursday.
5) Societe Generale has said it believes that Kerviel had no accomplices. Spokespeople for the bank, one of France's biggest, did not immediately return calls seeking comment on Le Monde's report.
6) Kerviel was in custody for two days last month, and judges filed preliminary charges against him but released him during the investigation.
7) Joelle Rosello, a Societe Generale spokeswoman, confirmed that an employee of Newedge, a 50-percent owned affiliate, was in police custody in the Kerviel probe. "We are cooperating closely with police," said Rosello.
8) Le Monde said new evidence provided by Societe Generale for the legal probe into Kerviel's actions included a message sent by the second trader to Kerviel over the bank's computer system. The newspaper said the message, sent last Nov. 30, read: "You have done nothing illegal in terms of the law."
9) Societe Generale announced Jan. 24 that it lost euro4.82 billion (US$7.09 billion) in cleaning up unauthorized transactions by 31-year-old Kerviel. It said Kerviel overstepped his authority and bet euro50 billion euros ($73 billion) -- more than the bank's market value -- on futures in European equity markets. It also said he did not appear to have profited personally from the trades.
10) Since the case broke, Societe Generale has faced questions about its future, amid speculation it could be bought out or broken up, and about how Kerviel's activities went unnoticed or ignored.
11) Judges on Friday were to weigh a request from prosecutors that Kerviel be jailed while the investigation continues. The judges could rule immediately Friday on the prosecutors' request or delay their decision to a later date.
12) A spokeswoman for the prosecutors' office, Ulrika Weiss, said Kerviel should be held in prison to ensure that he cannot contact any accomplices, if he had them.
13) Investigating judges have filed preliminary charges against Kerviel for forgery, breach of trust and unauthorized computer activity. Such preliminary charges allow judges time to further investigate and decide whether to send the case to trial.
SocGen seeks to raise nearly US$8 billion in heavily discounted capital hike
(APW_ENG_20080211.1353)
1) Societe Generale SA, reeling from the biggest-ever loss blamed on a single trader, launched a heavily discounted rights issue on Monday, seeking euro5.5 billion (nearly US$8 billion) to restore its position as a top-tier bank.
2) The fund-raising comes as reports suggest that Jerome Kerviel, the trader at the heart of the scandal, exchanged regular computer text messages with a broker about his unauthorized trades. The broker was questioned by financial police last week about his contacts with Kerviel.
3) Monday's move comes less than three weeks after the bank said Kerviel's unauthorized trades cost nearly euro5 billion (more than US$7 billion) to unwind. The bank is seeking new capital to boost its financial standing and fund future growth.
4) The bank said it would offer new shares to existing shareholders at euro47.50 (US$68.94) in a rights issue -- almost 40 percent below Societe Generale's Friday closing share price of euro77.72 (US$112.80).
5) The discount shows "the bank wants the capital increase to succeed," said Axel Pierron, an analyst with research house Celent in Paris.
6) Existing shareholders will have preferential subscription rights and be able to buy one new SocGen share for each four shares held.
7) They can also trade their preferential rights during the subscription period for a starting price of euro5.90 (US$8.58). New shareholders must purchase four rights to buy one new share, bringing the theoretical cost of SocGen shares after the capital increase to euro71 (US$103.25).
8) "The idea is that existing shareholders follow us," Chief Financial Officer Frederic Oudea said in a conference call. "We want this to be the biggest success possible."
9) Shares on Monday closed down 4.02 percent at euro74.59 (US$108.47), giving the bank a market value of euro34.8 billion (US$50.32 billion). In the past 12 months the bank has lost nearly half of its value.
10) The capital increase will allow the group's tier 1 ratio, a measure of financial strength, to be restored to 8 percent, the bank said. It will also use the cash to maintain lending in France and to fund growth in countries including Russia, Brazil, India and central and eastern Europe.
11) The subscription period will run from Feb. 21 to Feb. 29 and is being managed by JPMorgan Chase, Morgan Stanley and Societe Generale's own corporate and investment banking division, the bank said.
12) The bank said it intends to "draw lessons from recent events and strengthen our control procedures and anti-fraud measures" in the first half of the year in its corporate and investment banking division.
13) A report by the French Finance Ministry faulted the bank's controls for not halting the unauthorized activity by trader Kerviel.
14) Jean-Pierre Mustier, head of the company's corporate and investment banking arm, said in a conference call a number of measures have been taken to strengthen security including monitoring nominal, and not just net, exposure of traders and the introduction of biometric requirements in place of passwords. Kerviel is accused of using other employees' passwords to circumvent the bank's controls.
15) Kerviel was sent to La Sante prison, in southern Paris, on Friday pending further investigation into his case.
16) A report on the Web site of French newsmagazine Nouvel Observateur over the weekend detailed communication between Kerviel and brokerage employee Moussa Bakir, conducted via internal messaging on a Reuters financial information terminal.
17) Bakir worked at Newedge, a 50-50 joint venture between Societe Generale and Calyon bank, through which Kerviel passed some of his trades, judicial officials have said. Judicial officials would not confirm the authenticity of the extracts.
18) A lawyer for the bank, Jean Veil, said investigators are speaking with several Societe Generale employees but insisted, "It is much too early to have a definite clear opinion on the assistance Mr. Kerviel may have received from anybody."
19) Since Kerviel's actions came to light, analyst Pierron said major banks worldwide have been reviewing their security and control systems "because they know very well at a given moment they also could have a weakness."
20) Societe Generale bank has become the subject of takeover rumors since the affair, with cross-town rival BNP Paribas mulling a bid. Both Mustier and Oudea declined to comment on potential bids.
21) Chief Executive Daniel Bouton, whose resignation has so far been refused by the board, will keep his job at least until after the capital increase and possibly beyond, Pierron said.
22) Bouton provides a "certain stability" to the bank, and there are few candidates of his caliber, he said.
23) Societe Generale also announced write-downs Monday of euro2.6 billion (US$3.8 billion) related to the fallout from the U.S. mortgage crisis -- bigger than the euro2.05 billion (US$2.98 billion) announced in January. The bank said the January figure relates only to the fourth quarter and did not include residential mortgage-backed securities.
24) In a prospectus for investors, Societe Generale also said net profit for 2007 was euro947 million (US$1.37 billion), more than the euro600 million (US$871 million) to euro800 million (US$1.16 billion) announced in January.
25) Societe Generale also announced a number of new targets following an efficiency study launched last year which it said will lift gross operating profit by euro1 billion a year by 2010.
Lawyer seeks questioning of French trader ' s bosses in Societe Generale probe
(APW_ENG_20080214.1560)
1) A lawyer for shareholders of French bank Societe Generale asked judges Thursday to question a senior supervisor of a trader the bank blames for major losses and to revoke the company's status as "victim" in the probe.
2) Frederik Canoy, representing a shareholder association called APPAC, said senior officials at the bank must have been aware of trader Jerome Kerviel's unauthorized activity.
3) "Societe Generale, in presenting itself as a victim, is an impostor," Canoy said by telephone. "The real victims are the shareholders."
4) Two investigating judges are questioning people as they look into the affair, while Kerviel is in prison pinned with preliminary charges.
5) APPAC, which says shareholders suffered as a result of the trading losses, and Societe Generale, which says the bank suffered as a result of the losses, are both considered complainants in the case.
6) Canoy said he sent a letter Thursday to judges asking that Societe Generale's status be changed. It was unclear when the judges would consider his request.
7) The bank says Kerviel evaded computer controls and overstepped his authority to bet massively in futures in European equity indices, and that it lost nearly euro5 billion (more than US$7 billion) cleaning up his trades. The bank says he acted alone, but Kerviel said during questioning that his superiors looked the other way when he was making money for the bank.
8) In the lawyer's letter, Canoy asked the judges to question Martial Rouyere, the head of the trading desk where Kerviel worked. Canoy, who has access to legal documents filed in the case, suggested Rouyere had knowledge of Kerviel's activity but did not stop it because in 2007 Kerviel's trades were gaining money for the bank.
9) Officials at Societe Generale would not comment on Canoy's claim, or say whether Rouyere is still employed with the company.
10) Rouyere's name repeatedly came up in computer text messages Kerviel sent to a broker who has been questioned in the case, according to excerpts of the messages published in Nouvel Obs weekly over the weekend.
11) Kerviel was questioned for a third time Wednesday, for five hours.
Societe Generale trader acted alone under watch of superiors, lawyer says
(APW_ENG_20080215.0918)
1) Jerome Kerviel worked alone on the trades that French bank Societe Generale says led to billions of euros (dollars) of losses -- although his bosses must have known what he was doing, one of his lawyers said in an interview Friday.
2) Guillaume Selnet is seeking to get Kerviel out of jail, where he was sent by a French court a week ago on concerns that if left free he could have contacted possible accomplices.
3) "Jerome, since the start, has stated that he was acting alone," Selnet told The Associated Press at his office in Paris.
4) "The more relevant question is whether or not the whole staff of SocGen, who condoned everything that Jerome was doing over two and a half years, can or not be called accomplices."
5) "The facts speak for themselves. Jerome Kerviel was a junior trader on his team. For two and a half years he traded and invested up to twice the bank's value on the markets. Could he have done that without ever anyone in SocGen noticing?"
6) Societe Generale declined to comment via spokesperson Laura Schalk.
7) Kerviel was ordered held in Paris' La Sante prison last Friday pending further investigation into his case. His lawyers have lodged an appeal for his release.
8) Selnet said information may have been manipulated to ensure Kerviel's detention, citing "rumors" that were "leaked on purpose" to media about his state-of-mind and monthly phone bills exceeding euro1,000 (US$1,460).
9) Selnet said that being kept behind bars "reinforces this false idea that he is the Houdini of finance."
10) On Jan. 24, Societe Generale stunned the banking world with its announcement that it had uncovered Kerviel's unauthorized trades a few days earlier and that unwinding them had cost nearly euro5 billion (more than US$7 billion).
11) Kerviel, 31, was a junior trader on the Delta One desk charged with "plain vanilla" trading -- or the more basic forms of futures trading. He took home a relatively modest salary for the finance world of euro47,500 (US$69,470) last year -- excluding the results-related bonus, his lawyer said.
12) Yet he had been betting on futures markets with euro50 billion (US$73.13 billion) -- more than Societe Generale's market value.
13) The bank said he hid his positions and avoided controls thanks to his computer skills and experience from previous jobs in the bank's back offices that keep records of and process transactions.
14) Selnet disputed SocGen's version, saying Kerviel's superiors must have known and looked the other way while he was making money for the bank. His trades were in the black last year, but plunged in January before they were discovered.
15) "Although he was the youngest trader, he was by far the most profitable of the team. He was only entitled because of his age to a nominal bonus. What we can say so far is that apparently the rest of the team, including the senior members, was served bonuses based on Jerome's trades."
16) Judges probing the case questioned Kerviel for a third time Wednesday, for five hours. Selnet denied suggestions that he considered suicide.
17) "It's very tough for him but since the start Jerome has been very courageous," he said.
Societe Generale posts fourth-quarter loss after trading fraud
(APW_ENG_20080221.1319)
1) Troubled French bank Societe Generale SA said Thursday that a trading scandal and write-downs linked to the crisis in financial markets led to a net loss in the fourth quarter last year.
2) France's second-largest bank said it lost euro3.35 billion (US$4.91 billion) compared with a euro1.18 billion (US$1.73 billion) net profit in the same period of 2006.
3) The French bank took a euro4.9 billion (US$7.18 billion) hit closing the unauthorized positions of futures trader Jerome Kerviel, who is currently being held in a Paris prison and questioned for a third time Thursday by investigators. Though it discovered the positions on Jan. 18, the losses that resulted were booked in the fourth quarter.
4) Shares rose 0.3 percent to euro66.81 ($97.92) in Paris morning trading. The stock has lost roughly half of its value this year.
5) Societe Generale is seeking euro5.5 billion (nearly US$8 billion) in new capital to shore up its finances after the trading loss and euro2.6 billion (US$3.8 billion) in previously announced write-downs linked to the U.S. mortgage crisis.
6) The Paris-based bank had already announced preliminary results Feb. 11 in a prospectus for investors taking part in a capital increase, the subscription period for which starts Thursday and runs until Feb. 29.
7) CEO Daniel Bouton said in a conference call Thursday that initial contacts with investors went "very well."
8) Analysts say Societe Generale needs the new funds to ward off unwanted predators. France's largest bank BNP Paribas SA, which has said it is mulling a bid, declined to comment on its intentions Wednesday.
9) "Societe Generale needs to succeed at this capital increase which is needed to preserve a certain independence," said Axel Pierron, an analyst with research house Celent in Paris.
10) For the full year, SocGen confirmed that despite its recent troubles it made a net profit of euro947 million (US$1.4 billion), after euro5.2 billion (US$7.62 billion) in 2006.
11) The trading scandal is "an isolated event," said Pierron. "Without this event, the results of Societe Generale were not at all bad."
12) Without the trading losses, Societe Generale said it would have gained euro4.17 billion (US$6.11 billion) over the full year.
13) The trading scandal has raised questions about the bank's control procedures.
14) An internal report on Wednesday said bank officials failed to follow up on warnings and carry out more detailed checks, leaving concealment tricks allegedly used by Kerviel uncovered.
15) The report commissioned by a committee of three independent board members detailed 75 warnings signs in Kerviel's exchanges, such as a trade with a maturity date on a Saturday or a missing broker name.
16) Analyzing what went wrong, the report said "no initiative was taken to check the truth of affirmations" provided by Kerviel, "even when they lacked probability."
17) The signals weren't always flagged to superiors and "when the hierarchy was warned, they didn't react," the report said.
18) Kerviel claims his superiors must have known what he was doing but that they looked the other way when he was making money. He is being held on preliminary charges of breach of trust, forgery and unauthorized computer activity.
19) Societe Generale has tightened controls in the wake of the trading scandal, the report said.
20) Bouton vowed "total transparency" in the case in order to maintain the bank's reputation.
21) His offer to resign over the affair has been twice rejected by the bank's board despite calls from French President Nicolas Sarkozy for top executives to face the "consequences" of the huge losses.
22) Bouton said he is holding up "very well" under the pressure.
23) Full-year revenue fell 2.2 percent to euro21.92 billion (US$32.13 billion) from euro22.42 billion (US$32.86 billion) in 2006. Fourth-quarter revenue dropped 32 percent to euro3.88 billion (US$5.69 billion) from euro5.67 billion (US$8.31 billion) a year-earlier.
24) The bank warned of the possibility of "further write-downs" in the first quarter at its asset management division as the liquidity crisis in financial markets continues.
25) Banks globally have written off more than US$150 billion (euro100 billion) in the past half-year, including large fourth-quarter write-offs by European competitors such as UBS AG and Credit Suisse.
26) Societe Generale's subprime-related write-downs are bigger than the euro589 million (US$868.3 million) announced Wednesday by cross-town rival BNP Paribas SA but are dwarfed in comparison with the 15.6 billion francs (US$13.7 billion; euro9 billion) announced by UBS.
27) SocGen said it is proposing a 2007 dividend of 90 euro cents (US$1.32) a share compared with euro5.20 the year before.
Trader suspected in Societe Generale bank scandal leaves prison
(APW_ENG_20080318.1272)
1) The trader accused of causing massive losses at French bank Societe Generale left a Paris prison Tuesday as the investigation proceeds into one of history's biggest trading scandals.
2) Jerome Kerviel ended nearly six weeks behind bars at Paris' La Sante prison. Hours earlier, a court had ordered him freed but set out strict conditions, including turning over his passport and staying within the Paris region.
3) Kerviel, wearing a pink shirt under a jacket, smiled and waved to scores of reporters huddled outside the prison. Appearing relaxed, he walked to a small black car with lawyer Elisabeth Meyer without speaking to the reporters.
4) Meyer said earlier that the 31-year-old trader had not been expecting the court to grant him freedom.
5) "He was very happy .... He wasn't expecting that," she said.
6) Prosecutors had said they wanted to keep him jailed to prevent him from speaking with accomplices -- if he had any. Kerviel maintains that he acted alone.
7) Kerviel's lawyers had argued that there were no grounds to hold their client since he is cooperating with investigators and had shown no signs of wanting to flee.
8) He had been held in La Sante since Feb. 8, while investigators probe an affair that rocked France's No. 2 bank and rattled an already volatile world banking sector.
9) Societe Generale says it discovered the unauthorized trades by Kerviel the weekend of Jan. 19-20 and spent three days unwinding them on shaky world markets. It announced Jan. 24 that it had lost nearly euro5 billion (more than US$7 billion) in the process.
10) "He is doing well. He has courageously resisted," said Kerviel's spokesman, Christophe Reille, outside the gate of the walled prison. "He is not depressive, he is not suicidal and he isn't taking medication."
11) Prosecutors had initially suggested that Kerviel may harm himself.
12) "We were expecting this decision, we were hoping for it," said Kerviel's lawyer Elisabeth Meyer. "The court listened to us."
13) "He is going to rest, and we are all going to let him rest," Meyer said. She did not say where he would go. However, his spokesman said he would go home.
14) Societe Generale did not protest the ruling. A lawyer for the bank, Jean Veil, called it a "very balanced decision" that will allow a "calm and secure" investigation.
15) Kerviel had to turn in his identity card and his passport and is forbidden from leaving the Paris region and entering trading floors or stock exchanges, according to a judicial official. The official spoke on condition of anonymity because the investigation is ongoing.
16) Kerviel is also barred from meeting certain people, judicial officials said, without giving names. He has to report to police once a week.
17) Shares in Societe Generale have fallen in recent months amid the trading losses and worldwide financial troubles, but the company restored some investor confidence -- and might have deterred predators -- with a euro5.5 billion capital hike last month. Shares rose 2.6 percent Tuesday morning to euro64.62 ($101.90) in Paris.
18) Investigating judges filed preliminary charges against Kerviel on Jan. 28 of forgery, breach of trust and unauthorized computer activity.
19) Although Kerviel has said he acted alone, he also said his bosses at Societe Generale must have been aware of his massive risk-taking, and turned a blind eye as long as he was making money for the bank. Investigators want to determine what Kerviel's colleagues and superiors may or may not have known about his trades.
20) At least two people who worked with Kerviel have been questioned and released.
21) A preliminary internal probe by Societe Generale found no evidence that anyone helped Kerviel hide his positions, or that the trader profitted from personal monetary gains. The report said bank officials failed to follow up on 74 warnings about questionable trades, uncovering Kerviel's positions only on the 75th.
22) Frederik Canoy, a lawyer for small shareholders of Societe Generale, a third party in the case who also filed a suit, said it is easier for Kerviel to defend himself now that he is being released.
23) "It was much more difficult when he was locked up to speak with his lawyer. Now that he is out of prison it will accelerate the process," he said.
Lawyers for trader allegedly behind huge loss at Societe Generale protest his firing
(APW_ENG_20080403.0387)
1) Lawyers for a former Societe Generale trader blamed for billions of euros (dollars) in losses have sent a letter to the French bank protesting the conditions of his dismissal.
2) Jerome Kerviel was released last month from provisional detention in prison pending the investigation into nearly euro5 billion (US$7.8 billion) in trading losses at the bank.
3) Kerviel's spokesman Christophe Reille says his lawyers are arguing that the bank violated French employment law -- such as by not giving him a face-to-face meeting to explain the firing.
4) Reille says the defense team has not decided whether to launch court proceedings.
5) The Times of London reports Thursday that Kerviel is to sue his former employers. The newspaper cites a source in Paris that it did not identify.
Societe Generale chief says lessons learned from trader fiasco will boost banking security
(APW_ENG_20080409.0936)
1) The head of Societe Generale SA said lessons learned from its trading fiasco are helping strengthen security in the global banking community -- but that doesn't mean banks will be spared from future fraud.
2) "Fraud has existed for as long as banks have existed," Daniel Bouton told a parliament committee. "There will be other cases."
3) Speaking in his capacity as president of the French Banking Federation, Bouton said losses of almost euro5 billion (more than $7 billion) SocGen blames on unauthorized trades by Jerome Kerviel have prompted the French bank and many of its competitors to strengthen control systems.
4) "We are an innovator in something which is being studied: changing the architecture of control. There are a number of banks which are in the process of developing this."
5) Societe Generale has taken several steps to tighten controls following an internal report into what went wrong in the Kerviel case. The report noted 74 red flags raised on Kerviel's trades that failed to sound the alarm -- he was spotted only on the 75th.
6) The bank says Kerviel faked hedging transactions across a range of financial instruments. They weren't spotted because Societe Generale's back office controllers monitored the trading of individual products separately.
7) The bank now has installed new controls that cross-check red flags raised across different products, allowing individual traders' histories to be monitored.
8) "That's something we lacked and we have now," Bouton said.
9) Societe Generale has also changed its procedures to monitor the gross exposure of traders, besides the net position. Kerviel amassed positions worth around euro50 billion ($78.47 billion), but his net position appeared unremarkable because he balanced his real trades with fictitious transactions.
10) "It is not the business of banks to take large positions," Bouton said.
11) Security has been stepped up in computer systems to prevent a repetition of Kerviel's trick of borrowing colleagues logins and passwords.
12) Georges Ugeux, a former vice president at the New York Stock Exchange who now runs consultancy Galileo Global Advisors, said the SocGen debacle has prompted a lot of banks to re-examine their own internal controls -- but that doesn't mean what happened in Paris could happen anywhere.
13) "What's surprising is the amplitude of the position that one junior trader could move by himself: euro50 billion is a lot of money for one single person," he told The Associated Press.
14) "I hope Mr. Bouton is not trying to say that Societe Generale was like everybody and everybody had to tighten their system afterward just to try to minimize the deficiencies of its own system and of its own bank. The deficiencies were clearly serious at Societe Generale," he added.
15) Kerviel, recently released from jail pending further investigation, claims his superiors must have known what he was doing but that they chose to look the other way when he was making money.
16) He is facing preliminary charges of breach of trust, forgery and unauthorized computer activity.
17) Bouton said Kerviel's trades haven't dented confidence in the bank among "the hundreds of financial operators we work with."
18) "This fraud does not put into question our risk-assessment system because it involved positions that were hidden," he told a finance committee hearing.
19) "We have not lost any clients."
20) The judicial investigation could end by this summer and a trial could be held next year, the trader's lawyer, Guillaume Selnet said earlier this month.
21) Bouton offered his resignation twice over the scandal, but his offer was rejected by the board.
22) Questioned over the financial crisis in general, Bouton said he sees no evidence of a credit crunch in France.
23) The International Monetary Fund on Tuesday said the U.S. mortgage and credit crises could cause almost $1 trillion (euro640 billion) in financial losses globally.
Former Societe Generale trader accused of causing big bank loss gets new job
(APW_ENG_20080425.0644)
1) His former employer claims Jerome Kerviel caused one of the biggest trading losses in history and he's charged with unauthorized computer use, but that hasn't prevented ex-Societe Generale trader Kerviel from getting a new job -- as a computer consultant.
2) The 32-year-old former trader's spokesman says Kerviel has landed work with a man who hid him from journalists as the nearly euro5 billion trading loss at the French bank emerged in January. He started last week.
3) "Jerome is a young man who wants to work, and doesn't want to remain inactive living on unemployment insurance -- or whatever," said the spokesman, Christophe Reille.
4) Kerviel, who was given provisional release from prison last month, got the job offer while behind bars in early February, said Reille. Kerviel is working for LCA computer consultancy in the Paris suburb of Levallois.
5) The revelation marks how Kerviel's life is at least partly returning to normal while he awaits his fate, now in the hands of investigating judges.
6) Societe Generale stunned the banking world in January by announcing nearly euro5 billion (over US$7 billion) in losses related to closing unauthorized trading positions by Kerviel.
7) Kerviel says his superiors must have known what he was doing but that they chose to look the other way when he was making money for the bank.
8) He is facing preliminary charges for breach of trust, forgery and unauthorized computer activity. Reille said Kerviel was allowed to get the job because of a judge's change in the terms of his provisional release from prison.
9) Societe Generale, one of Europe's largest banks, is trying to rebuild its reputation after the trading fiasco. It completed a successful euro5.5 billion capital hike launched to fill a hole in finances caused by the trading losses -- and to fend off potential bidders. It has also taken steps to tighten controls following an internal report into what went wrong in its trading division.
Swiss stock exchange fines Societe Generale for trading breach
(APW_ENG_20080502.0433)
1) The Swiss stock exchange said Friday it has fined French bank Societe Generale for violating trading rules two years ago.
2) The Zurich-based exchange -- known as SWX -- said it imposed a 30,000 Swiss francs (US$28,600; euro18,400) fine on Societe Generale for allowing four authorized traders to make transactions under other people's names. A fifth person, who was not authorized to trade on the SWX, also carried out transactions, it said.
3) "This has happened before with other banks," SWX spokesman Werner Vogt said.
4) The French bank hit the headlines earlier this year after it become embroiled in one of the largest securities scandals in history.
5) One of the bank's former employees, Jerome Kerviel, faces charges ranging from forgery to unauthorized computer use linked to a multibillion euro (dollar) trading loss.
6) "This story has nothing to do with Kerviel," Vogt said.
7) He said Societe Generale was warned about the rule breach at the time, but failed to act on the reprimand.
8) "That tends to increase the fine," Vogt said.
9) Societe Generale has also been ordered to pay 10,000 francs (US$9,540; euro6,140) in costs.
10) The maximum fine possible for trading breaches on the SWX is 200,000 francs (US$190,820; euro122,790) or a suspension of the trader's license.
11) Societe Generale spokeswoman Laura Schalk said the bank is cooperating with the SWX exchange and has implemented the measures required of it.
Troubled French bank Societe Generale to publish reports on alleged fraud Friday
(APW_ENG_20080523.0426)
1) Troubled French bank Societe Generale SA will publish two related reports Friday into what went wrong during a multi-billion-euro trading scandal uncovered in January.
2) An internal report by a three-person committee of independent directors headed by former auto executive Jean-Martin Folz and a report by auditing company PriceWaterhouseCoopers will be made public after the Paris stock market closes, Societe Generale spokeswoman Stephanie Carson-Parker said.
3) A preliminary probe by the committee said the bank failed to follow up on 75 warnings and said that trader Jerome Kerviel acted alone. Investigators promised a full report before the annual shareholder meeting, which takes place Tuesday.
4) Folz said Friday that the committee's report "is clear and lacks any ambiguity"and that he would make an oral presentation on the report during the meeting.
5) In an e-mailed response to The Associated Press, he declined to comment further before the report is made public.
6) Societe Generale has said Kerviel began trading illicitly in 2005 for modest amounts and later built up to bets totaling some euro50 billion (US$78 billion) discovered on Jan. 18, which the bank then liquidated.
7) On Jan. 24, the bank revealed almost euro5 billion (more than US$7 billion) in losses from closing the positions, saying Kerviel forged documents and e-mails to suggest he had hedged his positions.
8) Critics of the bank's version of the events say Kerviel could not have amassed such large positions without attracting the attention of his superiors.
9) Societe Generale's board chose Folz, Jean Azema, head of insurer Groupama, and Antoine Jeancout-Galignani, a director of real estate company Gecina SA, to examine the causes and sizes of the trading losses and look into whether the bank accurately communicated information about the scandal. PriceWaterhouseCoopers was asked to assist with the probe.
10) The case is also being investigated by France's market authority, the country's banking commission and a French court.
11) Societe Generale has said it is tightening computer security, reinforcing controls and taking more account of the possibility of fraud since the affair was uncovered.
12) Societe Generale's shares, which have suffered significantly since last year amid subprime market-related losses and the trading scandal, were trading up slightly -- less than 1 percent -- Friday morning at euro68.30 (US$107.61).
Societe Generale investigators suspect Kerviel got help in trades behind huge bank loss
(APW_ENG_20080523.1406)
1) Investigators at Societe Generale SA say they suspect former futures trader Jerome Kerviel was helped by an assistant to cover up massive trading positions that led to a multibillion euro (dollar) loss.
2) In two long-awaited reports released Friday, the investigators said the French bank's management failures and culture of risk-taking were partly to blame for failing to spot the positions, which led to a loss of almost euro5 billion (over US$7 billion) once they were unwound.
3) The reports detail the extent of Kerviel's alleged fraud in a scandal that broke out in January and has sullied the reputation of the glamorous trading desk at the award-winning bank.
4) Investigators say Kerviel's bosses missed more than 1,000 faked trades; a huge jump in his earnings in 2007; questions about his trades from the Eurex exchange; unusually high levels of cash flow, accounting anomalies, and high brokerage expenses; Kerviel's failure to take vacation; and his breach of the desk's market risk limit on one position.
5) "The trader's hierarchy, constituting the first level of control, proved deficient in the supervision of his activities," said the board of directors in a seven-page statement to shareholders accompanying the reports.
6) The reports said Kerviel's direct superior "lacked trading experience" and showed "an inappropriate degree of tolerance" about his trades. The bank did not name the superior, who they said they have been unable to question because he no longer works for the company.
7) The reports also criticized the manager of the company's Delta One trading desk, who they said was aware of the lack of experience of Kerviel's manager, and "deficiencies in the monitoring of risks by the desk in general."
8) One report was led by a committee of three board directors, the other by audit firm PriceWaterhouseCoopers. They were published ahead of next Tuesday's annual shareholder meeting.
9) The 69-report by the directors said that they had "discovered indications of internal collusion involving a trading assistant," whom they declined to identify. They said they were unable to speak to the assistant because of an ongoing judicial probe, adding that it will be up to the court to confirm its suspicions.
10) However, they said they had uncovered an e-mail which suggested that the assistant must have known about the fake trades.
11) The assistant's complicity would have helped Kerviel avoid being uncovered, the directors' report said.
12) Previously, Societe Generale had said it believed that Kerviel acted alone.
13) But while he had help from a junior colleague, the internal report found that "neither JK's hierarchical superiors, nor his colleagues, were aware of the fraudulent mechanisms used or the size of his positions."
14) Kerviel says his superiors must have known what he was doing but that they chose to look the other way when he was making money for the bank.
15) "We notice that while protecting the superiors of Jerome Kerviel, the Societe Generale has found a new scapegoat -- who just happens to be a 23-year-old assistant," said Guillaume Selnet, a lawyer for Kerviel.
16) He noted that the directors' report was prepared by the bank's own services and insisted that SocGen's version of events keeps changing. The bank issued a preliminary investigation into the scandal in February.
17) "My feeling is that -- we are now on the second report -- by the third report it's going to be the fault of the cleaning ladies," he added. "Each time it goes down (the corporate hierarchy), instead of up."
18) SocGen employee Patrice Leclerc, who heads an association of the bank's employee shareholders, said Kerviel's managers need to explain why they missed warning signals that were picked up in Germany -- and why they didn't follow up on questions from Eurex, the German derivatives exchange.
19) "There exists ways of monitoring this type of thing -- why weren't they used?" he said.
20) Investigators didn't find any signs of embezzlement by Kerviel, but said it appeared that he had sought to boost his results, and thus increase the amount of bonus he could hope for. The report established that part of Kerviel's "official" earnings came from his concealed positions.
21) While the directors' report plumbed the details of the alleged fraud, the 36-page report by PriceWaterhouseCoopers focused on the culture of risk-taking at the bank as it grew its investment banking business and on a review of the measures taken by the bank to fix the problems that the scandal exposed.
22) "The surge in Delta One trading volumes and profits was accompanied by the emergence of unauthorized practices, with limits regularly exceeded and results smoothed or transferred between traders," the PWC report said.
23) "Several key controls that could have identified fraudulent mechanisms were lacking" and "there was a lack of an appropriate awareness of the risk of fraud," it said.
24) The report will be "good news for the lawyers" who are preparing a class action in the U.S. as it spreads the blame, according to Stephane Bonifassi, a French lawyer and a member of the FraudNet network, which operates under the International Chamber of Commerce's commercial crime unit.
25) For Kerviel, "the fact that his hierarchy was a bit laid back will help him."
26) SocGen's board said in a statement to shareholders it approved the conclusions of both reports and their recommendations.
27) The board said the investment bank is tightening computer security, reinforcing controls and taking more account of the possibility of fraud.
28) Deeper reforms, such as the creation of a team dedicated to preventing fraud, "significant investments in security for information technology," and a campaign to raise staff awareness have been launched and will be completed by 2010, the board said.
29) The independent directors in charge of the report are former auto executive Jean-Martin Folz, Jean Azema, head of insurer Groupama, and Antoine Jeancout-Galignani, a director of real estate company Gecina SA.
30) The case is also being investigated by France's market authority, the country's banking commission and a French court.
New lawyer for ex-SocGen trader outlines strategy
(APW_ENG_20080730.0691)
1) The head of the new legal team representing Jerome Kerviel said Wednesday more questions need to be asked about why Societe Generale liquidated the former trader's bets just as stock markets were plunging worldwide.
2) "Where did the money go? Who profited from it?" Bernard Benaiem told journalists in Paris. Kerviel's next appearance before investigating judges Francoise Desset and Renaud van Ruymbeke will be Monday.
3) Benaiem explained Kerviel's decision to change lawyers earlier this month, saying the 31-year-old "had the feeling that everything had not been said and the Societe Generale affair had not begun."
4) Kerviel's new defense will focus on SocGen's role in events that triggered almost euro5 billion (more than US$7 billion) in losses -- and in particular whether the bank was trying to deflect attention from subprime-related losses by making Kerviel a scapegoat, Benaiem said.
5) SocGen secretly began unwinding some euro50 billion (US$78 billion) of Kerviel's positions on Jan. 21, when U.S. markets were closed because of the Martin Luther King Day holiday, putting massive pressure on futures markets and exacerbating its losses. That week was marked by turmoil in financial markets worldwide.
6) The bank revealed its actions Jan. 24, when it also announced subprime-related writedowns and provisions of euro2.05 billion ($3.22 billion).
7) SocGen's lawyer Jean Veil said it is "absurd" to claim the bank was seeking to hide its subprime exposure and that it was legally obliged to begin unwinding the trades as soon as it was aware of them.
8) SocGen has said Kerviel began trading illicitly in 2005 for modest amounts. He was involved in what is known as "plain vanilla," or the more basic forms of hedging, with limited authority.
9) The bank says in 2007 he went far beyond his role -- taking massive directional positions in various futures contracts, apparently escaping detection by the bank's control systems by forging documents and e-mails to suggest he had hedged his positions.
10) An internal report by the bank in May said Societe Generale managers failed to follow up on 74 different alarms about Kerviel's activities and queries from derivatives exchange Eurex.
11) "It's about knowing whether there was any complacency on the part of the bank, or a culpable ignorance, or a complicity by information or through the provision of means," Benaiem said.
12) Veil said the bank's position is simple: Kerviel lied about his positions.
13) Kerviel's defense has contended from the start that his supervisors were aware of his trades and did not stop them while he was making money for the bank.
14) Kerviel ousted lawyer Elisabeth Meyer in favor of a new team this month. Working with Benaiem are Caroline Wassermann, Eric Dupond-Moretti, and Francis Tissot. The lawyers are not being paid for working on the case, Benaiem said.
15) The new defense could lengthen investigations. Veil said he thinks that Kerviel may be afraid of going before a judge.
16) "It's strange when someone who claims to be innocent wants to make the process last longer," he said.
SocGen: ' Well-armed ' to face financial crisis
(APW_ENG_20080925.0392)
1) French bank Societe Generale SA, recovering from a multibillion-dollar trading scandal, argued Thursday that it is still strong enough to survive the current turmoil in financial markets.
2) SocGen announced in January it had taken a euro4.9 billion ($7 billion) hit while closing what it calls unauthorized positions by former trader Jerome Kerviel. The loss was included in the bank's 2007 results.
3) The French bank has also been dealing with the contagion from risky U.S. mortgages that has hit financial markets. In the past weeks meltdown among some of the most storied names on Wall Street has caused the bankruptcy of Lehman Brothers Holdings Inc. and forced the U.S. government to prepare a $700 billion bailout of the industry.
4) "Societe Generale has demonstrated over the last months our capacity to bounce back and move forward in a very harsh environment and we consider this is mainly due to strong assets of the company," Deputy CEO Severin Cabannes told journalists in Villiers Le Mahieu, near Paris.
5) Cabannes didn't refer to Kerviel by name during the opening remarks of daylong series of presentations, saying only that the bank has strengthened its risk management systems "after what we had to manage at the beginning of this year."
6) Kerviel's legal team has insisted his higher-ups were aware of what he was doing and did not stop him as long as he made money for the bank -- charges the bank has always denied.
7) The bank was forced to take a euro5.5 billion (US$8.5 billion) capital increase earlier this year to raise funds to cover the trading losses, which Cabannes says gives SocGen "financial solidity," one of the assets that would help it weather the global crisis.
8) He also cited the "solidarity and loyalty" of SocGen's 151,000 staff, the loyalty of the bank's customer base and a "continuing and very clear strategy."
9) In August, SocGen reported a 63 percent fall in net profit in the second quarter after a loss in its investment banking unit.
French trader to be held additional day
(APW_ENG_20081030.1249)
1) A trader suspected of losing more than 600 million euros ($751.5 million) in complex derivative trades at French mutual bank Caisse d'Epargne is to be held 24 additional hours, a judicial official said on Thursday.
2) Investigators with a specialized financial brigade are interrogating the man, whose name has not been released, the official said. The trader is expected to be brought before a judge later Thursday or early Friday.
3) The official was speaking on condition of anonymity, in accordance with judicial policy. The trader was initially taken in for questioning on Wednesday morning and ordered to be held for 24 hours.
4) Caisse d'Epargne's top three executives quit after the losses became known on Oct. 17.
5) A Caisse d'Epargne spokesman has said the bank now calculates the loss was larger than the 600 million euros ($751.5 million) it initially announced. The spokesman declined to provide a new estimate, although the prosecutor's office has mentioned the loss would amount to 751 million euros ($940 million).
6) Paris prosecutors are investigating whether there are grounds for a possible legal case of breach of trust.
7) French Finance Minister Christine Lagarde said last week that an initial investigation discovered "serious holes" in the bank's system of controls.
8) Citing a preliminary report by France's banking commission, she said the losses came in complex trades far removed from the bank's core business.
9) The bank's own internal investigation found a large number of breakdowns in internal controls and said alerts had been disregarded, French news magazine Nouvel Observateur reported on its Web site Wednesday, citing a copy of the investigator's report that the magazine said it had obtained.
10) The losses drew comparisons with the much larger trading scandal suffered by another French bank, Societe Generale, earlier this year. Societe Generale took a 4.9 billion euro ($7 billion) hit closing what it says were unauthorized positions by former trader Jerome Kerviel.
French ex-trader wants deeper probe into bank loss
(APW_ENG_20090423.1318)
1) A former trader accused of causing huge losses at French bank Societe Generale has asked investigators to reopen a probe into the case to determine how much his bosses knew about his actions, his lawyer said Thursday.
2) Jerome Kerviel maintains that his superiors were aware of his risky transactions but looked the other way while he was earning big money for the bank, intervening only when he started to lose. The bank insists Kerviel was acting alone.
3) Two investigating judges wrapped up a yearlong probe into the case in January.
4) On Thursday, Kerviel's new lawyer, Olivier Metzner, asked the judges to assign a group of financial market experts to determine how much Kerviel's supervisors knew about the staggering euro800 billion in trades he handled over three years.
5) In an 18-page note to the judges, Metzner said the bank should have known about the trades via data from its internal control systems.
6) "Unless you claim that all of Jerome Kerviel's operational hierarchy was blind, all the recipients of this data, and they were numerous, could not help but see" what Kerviel was doing, Metzner said.
7) "Unless," he added, "they didn't want to look."
8) There was no immediate response from the investigating judges.
9) A lawyer for Societe Generale, Jean Veil, dismissed Metzner's note as a repetition of previous appeals by Kerviel's lawyers.
10) Kerviel shot to infamy in January 2008 after Societe Generale accused him of inflicting the French bank with a loss of euro4.9 billion in one of history's biggest trading scandals. The 32-year-old is facing preliminary charges for forgery, breach of trust and unauthorized computer use.
French bank Societe Generale posts 1Q loss
(APW_ENG_20090507.0542)
1) French bank Societe Generale said Thursday it returned to a loss in the first quarter after the further devaluation of assets linked to U.S. real estate caused it to take nearly euro2 billion ($2.7 billion) in new writedowns and provisions.
2) Paris-based Societe Generale, which had struggled to return to profitability last year after losing billions of euros in a massive trading scandal, reported a net loss of euro278 million in the first quarter, down from a euro1.1 billion profit a year earlier.
3) The bank, whose chairman announced his resignation last week, blamed the downturn in the U.S. real estate market, ratings downgrades of bond insurers, and what it called its own "tighter valuation assumptions" for euro1.5 billion in new losses and writedowns in its investment banking division.
4) Investors dumped the company's shares, and at midday the stock was down 4.3 percent at euro41.88.
5) Societe Generale's loss comes in stark contrast to larger French rival BNP Paribas, which Wednesday reported a quarterly profit of euro1.56 billion. In a statement, it forecast that the global economic recession would continue to weigh on banks' performance this year and said "Societe Generale will not be immune from this trend."
6) Speaking at a news conference at the bank's headquarters near Paris, CEO Frederic Oudea declined to explain why the financial crisis had hurt Societe Generale so much more than rivals like BNP Paribas in the first quarter.
7) "I haven' studied BNP's results line-by-line, but I believe they also took some depreciations," Oudea said, "I can't comment beyond that."
8) The bank's loss also contrasted with reassuring comments from the CEO over the first three months of the year. Presenting the 2008 results in February, Oudea said "Overall when I see how we entered 2009, I think we are in good shape in relative terms compared with our peers."
9) In its statement, Societe Generale predicted its cost of risk will remain high this year and didn't rule out additional writedowns, although those taken in the first quarter "already reflect the current deterioration in the U.S. real estate market and monoline (bond) insurer counterparties."
10) Societe Generale shares fell 18 percent during the first quarter, but have jumped 45 percent since then as stock markets have rebounded globally on hopes that the worst of the financial crisis is over.
11) The bank also said it has decided to participate in the second round of the French government's plan to recapitalize the country's banks. Societe Generale received euro1.7 billion in the first round last December, when France pumped a total of euro10.5 billion into six of the country's largest lenders.
12) The investment banking division reported a loss of euro414 million, down from earnings of euro141 million a year ago, while sales slumped 46 percent to euro841 million.
13) The bank's domestic retail banking business saw earnings slump 29 percent to euro216 million, on a 1 percent slide in revenue to euro1.73 billion.
14) Announcing his resignation last week, Societe Generale chairman Daniel Bouton said his aim in leaving was to protect the bank, and that it was "better for me to withdraw, proud of having led a wonderful company."
15) Bouton was Societe Generale's chief executive in January 2008, when the bank announced one of the world's largest trading scandals, which caused a massive loss. He stepped down as CEO last May but had remained as chairman.
16) Oudea is to take on the chairman's duties May 24, while keeping his job as CEO.
17) Splitting the two roles had been one of Societe Generale's responses to the firestorm that erupted at the bank in late January 2008, when it announced losses of almost euro5 billion (more than $7 billion) in the trading scandal it has blamed on unauthorized deals by a single trader, Jerome Kerviel.
18) Kerviel maintains that his superiors were aware of his risky transactions but looked the other way while he was earning big money for the bank, intervening only when he started to lose. The bank insists Kerviel was acting alone.
19) Two investigating judges wrapped up a yearlong probe into the case last January but have not yet announced any findings.
Lawyers hail ruling in SocGen trader case
(APW_ENG_20090901.1022)
1) Defense lawyers say France's top court has agreed to hear an appeal from former Societe Generale trader Jerome Kerviel before he can stand trial for alleged wrongdoing behind huge bank losses.
2) The lawyers said Tuesday that the Court of Cassation will hear their appeal for alleged "excess of power" by investigating judges. The defense insists magistrates relied too heavily on evidence provided by the bank.
3) The magistrates sent their case Monday to a Paris court, and a trial is expected in 2010.
4) Societe Generale said in January 2008 it lost nearly ⁈ion ($7.4 billion at the time) cleaning up what it said were unauthorized positions held by Kerviel.
5) The case exposed a culture of risk-taking blamed for feeding the financial crisis.
Societe Generale says Greek exposure is $3.9B
(APW_ENG_20100505.0372)
1) French bank Societe Generale SA said Wednesday its exposure to Greece's government debt is (EURO)3 billion ($3.93 billion) and it has tightened credit at its Greek unit in response to the financial crisis there.
2) The bank based in Paris said in a statement that the financial crisis had hurt the performance of its majority-owned Geniki Bank Greek subsidiary in the first quarter, and that it was tightening loan approval conditions there among other precautionary measures.
3) Societe Generale disclosed the Greek exposure alongside its first quarter earnings report which showed it made a net profit of (EURO)1.06 billion ($1.39 billion) in the period. That compared to a (EURO)278 million loss in the year-earlier quarter, when the bank's earnings were hammered by nearly (EURO)2 billion in writedowns and provisions on the devalued assets linked to U.S. real estate.
4) The bank warned that "the pick-up in activity in developed European countries is much less pronounced than in the other areas of the world," and said European governments' efforts to reduce public deficits and debt is likely to weigh on the zone's near-term economic prospects.
5) Societe Generale owns 54 percent of Athens' based Geniki Bank, which it bought in 2004. The Greek financial crisis that has spilled over into other parts of Europe "had a considerable impact" on the bank's performance in the first quarter, Societe Generale said.
6) "In light of this situation, the group has implemented a number of precautionary measures, in particular tightening its loan approval conditions and cutting costs," Societe Generale said.
7) Higher risk provisions due to the Greek crisis helped push earnings in Societe Generale's international retail banking division down 5.8 percent in the first quarter.
8) Corporate and investment banking, the largest contributor to Societe Generale's revenue and profit, benefited from a gradual return to pre-crisis market conditions, the bank said. The division posted net profit of (EURO)541 million in the quarter, compared to a (EURO)171 million loss in the year earlier period. Revenue rose 74 percent to (EURO)2.1 billion.
9) Societe Generale reconfirmed its aim to improve earnings this year, after 2009 earnings were slashed to (EURO)678 million from (EURO)2.01 billion in 2008, a year when governments pumped billions into banks to prevent further meltdown after some of Wall Street's most storied names collapsed.
10) Societe Generale slowly has been recovering from a trading scandal in 2008 that saw it lose billions of euros.
11) SocGen announced in January 2008 that it lost nearly (EURO)5 billion (more than $7 billion) unwinding what it said were unauthorized positions held be a single trader, Jerome Kerviel. The affair rattled an already uneasy banking sector and prompted widespread calls for tighter internal controls at banks.
12) Kerviel goes on trial next month, charged with forgery, breach of trust and unauthorized computer use. The former trader's legal team has insisted his higher-ups were aware of what he was doing and did not stop him as long as he made money for the bank -- charges the bank has always denied.
Accused French rogue trader Kerviel to stand trial
(APW_ENG_20100607.0282)
1) Jerome Kerviel says he's living the simple life these days. The former French trader accused of gambling away billions of his bank's money has a job in the suburbs making (EURO)2,300 ($2,700) a month. He doesn't take vacations. His adrenaline-fueled life on the trading floor seems far away.
2) Two and a half years after the scandal broke, Kerviel goes on trial in Paris on Tuesday, accused by Societe Generale SA of risking tens of billions of euros of its money in trades that led to nearly (EURO)5 billion (more than $7 billion) in losses once the bank unwound his positions in January 2008.
3) At the time it was considered history's biggest trading fraud, but it was soon dwarfed by a global financial crisis, the fall of Lehman Brothers and the Bernard L. Madoff multibillion-dollar Ponzi scheme.
4) Kerviel, the accused rogue trader, already has hammered out his defense in a book and interviews with French media, casting himself as an everyman who got carried away, a scapegoat for the bank, the victim of an out-of-control banking system.
5) It's a tactic that seems crafted to tap into popular discontent at a time of ongoing financial scandals and economic turmoil. His case destabilized the banking sector, already on the verge of the 2008 meltdown, and heightened pressure for better financial regulation, still high on today's agenda for governments worldwide.
6) Helping along that message is the 33-year-old's standing as an anti-hero in France. The son of a metalworker and a hairdresser, Kerviel grew up in the provinces and lacked the snooty education usually required for coveted trading jobs, yet he nonetheless managed to humiliate a banking powerhouse and expose the weakness of its controls.
7) A few bank executives resigned in the scandal's aftermath, including longtime Chairman Daniel Bouton. Kerviel's superiors were questioned in the probe, but none of them face charges.
8) Kerviel's dark-haired Gallic good looks also helped his mystique: T-shirts were sold proclaiming their wearers "Jerome Kerviel's girlfriend."
9) The former futures trader's defense contends his supervisors were aware of his risks but did not stop them as long as he was making money for Societe Generale. The bank denies that claim.
10) In Kerviel's book out last month, "L'Engrenage: Memoires d'un trader" ("The Spiral: Memoirs of a Trader"), he compared his former job to prostitution -- with his superiors eagerly counting his days' earnings -- and likened that milieu to a "great banking orgy."
11) Kerviel is charged with forgery, breach of trust and unauthorized computer use. He risks five years in prison as well as a fine of (EURO)375,000 ($448,000) if convicted.
12) Societe Generale lawyer Jean Veil told the Sunday paper Le Journal du Dimanche that the bank would also ask for (EURO)4.9 billion in damages, the amount lost in the scandal's aftermath, though he acknowledged that realistically Kerviel couldn't pay it. The massive sum earned Kerviel a nickname, "the 5-billion-euro man."
13) Among the defense arguments expected in court, Kerviel has argued that the bank was trying to deflect attention from subprime-related losses by making him a scapegoat.
14) Societe Generale secretly began unwinding some 50 billion euros ($78 billion) of Kerviel's positions on Jan. 21, 2008, when U.S. markets were closed because of Martin Luther King Day, putting massive pressure on futures markets and exacerbating its losses. That week was marked by turmoil in financial markets worldwide.
15) The bank revealed its actions three days later, when it also announced subprime-related writedowns and provisions of (EURO)2.05 billion. Societe Generale's legal team has said it is absurd to claim the bank was seeking to hide its subprime exposure.
16) Societe Generale has been gradually recovering from the trading scandal, but it's been an up-and-down ride. It successfully raised capital not long after the Kerviel affair broke, but then was hit by the global financial crisis in late 2008.
17) It weathered the meltdown better than some, and paid back its state loans early. This year the bank has faced another challenge -- (EURO)3 billion in exposure to Greek government debt -- but reported (EURO)1.06 billion in profit for the first quarter and is forecasting a profitable year.
18) The trial is expected to last through late June. Questions abound, including how Kerviel managed to cover up his risky trading for so long. An internal report by the bank has said managers failed to follow up on 74 different alarms about Kerviel's activities and queries from derivatives exchange Eurex.
19) And why did Kerviel take such huge risks? He is not believed to have profited personally -- he never made more than (EURO)100,000 annually, including his bonus -- and insists he only wanted to earn money for Societe Generale.
20) In an interview last month with Le Journal du Dimanche, Kerviel said his mother instilled him with a dogged sense of dedication to your job, and he often helped out in her hair salon. Kerviel has reportedly received media training for his "I'm just an average guy" strategy.
21) Asked, "How are you living these days?" Kerviel responded: "Modestly, like a lost of people," adding that he has a small apartment, doesn't go on vacation and earns (EURO)2,300 a month at a computer services company outside Paris.
French court probes trader Kerviel ' s risk-taking
(APW_ENG_20100609.0899)
1) Judges trying French futures trader Jerome Kerviel probed Wednesday how he could have overstepped his authority so completely as to wind up gambling tens of billions of euros (dollars) of Societe Generale's money.
2) When his trial opened Tuesday, Kerviel argued that he never hid what he was doing from his bosses, who sat close to him in the trading room. The scandal cost (EURO)5 billion (more than $7 billion at the time) in losses once the bank unwound Kerviel's positions in January 2008.
3) Kerviel's lawyers argue that his superiors tacitly encouraged his massive risk-taking as long as he made money. The bank denies that claim, insisting that Kerviel methodically concealed his tracks.
4) The 33-year-old trader is not accused profiting personally from his huge trades, and he insists he only wanted to make money for the bank.
5) Kerviel's defense team also paints him as a pawn of an out-of-control banking system that encouraged massive risk-taking in the pursuit of ever-greater profits -- a system that has since imploded. His case gave a taste of the much larger banking crises to come, from the fall of Lehman Brothers to Bernard L. Madoff's multibillion-dollar Ponzi scheme.
6) Societe Generale stunned the banking world when it accused Kerviel of massive fraud in 2008. It said Kerviel overstepped his authority and bet 50 billion euros ($73 billion) -- more than the bank's market value -- on futures in European equity markets. The risk limit for Kerviel's entire 8-member trading team was only (EURO)125 million.
7) Asked by the head judge if he was mandated to bet tens of billions, Kerviel responded "Probably not." Then he amended his response: "Certainly not."
8) Kerviel is accused of concealing his actions by balancing out his real trades with fictitious transactions. The bank spent days quietly unwinding his positions before it announced the scandal to the markets.
9) Kerviel said Societe Generale traders often overstepped their limits, adding, "we were never given a hard time" by managers.
10) The former chairman of the French stock market regulator, Jean-Francois Lepetit, testified Wednesday that traders did occasionally go over their limits but were obligated to inform their supervisors immediately.
11) "There is no justification for remaining silent," he said. "If you go over your limits and you don't say it, you are at fault."
12) Questions remain about how the bank missed so many warning signals about Kerviel. An internal report by the bank said managers failed to follow up on 74 different alarms about Kerviel's activities.
13) The former futures trader faces a possible five years in prison as well as a (EURO)375,000 ($450,000) fine if convicted on charges of forgery, breach of trust and unauthorized computer use.
14) The bank, a civil party, is also asking for nearly (EURO)5 billion in damages -- the amount lost in the scandal -- even though Kerviel could never pay that amount.
Kerviel goes on offensive on trial ' s second day
(APW_ENG_20100609.1172)
1) The former trader accused of nearly toppling France's Societe Generale argued in court Wednesday that he didn't invent the tricks that allowed him to gamble tens of billions of euros (dollars) of the bank's money, insisting that such practices were tolerated by management.
2) Jerome Kerviel used his second day in court to try to turn the tables on his former employer, portraying himself as a pawn and casting his bank as an anything-goes place where he was encouraged to take massive risks until the scandal broke in January 2008. Societe Generale strongly denies his claims.
3) The 33-year-old former futures trader eventually bet (EURO)50 billion ($73 billion at the time), even more than the bank's market value.
4) One of Kerviel's former bosses, visibly riled by the defense strategy, called him a liar who has never apologized for putting the bank at risk.
5) "Jerome Kerviel is not Robin Hood," Jean-Pierre Mustier, the bank's former head of corporate and investment banking, testified. "Jerome Kerviel is the trader who lost the largest amount of money in the world."
6) Kerviel, the son of a hairdresser and a metalworker, has become an anti-hero in France for humiliating one of the country's most powerful financial institutions and revealing the weakness of its risk controls. Internationally, his case is fodder for those seeking greater regulations in the industry.
7) The scandal cost the bank (EURO)5 billion (more than $7 billion at the time) in losses once Societe Generale SA unwound Kerviel's positions in January 2008. It remains the largest-ever alleged fraud by a single trader, though it has since been dwarfed by other crises in the financial world, from the fall of Lehman Brothers to Bernard L. Madoff's multibillion-dollar Ponzi scheme.
8) On Wednesday, judges probed how Kerviel could have overstepped his authority so completely as to wind up betting tens of billions of euros (dollars), and how the bank failed to stop him sooner.
9) While accusing the bank of encouraging him, Kerviel -- relaxed and tieless -- nonetheless admitted mistakes of his own.
10) "I recognize that it was completely idiotic," he told the court, referring to his gambles in general.
11) When the head judge asked if he was mandated to bet such sums, Kerviel responded "Probably not." Then, somewhat sheepishly, he added: "Certainly not."
12) But Kerviel insisted that his superiors accepted his tricks -- such as covering up his huge positions with fictional trades that appeared to balance them out.
13) "I'm not the one who invented them, others did it too," he said, without naming names. He added, "These practices were known and recognized by management."
14) The bank strongly denies that Kerviel's bosses knew what he was doing.
15) "The hierarchy didn't know," said Mustier, Kerviel's former boss, who left the bank amid an unrelated insider trading probe. "The hierarchy is me ... Mr. Kerviel is lying, like he lied to me all the time."
16) Questions remain about how managers failed to follow up on 74 different alarms about Kerviel's activities -- bank official Claire Dumas said the warnings went unnoticed because they were sent to many different departments.
17) The accused rogue trader faces a possible five years in prison as well as a (EURO)375,000 ($450,000) fine if convicted on charges of forgery, breach of trust and unauthorized computer use.
18) The bank, a civil party, is also asking for nearly (EURO)5 billion in damages, though Kerviel could never pay that amount.
19) Kerviel is not accused profiting personally from his huge trades. His motive -- beyond the hope of a few hundred thousand euros (dollars) bonus -- remains the great mystery of the case. The ex-trader says he only wanted to make money for the bank.
20) Jean Veil, lawyer for Societe Generale, said Kerviel's explanations were "muddled."
21) "He keeps saying he did it as a gift to the bank," Veil said. "But the thing with gifts is that you eventually have to give them. He never did."
Kerviel ' s last day in French trading trial
(APW_ENG_20100625.0811)
1) Lawyers for accused rogue trader Jerome Kerviel contended Friday that Societe Generale had the means to track soaring bets that cost the French banking giant billions -- and stop him.
2) On the final day of Kerviel's trial, the defense turned on its head the prosecutor's accusation that the 33-year-old trader was a "manipulator, a trickster, a liar."
3) Defense lawyer Olivier Metzner said in closing arguments Friday that Kerviel was "trained, fabricated" by Societe Generale, the bank's creature "in a virtual world where numbers no longer have any value."
4) The soft-spoken Kerviel has maintained throughout the trial that the bank tolerated his massive risk-taking as long as he was making money, a claim the bank denies.
5) Kerviel had bet up to (EURO)50 billion ($73 billion at the time) of the bank's money, costing Societe Generale nearly (EURO)5 billion once it unwound his positions in January 2008 -- one of history's biggest trading frauds.
6) Kerviel is charged with forgery, breach of trust and unauthorized computer use. He risks a maximum 5 years in prison with no possibility of early release and a (EURO)375,000 fine.
7) The prosecutor asked the court to convict Kerviel and sentence him to four years in prison and a one-year suspended sentence.
8) The verdict is expected Oct. 5.
9) Since the start of the trial, the court has tried to peel away what the prosecution claims is Kerviel's facade and understand why he gambled sums of money that went beyond what the bank authorized.
10) During the 3-hour-long defense plea, Kerviel's lawyers, assisted by computers, tried to show that the bank was able to track the trader's actions as he bet on exotic derivatives.
11) A question that has haunted the trial was put forth on the first day of the proceedings by presiding Judge Dominique Pauthe: "Who are you, Monsieur Kerviel?"
12) Defense attorney Nicolas Huc-Morel retorted on the final day: "There is no Kerviel mystery but a Societe Generale mystery," the mystery of what guided the bank.
13) For the leading defense attorney, Olivier Metzner, Kerviel never put the bank in danger, because the bank put itself in danger with its risky products and negligent oversight. Kerviel did not embezzle money, but simply went beyond the limits "of the immaterial," Metzner said. "He committed a grave professional error, not a penal infraction."
14) The bank says Kerviel made bets of up to (EURO)50 billion -- more than the bank's market capitalization -- on futures contracts on three European equity indices, though his net position appeared unremarkable because he balanced his real trades with fictitious transactions.
15) Still, an internal report by the bank has said managers failed to follow up on 74 different alarms about Kerviel's activities.
Ex-French trader must pay $6.7 billion for fraud
(APW_ENG_20101006.0007)
1) Ex-trader Jerome Kerviel was convicted on all counts in history's biggest rogue trading scandal, sentenced to at least three years in prison and ordered to pay his former employer damages of (EURO)4.9 billion ($6.7 billion) -- a sum so staggering it drew gasps in the courtroom.
2) The court rejected defense arguments that the 33-year-old trader was a scapegoat for a financial system gone haywire with greed and the pursuit of profit at any cost -- a decision sure to take some pressure off the beleaguered banking system overall.
3) By ordering a tough sentence for a lone trader, Tuesday's ruling marked a startling departure from the general atmosphere of hostility and suspicion about big banks in an era of financial turmoil. It was a huge victory for Kerviel's former employer Societe Generale SA, France's second-biggest bank, which long had a reputation for cutting-edge financial engineering and has put in place tougher risk controls since the scandal broke in 2008.
4) Kerviel maintained that the bank and his bosses tolerated his massive risk-taking as long as it made money -- a claim the bank strongly denied.
5) "I have the feeling Jerome Kerviel is paying for an entire system," said Olivier Metzner, Kerviel's lawyer, noting that his client hadn't benefited financially from the fraud.
6) Kerviel stood expressionless as the court convicted him and pronounced a five-year sentence with two years suspended. Kerviel was found guilty on charges of forgery, breach of trust and unauthorized computer use for covering up bets worth nearly (EURO)50 billion between late 2007 and early 2008. He was also banned for life from working in the financial industry.
7) In the most stunning blow, the court ordered Kerviel to pay the bank back the (EURO)4.9 billion that it lost unwinding his complex positions in January 2008 -- a punishment nobody realistically expects him to repay.
8) It's the equivalent of 20 Airbus A380 superjumbo jets, or the entire gross domestic product of the west African nation of Benin.
9) French media calculated that -- based on his current salary of (EURO)2,300 ($3,150) a month as a computer consultant -- it would take Kerviel 177,536 years to pay off the damages.
10) The sentence "is more symbolic than real" said Bradley Simon, a white collar criminal defense attorney, "because he will never be able to pay even a tiny fraction" of the amount.
11) Simon, a New York-based former federal prosecutor turned white-collar criminal defense attorney, said the decision was "breathtaking."
12) "One low-level individual must bear the total responsibility for the near-demise of a pillar of the French financial system," Simon said. "This judgment ignores what we now know to be the real case, that Societe Generale and financial institutions throughout the world were encouraging risky trades."
13) Kerviel's lawyer said he would appeal and will remain free pending that appeal. The damages are also suspended during the appeals process.
14) Paris lawyer Emmanuelle Kneuse, who works on white-collar crime cases, said the damages were the largest she could recall in France.
15) If the prison sentence and huge damages are maintained on appeal, that would likely force Kerviel to promise substantial monthly payments to secure his release on parole, she said.
16) Societe Generale spokeswoman Caroline Guillaumin called the verdict "an important ruling that acknowledges the moral and financial harm done to the bank and its staff."
17) "The bank can now turn the page, pursue its strategy and continue to rebound," Guillaumin said in an e-mailed statement.
18) Kerviel sat with his arms folded and his legs crossed during the first 45 minutes of the hour-long hearing, alone in the front row of the courtroom. He barely blinked as each guilty verdict was read out. He then stood for sentencing in a dark suit and tie, frowning and silent.
19) "He is disgusted," Metzner said of Kerviel's reaction, adding the court had judged the bank "was responsible for nothing, not responsible for the creature that it had created."
20) "I hope you all will donate a euro to Jerome Kerviel," the lawyer told TV cameras and reporters.
21) Kerviel, a soft-spoken and debonair man from western Brittany, has garnered considerable public appeal in France for his image of being a scapegoat for powerful corporate interests.
22) While trading for the bank, Kerviel took home a salary and bonus of less than (EURO)100,000, or about $155,700 -- a relatively modest sum in the financial world.
23) In 2007, Kerviel amassed (EURO)1.4 billion in profits for Societe Generale, the presiding judge noted.
24) But in the end, the bank's loss of (EURO)4.9 billion stands as the largest-ever alleged fraud by a single trader, though the case has since been overshadowed by other financial world crises, from the fall of Lehman Brothers to Bernard L. Madoff's multibillion-dollar Ponzi scheme.
25) During the proceedings, both sides admitted to mistakes. Kerviel insisted his bank superiors knew what he was doing, which the bank denied. Societe Generale's former chairman acknowledged there were problems in monitoring the trader's work, and an internal report by the bank found managers failed to follow up on 74 different alarms about Kerviel's activities.
26) The bank says Kerviel made bets of up to (EURO)50 billion -- more than the bank's total market value -- on futures contracts on three European equity indices, and that he masked the size of his bets by recording fictitious offsetting transactions.
27) In the ruling, the court said Kerviel acted without the bank's knowledge and said it was "obvious" none of his bosses would have allowed him to bet sums exceeding the bank's capital.
28) "Through his deliberate actions, he endangered the solvency of a bank that employed 140,000 people including himself, and whose future was seriously put at risk," the ruling said.
29) No one else faced charges in the case. The bank's CEO Daniel Bouton and its head of investment banking Jean-Pierre Mustier stepped down in the wake of the scandal, with Bouton saying attacks on him risked hurting the bank.
30) The bank's earnings crumpled in 2007 after taking into account the losses on Kerviel's trades. Its profit rebounded in 2008 but were cut by more than half last year when the bank was hit by billions in new losses stemming from bad bets prior to the financial crisis. This year the bank's earnings have bounced back, thanks to strong retail banking in its home market.
31) Employed by Societe Generale since 2000, Kerviel worked his way up from a supporting role in an office that monitors trades to a job on the futures desk where he invested the bank's money by hedging on European equity market indices.
32) He was arrested in January 2008 and held for six weeks in Paris' La Sante prison.
33) Societe Generale's shares rose after the announcement of the verdict, closing up 3.6 percent at (EURO)42.33 (US$58.33).
34) Kerviel's fraud eclipsed that of previous lone traders.
35) In one infamous case, Nick Leeson, a British trader working in Singapore for Barings Bank, made unauthorized futures trades that lost more than $1 billion and led to the venerable bank's collapse in 1995. That case prompted banks worldwide to tighten their internal checks.
36) Leeson was released from a Singapore jail in 1998 for good behavior after serving 3 1/2 years of a 6 1/2-year sentence. He claimed he did not make a cent from his disastrous trades but is still subject to an injunction from Barings' liquidators that seeks the return of 100 million pounds on any of his earnings relating to Barings.
37) Leeson's agent said Tuesday the former trader was willing to do an exclusive interview on the Kerviel verdict -- in exchange for a fee.