Ex-trader Kerviel sentenced to 3 years in jail

PARIS Tue Oct 5, 2010 4:26pm EDT

Former trader Jerome Kerviel arrives at Paris courts for the verdict in his trial, as he faces charges of breach of trust, computer abuse and forgery, October 5, 2010. REUTERS/Charles Platiau

Former trader Jerome Kerviel arrives at Paris courts for the verdict in his trial, as he faces charges of breach of trust, computer abuse and forgery, October 5, 2010.

Credit: Reuters/Charles Platiau

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PARIS (Reuters) - Former Societe Generale trader Jerome Kerviel was sentenced to three years in jail by a Paris court on Tuesday for his role in a trading scandal and ordered to pay the French bank 4.9 billion euros ($6.8 billion).

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

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

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

The payment to SocGen equates to 3.2 percent of France's central government deficit for 2010, the GDP of Monaco or 16 percent of the French bank's market value. Kerviel is currently paid 2,300 euros a month as a technology consultant.

EXCEPTIONAL DAMAGE

"Kerviel will never be able to repay this sum, but the fact that the punishment was imposed vindicates (SocGen's) position," said Bruno Quentin, partner at French law firm Gide, Loyrette & Nouel.

A SocGen spokeswoman said the amount awarded showed clearly "the exceptional damage suffered by the bank and its employees."

She declined to comment on whether the bank would press for repayment because -- as with the jail sentence -- the verdict is suspended until the end of the appeal process.

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

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

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

"Kerviel knowingly went beyond his remit as a trader," presiding judge Dominique Pauthe told the court.

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

Pauthe added that Kerviel knew exactly what he was doing in overstepping his remit and that he sought to hide his trading positions.

LINE IN SAND

Tuesday's verdict draws a line in the sand for SocGen, which has worked to clean up its image and tighten risk controls since the scandal broke in 2008.

The bank said Kerviel acted alone and egregiously in taking unauthorized positions worth 50 billion euros that cost 4.9 billion to unwind.

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

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

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

"The accident we had has made us more aware... I think the bank will move on after today," Alberto Valenzuela, Deputy CEO of Societe Generale Private Banking (Suisse) SA and Global Market Manager for Latin America, told a Reuters Global Private Banking Summit on Tuesday.

(Additional reporting by Matthieu Protard and Thierry Leveque; Editing by James Regan, Mike Nesbit)

($1=.7261 euros)

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Comments (6)
humantrick wrote:
Reimbursing 4,9 billion euros? The court thinks it’s possible for an individual to do that?

Oct 05, 2010 5:43am EDT  --  Report as abuse
GA_Chris wrote:
This is typically French… The bank is corrupt, with many execs having been to “Science Po”, the elite school which almost all politicians go to. There were no controls at the bank and the risks he took were overlooked when he made a profit, and now he is being hung out to dry by a judge who no doubt had already determined the outcome before the case started.
His actions are inexcusable, but he was a low down pion in the machine, and the senior management needs to take responsibility. If he is required to pay back the $5bn, then SocGen should pay him the ~$10bn profit they made on these same kind of trades the year before

Oct 05, 2010 6:35am EDT  --  Report as abuse
milkel wrote:
Re: Humantrick’s remark……This is known as Court’s intelligence. While handing over the verdict, the court will only consider how much money he has to pay back, disregarding the source from where he can possibly raise that amount.
It serves as a valid claim and ranks higher than other claims like creditors for personal loans, etc. in case Kerviel declares himself bankrupt.
Obviously, he cannot raise than amount even if he works for his lifetime, that is a known fact, but assuming he hits a jackpot in future, the court will have first right of recovery of that amount.

Oct 05, 2010 9:04am EDT  --  Report as abuse
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