New arrest in SocGen trading scandal

By Sudip Kar-Gupta and Yann Le Guernigou

PARIS (Reuters) - Police arrested another employee of French bank Societe Generale on Wednesday as they probe the world's biggest rogue trading scandal, Paris prosecutors said.

The arrest came as a U.S.-based law firm said it had filed a class action suit against SocGen, alleging France's second-biggest listed bank misled investors about its exposure in the subprime mortgage markets and failed to act on information about trades by Jerome Kerviel.

In January, SocGen unveiled 4.9 billion euros ($7.53 billion) of losses which it blamed on rogue deals carried out by Kerviel, a 31-year old junior trader at the bank.

The trading losses and writedowns related to the credit market turmoil have made SocGen, whose market capitalization stands at over 30 billion euros, a possible bid target.

The latest person arrested in the trading scandal was working for a subsidiary of SocGen, the Paris prosecutor's office said.

A source close to the matter said the person being held works for SG Securities, the bank's share brokerage arm.

SocGen declined to identify the person or the division.

A spokeswoman for the bank said police had searched SocGen's trading room at its glass-fronted headquarters in the capital's La Defense financial district on Wednesday.

She confirmed one person was being held for questioning.

Europe 1 radio said the person arrested on Wednesday was one of Kerviel's friends listed on the Facebook Internet social networking site. The same person's profile on another networking site said he had worked at the bank since 2006.

The investigation has focused on whether or not Kerviel had any accomplices.

SocGen published an internal report on February 20, which supported its view that Kerviel acted alone although it also highlighted flaws in SocGen's risk controls.

KERVIEL HEARING

The fresh arrest comes ahead of a hearing on Friday on whether Kerviel should remain in custody.

Kerviel has been placed under investigation for breach of trust, computer abuse and falsification. He is being held in a Paris prison after a decision to grant bail was overturned.