July 23, 2008 / 7:22 PM / 11 years ago

Kerviel lawyer plans new defense of rogue trader

PARIS (Reuters) - The new legal team for Jerome Kerviel, the banker blamed for a record rogue trading scandal, said on Wednesday it had a new defense strategy to put more pressure on Kerviel’s former employer, Societe Generale (SOGN.PA).

Bernard Benaiem, Kerviel’s new principal lawyer, said he would focus more on the role of Societe Generale, France’s second-biggest listed bank, which posted record losses as a result of the Kerviel debacle.

On Jan 24, Societe Generale unveiled 4.9 billion euros ($7.7 billion) of losses that it said were caused by rogue deals carried out by Kerviel, then a 31-year-old junior trader.

The losses rocked world markets and eclipsed those of previous trading scandals, such as Nick Leeson’s rogue trades that toppled British merchant bank Barings in 1995.

Following a court hearing on Wednesday, Benaiem told reporters his team had focused on a decision in July by France’s Banking Commission to fine SocGen 4 million euros for serious breaches of internal controls over the Kerviel affair.

“This has allowed us to highlight a certain number of mechanisms that Kerviel has already criticized and which are today set in stone,” he said.

Kerviel was freed from prison in March after an appeal against his detention, but he remains under formal investigation for breach of trust, computer abuse and falsification.


There have been several hearings in the case, but Wednesday marked one of Kerviel’s first public appearances since he left La Sante prison in Paris in March.

Flanked by four lawyers and wearing a grey suit and tie, Kerviel ate at a pizza restaurant nearby before striding confidently toward the court. He declined to comment to reporters.

Also present at Wednesday’s hearing was Christophe Mianne, one of the top managers of the SocGen equity derivatives division in which Kerviel had worked.

SocGen lawyer Jean Veil declined to comment to reporters after the hearing, although before the hearing he expressed surprise at the change of strategy from Kerviel’s camp.

One key aspect of the case is to determine to what extent SocGen might have been negligent in its supervision of Kerviel.

SocGen has published several internal reports on the Kerviel affair. These reports show Kerviel started building up non-authorized trading positions in 2005 and 2006 for “small amounts,” which got bigger from March 2007 onward.

By the time SocGen discovered what was going on in late January, Kerviel had amassed a position worth 49 billion euros — greater than SocGen’s own stock market value. The French bank had to unwind this position between January 21 and January 23 into an already falling stock market.

Kerviel managed to evade the scrutiny of top managers despite having raised alarms with derivatives exchange Eurex in 2007 and despite having been the subject of more than 70 “alert” warnings within SocGen itself.

In May, a SocGen report said Kerviel may have had help from an assistant but added there was no conclusive proof of this.

Benaiem said his defense of Kerviel would probe SocGen’s unwinding of the trading position built up by Kerviel.

Earlier this month Kerviel decided to change lawyers, ousting Elisabeth Meyer and bringing in the new team.

Along with Benaiem, the other lawyers working on his defense are Caroline Wassermann, Guillaume Selnet, Eric Dupond-Moretti, Francis Tissot and Eric Hemmerdinger.

Since April, Kerviel has been working at French software company LCA, near Paris. LCA founder Jean-Raymond Lemaire let Kerviel stay at his house just after the scandal broke.

(Editing by John Wallace)

$1=.6356 Euro

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