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UPDATE 3-French court upholds rogue trader Kerviel's jail term, overturns giant fine
March 19, 2014 / 11:17 AM / in 4 years

UPDATE 3-French court upholds rogue trader Kerviel's jail term, overturns giant fine

* Kerviel’s risky bets cost Societe Generale billions

* Appeals court leaves him facing three years in jail

* Ruling quashes 4.9 bln euro fine, sets off new court process

* New process will look at SocGen’s share of blame

* SocGen tax exemption on losses could be affected-lawyer (Adds comments from lawyers Mabrouk Sassi and Jean Veil)

By Lionel Laurent and Chine Labbé

PARIS, March 19 (Reuters) - France’s highest appeal court upheld a three-year jail term for former Societe Generale trader Jerome Kerviel on Wednesday but quashed the giant fine he faced for making the risky bets that cost the bank billions to unwind in 2008.

The Court of Cassation ruling upheld previous court verdicts that said the 37-year-old former trader had acted alone, without SocGen’s knowledge, in building up huge positions of around 50 billion euros ($70 billion) that brought the bank to the brink of collapse in the midst of the financial crisis.

However, the Court of Cassation also ruled that Kerviel was no longer liable to pay SocGen 4.9 billion euros ($6.8 billion) in civil damages to compensate the French bank for its losses, saying that the last appeals verdict in 2012 had highlighted SocGen’s own risk-control failures, yet had not quantified their share of the blame.

The size of the fine, which essentially meant the bank could have had a lifetime claim on Kerviel’s income, had caused an outcry from the public and some politicians who saw it as excessive.


A new civil trial is now due to take place at the Versailles Appeals Court to decide on the eventual damages Kerviel should pay and it is likely that SocGen, which according to the courts was always a victim, will face further scrutiny over its risk controls at the time of Kerviel’s trades.

This may cost SocGen financially, according to one independent lawyer. The bank was legally entitled to a 1.7 billion-euro tax deduction against Kerviel’s losses, but if the new trial apportions significant blame to the bank, it may find itself facing a new tax bill.

“There may be repercussions for the tax situation,” said Mabrouk Sassi, a Paris-based lawyer specialising in tax and company law.

“It will all depend on the figure attributed to SocGen’s responsibility. If it is marginal, say 5 percent of the losses, it’s not serious. But if it becomes half, then it’s colossal. The tax authorities will decide in the end.”

SocGen’s lawyer, Jean Veil, played down this possibility, saying that the relevant fiscal jurisprudence would not apply.

Kerviel has spent three years fighting to overturn his conviction for breach of trust, forgery and fraudulent data manipulation. He has never denied masking his 50 billion euro positions, but has accused his bosses of knowing what he was doing. SocGen, meanwhile, insisted Kerviel had acted alone.

Kerviel and his lawyer David Koubbi have since February used social media websites and traditional press outlets to portray the looming verdict as one individual’s struggle against high finance, with Kerviel even meeting the Pope and embarking on a march on foot from Rome to Paris.

Despite the upholding of the jail sentence, Kerviel told reporters in the northern Italian town of Modena that the quashing of the fine was good news.

“It’s really great news. All I will say is that I am going to continue walking,” he said, dressed in red outdoor gear and sporting a beard. “The fight goes on.”

Koubbi also claimed victory and told reporters he would ask the Versailles appeals court to investigate SocGen’s conduct. SocGen’s lawyer, Jean Veil, disagreed, saying, “We do not at all feel that we have lost this case.”

Kerviel was originally convicted in 2010, and during a retrial in 2012, Koubbi said his client had been a victim of a conspiracy of “powerful” French elites.

But with little in the way of new “smoking-gun” evidence from the defence team, the original appeals court sided with SocGen and laid the blame exclusively at Kerviel’s feet.

Kerviel’s defence team said it would take from two weeks and a month before the court officially notifies him of its ruling, at which point he would have to start serving his sentence. ($1 = 0.7188 euros)

Additional reporting by Antonio Denti; Editing by Mark Heinrich and Greg Mahlich

Our Standards:The Thomson Reuters Trust Principles.
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