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.
“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.
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)