Quote:
He is 31, a lowly paid employee, and said to be a loner. But in perpetrating the greatest banking fraud in history, could Jerome Kerviel really have acted alone?
It is just one of the questions swirling around the world's money markets as they try to digest the impact of the 4.9 billion ($NZ9.4 billion) defrauding of Societe Generale, France's second-largest bank.
Financiers are also asking whether the bank's desperate attempt to unravel Kerviel's trading positions on Monday provoked the stockmarket turmoil, in which prices fell 7 per cent across Europe. And why is Kerviel nowhere to be found?
Last Friday, a control officer at the bank noticed something odd on the computer: a trade that exceeded the bank's limits. A further check and a phone call revealed something far more shocking - the trade did not exist. Working "24 hours out of 24" at the weekend, said the bank's chairman, Daniel Bouton, shocked bank officers discovered the fraud and its perpetrator.
What was astonishing was that Kerviel had lost so much money using a basic and normally easily traceable product - "plain vanilla futures" - at a bank with a good reputation for risk management.
On Saturday, Bouton summoned Kerviel to the bank's headquarters. The trader confessed to the fraud and assisted the investigation all weekend. On Sunday bank chiefs sacked him, then, inexplicably, let him walk out the door.
While the governor of the Bank of France, Christian Noyer, said he had been told Kerviel was "on the run", Kerviel's lawyer, Elisabeth Meyer, said on Thursday that he had been in her offices that week and was ready to face justice.
The crime was unbelievable, said Noyer. He called Kerviel a "computer genius" and "a genius of fraud".
He is also "a fragile being
without particular brilliance" and going through "family difficulties", according to a bank human resources manager quoted by Agence France-Presse. In another report, he had suffered a recent death in the family and had been unable to take a holiday for more than a year.
A senior bank executive, Jean-Pierre Mustier, insisted that Kerviel had acted alone. Yet while the French Prime Minister, Francois Fillon, backed the bank's account, a member of his Council of Economic Analysis, Professor Elie Cohen, said: "The sentiment in the stockmarket is that it is not possible that a lone individual could have done that."
Whatever the truth, Kerviel is no conventional criminal. "He didn't make a cent, this wasn't done to get rich," Philippe Collas, of the bank's global investment management division, told reporters. "What was his motive? I don't know, maybe he wanted to prove himself."
If so, Kerviel's crime would bear an uncanny resemblance to the defrauding of Barings by British trader Nick Leeson. "The one thing I wanted was success, and my biggest fear was fear of failure," Leeson said on Thursday. Both men had worked in their bank's back office, and used knowledge obtained there to avoid detection. Both amassed huge losses in the days before they were caught. Neither made personal profit from their trades.
Leeson's losses - a mere fifth of Kerviel's - nonetheless led to Barings' collapse in 1995, and provoked banks to install compliance procedures that should have prevented Kerviel's fraud. But it was his intimate knowledge of such procedures that enabled the trader to escape notice for so long.
After Kerviel joined the back office in 2000, he learnt how the bank checked on traders' activities and when. In 2006 he became a trader - the beneficiary of a scheme to promote back office staff - on a modest salary of 100,000 a year.
He was a restricted trader, no Gordon Gecko. But last year he began to bet on equity derivatives, or future movements in stock markets. As his bets got bigger, he created fictitious hedging positions to cover his tracks. He also reportedly logged into computers in the names of other employees to falsify accounts.
The fraud was "very simple in its techniques but extremely sophisticated in his method of hiding it", Bouton said. The concealment required brilliant knowledge of computers and the times at which compliance officers would monitor traders - both learnt in the back office - so that he could stay a step ahead.
Essentially, Kerviel bet against traders at other banks that the market would rise. Collas said that by the end of December, he was "massively in the money". But as the stockmarket turned down this year, Kerviel's losses grew. He began to create fictional profits to conceal them. It was one of these that reportedly led to his discovery.
On Monday, Societe Generale began to close Kerviel's open bets that the market would rise. But Monday was the very day global markets plunged, forcing the bank to accept a 4.9 billion loss.
The bank rejected widespread speculation that its selling had caused the market to fall, saying it had only sold about 10 per cent of trading volumes.
Societe Generale has taken a huge hit to its reputation. Legal actions from shareholders are likely. Colette Neuville, president of France's Association of Minority Shareholders, told Le Monde she was "stupefied" by the fraud. "It is as if someone was driving the wrong way up a motorway and nobody noticed."
If so, Kerviel's crime would bear an uncanny resemblance to the defrauding of Barings by British trader Nick Leeson. "The one thing I wanted was success, and my biggest fear was fear of failure," Leeson said on Thursday. Both men had worked in their bank's back office, and used knowledge obtained there to avoid detection. Both amassed huge losses in the days before they were caught. Neither made personal profit from their trades.
Leeson's losses - a mere fifth of Kerviel's - nonetheless led to Barings' collapse in 1995, and provoked banks to install compliance procedures that should have prevented Kerviel's fraud. But it was his intimate knowledge of such procedures that enabled the trader to escape notice for so long.
After Kerviel joined the back office in 2000, he learnt how the bank checked on traders' activities and when. In 2006 he became a trader - the beneficiary of a scheme to promote back office staff - on a modest salary of 100,000 a year.
He was a restricted trader, no Gordon Gecko. But last year he began to bet on equity derivatives, or future movements in stock markets. As his bets got bigger, he created fictitious hedging positions to cover his tracks. He also reportedly logged into computers in the names of other employees to falsify accounts.
The fraud was "very simple in its techniques but extremely sophisticated in his method of hiding it", Bouton said. The concealment required brilliant knowledge of computers and the times at which compliance officers would monitor traders - both learnt in the back office - so that he could stay a step ahead.
Essentially, Kerviel bet against traders at other banks that the market would rise. Collas said that by the end of December, he was "massively in the money". But as the stockmarket turned down this year, Kerviel's losses grew. He began to create fictional profits to conceal them. It was one of these that reportedly led to his discovery.
On Monday, Societe Generale began to close Kerviel's open bets that the market would rise. But Monday was the very day global markets plunged, forcing the bank to accept a 4.9 billion loss.
The bank rejected widespread speculation that its selling had caused the market to fall, saying it had only sold about 10 per cent of trading volumes.
Societe Generale has taken a huge hit to its reputation. Legal actions from shareholders are likely. Colette Neuville, president of France's Association of Minority Shareholders, told Le Monde she was "stupefied" by the fraud. "It is as if someone was driving the wrong way up a motorway and nobody noticed."
