Société Générale Blew Chances To Nab Trader

["Richard M. Smith" <rms () computerbytesman com>]

http://online.wsj.com/article/SB120151007395521821.html?mod=todays_us_page_o
ne
 

Société Générale Blew Chances To Nab Trader

Kerviel Said to Fake 
Counterparts' Emails; 
Talk Rises of Takeover
By DAVID GAUTHIER-VILLARS and CARRICK MOLLENKAMP
January 29, 2008; Page A1


PARIS -- Société Générale's account of how a rogue trader triggered billions
of dollars in losses is coming under strain, as it emerges that his risky
trades may have begun over a year earlier than the bank has said and
warnings were repeatedly missed.

Jérôme Kerviel, whom the bank has portrayed as an ingenious fraudster,
sometimes used simple tricks to cover his tracks, according to investigators
on the case. One of them was to fabricate email messages from nonexistent
trading partners to deflect supervisors' concerns about unusual trades, a
police official said.

Société Générale's woes are making it vulnerable to potential predators,
especially as its stock has fallen to a three-year low. France's largest
bank, BNP Paribas, has started preliminary internal talks over whether to
make a takeover bid for its smaller rival, according to a person familiar
with the matter.

Following Société Générale's disclosure last week of a $7.2 billion loss,
the biggest individual trading hit in banking history, French authorities
placed Mr. Kerviel under formal investigation yesterday on charges of
forgery, breach of trust and breaking into computer systems. But judges
won't investigate Mr. Kerviel for alleged fraud, and his lawyer said he had
been released from custody.

Discussing the case for the first time in public, prosecutor Jean-Claude
Marin said Mr. Kerviel was trying to make his name as a trader, not rob a
bank. Mr. Kerviel's positions at the end of 2007 amounted to a nominal gain
of $2.2 billion before the markets turned against him this month, said Mr.
Marin.

"He lost control," Mr. Marin told a news conference, likening trading to "a
drug" and "an addiction." Relaying information collected during two days of
questioning Mr. Kerviel, the prosecutor said the trader's risky transactions
began in late 2005. The bank had said the irregularities began last year.
Mr. Marin also said that Mr. Kerviel admitted to disregarding the bank's
limits on how much risk he could take. But Mr. Kerviel said other traders
flouted the rules too, according to Mr. Marin.

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