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French Bank Accuses Trader Held in Fraud Probe of Evading Controls to Bet Billions

PARIS (AP) — Societe Generale detailed Sunday how a young trader evaded all its controls to bet some $73 billion — more than the French bank’s market worth — saying he hacked computers and used other “fraudulent methods” to cover his tracks, causing billions of dollars in losses.

The bank says the trader, Jerome Kerviel, did not appear to have profited personally from the transactions and seemingly worked alone — a version of events reiterated Sunday by Jean-Pierre Mustier, chief executive of the bank’s corporate and investment banking arm. But, in a conference call with reporters, Mustier added: “I cannot guarantee to you 100 percent that there was no complicity.”

Jean-Michel Aldebert, the head of the financial section of the Paris prosecutor’s office, said the questioning of Kerviel was “going very well and the investigation led by the specialists of the financial police is extremely fruitful.”

Societe Generale said Kerviel misappropriated other people’s computer access codes, falsified documents and employed other methods to cover his tracks — helped by his previous experience working in offices that monitor traders.

In a five-page document released Sunday, France’s second-largest bank also sought to counter the notion that it had disrupted markets by hurriedly selling off the massive positions that Kerviel allegedly built up without authorization.

“He had a very good understanding of all of Societe Generale’s processing and control procedures,” the statement said.

The bank said Kerviel had built up a position worth some $73.5 billion – which was eventually closed or hedged by last Wednesday with a loss of $7.21 billion.

“The position was unwound over three days in a controlled fashion,” it said.

Jean-Michel Aldebert, of the Paris prosecutors’ office, told reporters Saturday that Kerviel gave himself up of his own free will. The trader had not been seen in public since the bank announced his unauthorized trades in a statement on Thursday.

His motives remained a mystery, and the bank said it appeared that he did not gain personally from the trades. Acquaintances described Kerviel as reserved and considerate, a young man who once taught children judo and held the door for elderly neighbors.

Kerviel had been investing the bank’s money by hedging on European equity market indices, meaning he bet on how the markets would perform at a future date.

Germany’s Der Spiegel newsmagazine cited unnamed traders as saying Kerviel made a huge gamble on Germany’s DAX stock exchange, buying some 140,000 DAX futures. When the exchange dropped, Kerviel racked up losses that amounted by mid-January to around $3 billion, said the report, posted on Der Spiegel’s web site.