Kerviel, Societe Generale Rogue Trader, Held in Paris (Update3)
By Fabio Benedetti-Valentini
Jan. 26 (Bloomberg) -- Jerome Kerviel, the trader accused of losing 4.9 billion euros ($7.2 billion) at Societe Generale SA through unauthorized trades, was taken into police custody, the Paris prosecutor said.
Kerviel, 31, was held for questioning today at the offices of the Paris police's financial brigade in the southeast of the city, Isabelle Montagne, a spokeswoman for the prosecutor, said in a phone interview. His detention order runs for 24 hours and can be extended for a further day.
Societe Generale, France's second-largest lender by market value, handed French investigators information about Kerviel at its headquarters yesterday as part of the probe, Montagne said. The lender has said the losses, the biggest in banking history, occurred when Kerviel set up secret positions in futures linked to European stock indexes.
Kerviel arrived at the financial brigade's headquarters in the city's 13th arrondissement at about 2 p.m. in a gray car, which drove past waiting journalists and in through an underground garage entrance.
Societe Generale on Jan. 24 filed a lawsuit with the Nanterre prosecutor against ``a 31-year-old person'' for creating fraudulent documents, using forged documents and making attacks on an automated system, according to a spokeswoman from the Nanterre prosecutor.
Lawsuit Filed
The investigation was transferred to the Paris prosecutor yesterday. A small investor in Societe Generale also filed a complaint on Jan. 24 ``against X'' for the trading loss, Montagne said.
Societe Generale's spokeswoman Stephanie Carson-Parker, contacted by phone, confirmed the ``voluntary handover'' of documents concerning Kerviel at the bank's headquarters in the financial district of La Defense, to the west of Paris. She said the bank has started procedures to fire Kerviel.
Kerviel's apartment in the Paris suburb of Neuilly-sur- Seine was also raided yesterday by French police. Elisabeth Meyer, his lawyer, wasn't available to comment.
Kerviel built a virtual company within Societe Generale, bank officials said. He balanced each bet with a fictitious one for almost a year. On Jan. 18, a routine check found a trade that exceeded the bank's limits. A call to the other party in the trade found the transaction didn't exist.
``He was running two books simultaneously, one real and one false,'' Chief Executive Officer Daniel Bouton said at Jan. 24 a press conference in Paris.
Government Probe
Societe Generale missed several opportunities to stop Kerviel, Jean-Pierre Mustier, who runs the bank's investment- banking unit, told the Wall Street Journal in an interview published today on its Web site. Mustier, called on his cell phone, wasn't immediately available to comment.
French Prime Minister Francois Fillon has asked Finance Minister Christine Lagarde to deliver a report next week on how Societe Generale suffered the trading loss. The Bank of France is also carrying out an investigation.
Lagarde said her probe will focus on why the bank's internal checks failed and whether financial companies should be forced to impose more controls on their businesses.
The study will seek to discover ``why controls did not work and what additional controls are required,'' Lagarde told reporters at the annual meeting of the World Economic Forum in Davos, Switzerland. She promised to consult with banks before introducing new measures.
Breton Childhood
The trader, whose father and grandfather were both iron- workers, grew up in Pont l'Abbe, a town of 8,200 in Britanny, western France. Kerviel, a green-belt judoka, attended high school at the Lycee Laennec. He went to work in Societe Generale's back office in 2000 after completing a degree in market operations at the University of Lyon II.
Kerviel spent his childhood in a white house with a slate roof and a triangular, peaked front based on the traditional Breton style, with a small front yard. Jerome's father, Charles, built it about 30 years ago and then constructed his workshop attached to it, according to neighbors.
Charles, who died a couple of years ago, was an ironworker, making pieces for furniture and ships mainly. Jerome's grandfather, Charles's father Laurent, also was an ironworker, making items for furniture and horseshoes, the neighbors said.
Tangi Hourmand, a 33-year-old childhood friend of Jerome, said Kerviel had always wanted to go in finance, describing him as ``very intelligent.'' ``He was a normal guy who liked to go out,'' Hourmand said.
To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fbenedettiva@bloomberg.net .
Last Updated: January 26, 2008 15:10 EST |
