PARIS (AFP) — Accused Societe Generale rogue trader Jerome Kerviel almost certainly had an accomplice in the huge deals which the French bank says cost more than seven billion dollars, according to a scathing internal report released Friday.
Managers were "negligent" in their oversight of the 31-year-old junior trader, said the report which coincided with an equally damning appraisal of the bank's control mechanisms by auditors PriceWaterhouseCoopers (PWC).
"Several operations of a fraudulent nature by Jerome Kerviel were processed by this assistant trader," said the internal report, which spoke of an electronic message indicating the assistant knew of Kerviel's "fraudulent transactions."
The bank says it made the 4.9 billion euros (7.1 billion dollars) of losses unwinding about 50 billion euros in unauthorised share deals by Kerviel. But the report said there was no sign of fraud by Kerviel for personal profit.
Kerviel has been charged with breach of trust, fabricating documents and illegally accessing computers. He is free on bail and has denied any wrongdoing, insisting Societe Generale managers knew about his massive deals and that he has been made "a scapegoat".
His lawyers, Elisabeth Meyer and Guillaume Selnet, said they were happy Societe Generale had started to admit others knew what was going on, but crticised the bank for still trying to exonerate Kerviel's superiors.
"Today the defenders of Jerome Kerviel are celebrating the fact that Societe Generale is admitting at last that numerous facts were available to" senior figures in the company's hierarchy, they said in a statement.
A study by auditors PWC, also released on Friday, described the flawed "general environment" that helped allow Kerviel rack up record-breaking losses.
"This general environment weakened the control system.... Several key controls that could have identified fraudulent mechanisms were lacking," it said.
The internal report pointed to "manoeuvres" Kerviel had made to help him cover up the deals, but added: "The fraud was facilitated, or its detection delayed, by supervisory weaknesses over the trader and the market activities checking."
Societe Generale has previously accused Kerviel of circumventing internal controls with stolen computer access codes and fictitious documents.
The report, which was ordered by a special committee after the scandal rocked the French banking establishment, added: "The trader's hierarchy, which constituted the first control level, showed itself negligent in the supervision of his activities."
Kerviel's immediate superior "showed inappropriate tolerance to the positions taken" by the trader. It said the superior did not have enough experience of market trading and should have been more strict.
Kerviel turned himself into police on January 26, two days after the bank revealed the unauthorised trading and how it had unwound the deals in a frenzied face-saving operation.
He spent one month in detention before being released on bail in March.
If found guilty of breach of trust, Kerviel would face a maximum sentence of three years in prison and a fine of 370,000 euros.
A judicial source has said Kerviel told investigators other workers at the bank helped him place hidden trades that led to the losses.
He claimed he asked his assistant at the bank to record fictitious transactions and that the assistant agreed knowing Kerviel was trying to conceal his unauthorised deals, the source said.
The trader also said he had taken "open positions, reaching 500-600 million euros, from his line manager's computer, and in his presence," according to prosecution documents seen by AFP.
French press reports said this month that Kerviel's boss is to be sacked for not spotting the massive deals Kerviel was racking up.
Two more of Kerviel's superiors also faced the sack, Le Parisien newspaper said.
The scandal could have led to the collapse of Societe Generale, which suffered a 3.35-billion-euro loss in the fourth quarter of 2007 because of the trade.
Societe Generale also lost more than two billion euros on the US subprime mortgage market but chairman Daniel Bouton has fought back since the scandal erupted to end talk of a takeover.
Copyright © 2009 AFP. All rights reserved. More »
