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Rogue trader closer to jail as court rejects appeal

Kerviel vows to keep fighting.

PARIS: A Paris court Wednesday rejected Jerome Kerviel’s appeal of a three-year jail term and a 4.9-billion-euro ($6.3-billion) fine for his part in France’s biggest rogue-trading scandal.

Kerviel, who insists he acted with the complicity of Societe Generale, the bank he brought to the brink of collapse, vowed that he would keep fighting and ensured he would avoid prison for the immediate future by taking his case to France’s highest appeal court.

“I’m completely devastated. I do not understand this judgement and I have no hesitation taking it to the final court of appeal,” Kerviel told RTL radio hours after his conviction was upheld.

The court upheld the five-year jail sentence handed down in 2010, two years of which were suspended, and confirmed that Kerviel had to pay back the billions his ill-fated gambles cost Societe Generale.

The trader sat stony-faced in a dark suit and black tie as the ruling was read out. The court did not order him to begin serving his sentence immediately and he left quickly without making any comment to the media gathered outside the courtroom.

His lawyer, David Koubbi, quickly condemned what he called a “lamentable injustice”.

Societe Generale welcomed the ruling. Its lawyer Jean Veil said it showed “the full and entire guilt of Mr Jerome Kerviel,” but he added that the bank would be “realistic” as regards getting its lost money back.

The sum is equivalent to what Kerviel – currently unemployed – might earn over 370,000 years if he started working for the French minimum wage.

Lawyers for the 35-year-old Kerviel had argued at his appeal hearing in June that he should be acquitted. Denouncing his conviction as a “farce,” they insisted that the bank knew he was making uncovered bets on futures markets.

But prosecutor Dominique Gaillardot urged the court to make an example of Kerviel, describing him as “perverse and manipulative.”

Calling for a maximum five-year term, he argued: “Your decision will be an example and a deterrent.”

Kerviel himself argued during the appeal that he was not responsible for the huge losses, having acted with the knowledge of his superiors. They had turned a blind eye as long as he was making a profit, he said.

A small-town boy from Brittany, the trader insisted that he was a scapegoat and that Societe Generale had to take responsibility for his gambles.

He did not profit personally from his unauthorized 50 billion euros of uncovered bets on futures markets in 2007 and 2008.

Originally convicted in October 2010 for breach of trust, forgery and entering false data into computers during the covert stock market deals, Kerviel has remained free pending the result of his appeal.

He changed his lawyer in March this year, hiring Koubbi, who accused the bank of manipulating secret recordings to make it appear that the trader’s superiors were unaware of his activities.

The lawyer had also argued that while Kerviel was ordered to repay the money he lost, the firm had already recovered a third of the sum in the form of a tax write-off.

French regulators fined Societe Generale four million euros for its slack oversight and the case cost a number of senior executives at the bank their jobs. Only Kerviel was prosecuted, however.

Since then, banks have tried to reinforce internal safeguards to prevent a repeat of such a crisis. But fresh trading scandals continue to erupt.

In 2011 a London-based trader was charged with fraud after losing Swiss bank UBS $2.25 billion.

And in July, US bank JP Morgan said losses blamed on one of its London trading units came to $5.8 billion – nearly triple the original estimate.

Those losses were blamed on another French trader, Bruno Michel Iksil, nicknamed the “London Whale” and “Voldemort,” after fictional boy wizard Harry Potter’s evil nemesis.

 
A version of this article appeared in the print edition of The Daily Star on October 25, 2012, on page 10.

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