“Monsieur Kerviel!, Monsieur Kerviel,” 50 reporters and half a dozen TV cameramen tried to draw French trader Jérôme Kerviel's attention on Monday morning as he walked into the Paris Court of Appeal. Found guilty for the €4.9 billion ($6.4 billion) loss suffered by Société Générale in 2008, the young man is hoping to get the 2010 verdict overturned.
Though Mireille Filippini, the no-nonsense head of the Appeal Court, opened the trial by separating the two parties – Kerviel's lawyers and Société Générale's counsels – on various benches amid confusion, it was obvious that Indian wrestling was going to be the name of the game, under the venerable gilded ceiling of the Paris court, featuring a painting of a naked woman – representing justice, most likely ...
I am not responsible
“Why do you appeal,” asked judge Mireille Filippini to Kerviel at the very beginning of the new trial. In a dark blue suit and tieless, the grumpy young trader simply muttered that he was “not responsible” for the loss suffered by his former employer while unwinding his trades, and that his superiors knew about his fraudulent activities.
In fact, though Kerviel's new lawyer, David Koubbi, promised new arguments, each party seemed to stick to old stuff. Basically, it was “collective culture of faking trades” vs. “individual intent to deceive.”
“I put fictitious trades in the system to hide my over-the-limits positions because that's what I had learned to do as a middle office employee and then as an assistant trader at Société Générale,” claimed Kerviel, while SocGen lawyers tried to focus on his keen awareness of limits set for his activities and on the notion that he clearly decided to trample them and hide his deeds.
Exceeding limit on an everyday basis
The head of the court did not seem taken by Kerviel's account of his everyday life at the bank trading desk. “Yeah, as a team, we did receive e-mails telling us we had gone over our limits - very often, in fact - but nothing happened,” he explained, “Sometimes, I would put a fake trade in the system to correct the situation and offset the risk.”
Though she still had a hard time pronouncing some of the lingo ( « complee-anz » was only one of the new coined words of the day), the judge, who mentioned that she did her homework and read “lots of books on trading,” was clearly trying to nail Kerviel on this first day. “If the limits were as informal as you claim they were, why report fictitious trades to hide that you had exceeded them,” she asked. “Because otherwise, the whole team would have been fined at the end of the year,” replied Kerviel. “Oh, solidarity with your co-workers, I see,” ironically mused the judge.
Société Générale admitted that one third to half of the time in the two years leading to the disaster, the team went over its limits, but claimed this was due to “hard market conditions” or other events, like “a difficulty to hedge a position at the end of a trading day.”
With his lawyers hovering over the Société Générale witness, Ms. Claire Dumas, who was trying to explain that if Kerviel's superiors had been aware of fake trades, the trader would have been fired right away, the Frenchman insisted that his direct boss and others “had to know” about fictitious hedging of his huge positions, since they had noticed that in one instance at least, he had reported risk-free trades (hence hedged, albeit with fictitious offsetting trades) for three days, while he was only allowed to practice intra-day trading at his desk at that time. And of course, he only unwound the real trades when asked to do it.
“It goes without saying that they knew,” he concluded. Stating the obvious might have been better.