Kerviel trial: Why Kerviel's direct boss didn't see anything

I see nothing!

Eric Cordelle, 40, is an unhappy man. He even has a chip on his shoulder. “I have two adversaries,” Kerviel's direct boss said on Monday as he took the stand at the Paris Court of Appeal. “Kerviel, because he is still lying, but also Société Générale, because it made me responsible for the disaster and fired me,” he added. “My career just stopped.” Indeed, in the relatively small world of international finance, Cordelle became known only as “Kerviel's boss.” His reputation was tarnished. It took him four years after the loss was disclosed to bounce back. He started his own consulting business, and he is suing Société Générale to obtain damage.

So, how could he sit next to Kerviel for 18 months and not detect any of the trader's fraudulent activities? One reason, in fact, might be that Cordelle wasn't familiar with trading. Strange, but true. A graduate from one of the French elite schools, Cordelle is an engineer. Sure, he isn't the first engineer to have worked in finance. In fact, he worked for Société Générale in France and Japan for 12 years, specializing in credit engineering and derivatives. But why promote him to a job as head of the Delta One desk, where Kerviel was trading?  “The team hadn't had a manager for quite a few months, and I knew about clients and sellers,” he explains. Oh, really?

He goes on: “2007 was supposed to be a year of training in trading activities for me.” And who was supposed to be his trainer? You guessed it! Kerviel! “I was told I could lean on Kerviel to learn,” he says, almost naïvely. Talk about learning the hard way.

What followed of Cordelle's testimony and of his own superiors who were called as witnesses on Monday is what we already knew:  While pursuing profits at all costs, Société Générale had hired a lot of top traders for the front office, while neglecting to properly staff the back office. It also put together a pretty weak management team, because all the witnesses had the same story to tell: They didn't know, they didn't see.

The result was that Cordelle and his own superiors would hardly question traders on their activities and would blindly trust the back office reports on positions and risk-taking. At one point, the head judge asked if Cordelle ever looked into Kerviel's book, just to check. “No, unfortunately,” he answered, almost sheepishly. “But weren't you surprised at Kerviel's profits or losses, which were sometimes huge?” insisted Mireille Fillipini. “No, I was satisfied with his explanations,” he admits. Everybody else at the bank was “satisfied” too, obviously.

Though the current trial is on Kerviel's fraudulent activities and not on “negligence” on the part of the bank, maybe it also should have been on trial.

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