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Jerome Kerviel: convicted, has to repay
Old 10-05-2010, 09:04 AM   #1
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Jerome Kerviel: convicted, has to repay

Well, the verdict is in

Ex-French trader must pay $6.7 billion for fraud - Yahoo! News
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PARIS – Former Societe Generale SA trader Jerome Kerviel was convicted on all counts Tuesday in one of history's biggest trading frauds, sentenced to three years in jail and ordered to pay the bank a mind-numbing euro4.9 billion ($6.7 billion) in damages.
I wonder how much he has saved in his bank account. Will he have to sign notes? Refinance? Maybe the bank will spread it out: over 1000 years, 0 interest – only 408 thousand euros per month. This gives new meaning to the duration of indentured servitude.

He didn't steal the money, he lost it trading. Imagine if the same rules were applied to traders and bankers in the US.
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Old 10-05-2010, 10:46 AM   #2
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Originally Posted by MichaelB View Post
Well, the verdict is in

Ex-French trader must pay $6.7 billion for fraud - Yahoo! News I wonder how much he has saved in his bank account. Will he have to sign notes? Refinance? Maybe the bank will spread it out: over 1000 years, 0 interest – only 408 thousand euros per month. This gives new meaning to the duration of indentured servitude.

He didn't steal the money, he lost it trading. Imagine if the same rules were applied to traders and bankers in the US.
He did steal. M. Kerviel was "found guilty on charges of forgery, breach of trust and unauthorized computer use for covering up bets worth nearly euro50 billion between late 2007 and early 2008." The story also says "In the ruling, the court said Kerviel acted without the bank's knowledge and said it was "obvious" none of his bosses would have allowed him to bet sums exceeding the bank's capital." In other words, he made unauthorized trades with money that didn't belong to him, and, according to the article, used fictitious trades to hide the magnitude of the risks he was taking. Unless it's true, as he claims, that his employers authorized his actions, how is it not stealing to do as he did?
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Old 10-05-2010, 11:09 AM   #3
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I agree with kyounge1956.... he stole the money and made bets on the market with stolen money... if he 'won' the bets, he would have paid back the stolen money and (probably) the gain... this would have earned him a BIG bonus


the problem is the first thing he did was steal... sure, not a big wad of cash, but when you make a trade that you know you should not be making.... and cover it up... you are stealing...

Now... when I was a trust officer... I made a trade for $300 mill... but the people in the back office saw the money sitting in the account (the trade was very late in the day) and wanted to get it swept out quickly so they could get a good rate... now, we have two trades... $600 mill out the door... this meant that I had to fill out an overdraft form that went to the various managers etc. etc... they all knew about it the next day... we unwound the one trade and got the money back with interest... no problems to the bank...
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Old 10-05-2010, 11:20 AM   #4
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Another take on Kerviel sentence: French justice for Kerviel, American style

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Kerviel and his attorneys obviously didn’t have enough convincing proof to support their claims that trading limits were often exceeded at the bank. But it isn’t outrageous to think that they should have known Kerviel had put more than $69 billion at risk — more than SocGen’s market value at the time.

Moreover, Kerviel never traded for himself. His profits went to SocGen, an arrangement that never seemed to raise red flags when his bets were bringing in profits.
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Yet in finding Kerviel guilty, the French seem to be saying that the bank shares no responsibility. It’s not unlike what we’ve seen in the U.S. system where Bear Stearns hedge fund managers were charged, but not their bosses, where low level research analysts had their careers ruined, but not their supervisors, and Goldman Sachs Group Inc. shareholders pay fines and low level bankers face charges, not their leaders.
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Old 10-05-2010, 02:42 PM   #5
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He abused, misused, committed fraud, invested without authorization, but he did not take the money. Maybe semantics, maybe not.

The bankers are off the hook, there and here, even though it is not at all clear that Jerome Kerviel's actions were so much different that others that led to financial collapse and taxpayer bailout. The status quo remains intact.
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Old 10-05-2010, 03:32 PM   #6
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Yet in finding Kerviel guilty, the French seem to be saying that the bank shares no responsibility. It’s not unlike what we’ve seen in the U.S. system where Bear Stearns hedge fund managers were charged, but not their bosses, where low level research analysts had their careers ruined, but not their supervisors, and Goldman Sachs Group Inc. shareholders pay fines and low level bankers face charges, not their leaders.
An alternative interpretation, of course, is that he was in fact pretty much solely guilty. I appreciate that many of us would like to see the top people in the banks getting their butt kicked, but that doesn't mean that they are guilty of everything we can think of.

At the time, the top SocGen people worked the entire weekend in secret to unravel Kerviel's positions without letting anyone catch on - the losses were concretised at this time. Kerviel had indeed bet more than the entire capital of the bank on the DAX. If their exposure had leaked out, the bank would have been toast. There is no way that any trader believes that he is authorised to bet $60 billion on an index future.

Note also that this was nothing to do with the general financial meltdown, which didn't happen until 9-10 months later, and from which many French banks emerged in surprisingly good shape.
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Old 10-05-2010, 06:43 PM   #7
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Where were the auditors ?

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Originally Posted by kyounge1956 View Post
He did steal. M. Kerviel was "found guilty on charges of forgery, breach of trust and unauthorized computer use for covering up bets worth nearly euro50 billion between late 2007 and early 2008."
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