Major losses in major French bank - rouge trader

[Guest guest]

Dear friends,

 

With Mars being at 0° Gemini under a 3° 30' orb aspect of Rahu in

Aquarius is the likely culprit in this breaking story. Those

searching for a mundane chart for France should consider this aspect

carefully. Hundreds of billions of euro's have been lost with unknown

repercussions for the French financial system. The case dwarfs that

of Nick Leeson who bankrupted Barings bank in the 1990s.

 

Best wishes,

 

Thor

 

'Invisible man' rogue trader in £3.7billion bank fraud prepares to

give himself up by MICHAEL SEAMARK

Last updated at 09:18am on 25th January 2008

 

Jerome Kerviel, the man named as the rogue trader in reports

The rogue trader behind the biggest banking fraud in history was

preparing to give himself up to the authorities today saying: " I've

nowhere to hide " . Despite losing his employer Societe Generale £3.7

billion, 31-year-old Jerome Kerviel has been free to come and go as

he pleases and has kept his passport.

 

But Elisabeth Meyer, lawyer to the " highly strung and extremely

intelligent " trader, insisted her client was " not on the run " and

was " preparing to co-operate fully with the judiciary " . Her comments

came as French financial police raided two addresses in Brittany

connected with Mr Kerviel, who was described yesterday as " a genius

of fraud " by the country's top banker.

 

A spokesman for the Paris branch of Interpol said: " The addresses

were searched on the basis that Monsieur Kerviel is suspected of

making and using fake documents, fraud and deception. " One address

was in Pont-L'Abbe in western Brittany and the other in Nantes in

southern Brittany. Investigating judges and police are expected to

interview Mr Kerviel at the earliest available opportunity, after the

Paris prosecutors office opened a preliminary hearing into the

scandal.

 

Mrs Meyer said that the trader, who worked on a desk known as Delta

One, had told her he had " nowhere to hide " , even though he had not

yet received formal notice of his sacking. Mrs Meyer added: " My

client was told verbally on Sunday that he was being dismissed and

was asked not to show up at the work on Monday. He is now at the

disposal of those who want to interview him. "

 

Kerviel is suspected of illegally gambling up to £60billion on stock

market movements. French authorities have launched a criminal

investigation into his dealings at Societe General, the country's

second biggest bank. Kerviel's losses dwarf the £800million

squandered by Nick Leeson that sank Barings Bank in 1995. The

Englishman admitted to feeling a " sickening twinge of recognition "

when he heard the news yesterday. Paris-based Kerviel worked in

Societe's Delta One trading department, betting on whether stock

markets will move up or down. Undetected by the bank's multilayered

security systems, Kerviel had for over a year been fraudulently using

the company's funds to bet on European stock markets, Societe

Generale said. They believe he was taking massive risks in an attempt

to boost his bonuses, which, his salary included, amounted to a

relatively modest £75,000 last year.

 

With money markets in turmoil, Societe Generale was forced to sell

the contracts built up by the rogue trader just as stocks were

plunging. It took three days to sell them. Societe General has filed

an official complaint with Paris prosecutors accusing him of

falsifying records and computer fraud. Last night, union officials

briefed by the French bank suggested Kerviel had been suffering

from " family problems " and " might have lost his mind a bit " .

 

Nick Leeson, who defrauded Barings Bank in 1995, served three years

in jail

 

Colleagues at the bank described him as a " clean-cut, hard-working

career banker who had never been in trouble in the past " . One

said: " None of us had any inkling of what he was up to. He put in the

hours and was always trying to advance himself in his career, but he

was by no means a high-flyer. " He was polite and good to deal with

but never made the breakthrough into the big-money league. " He is not

a member of the Paris-educated elite who get all the best jobs in

banking and finance. " Kerviel's name is currently the 26th most

searched term on Google. Kerviel joined the bank in 2000 after

studying for a masters degree in finance at a business school in

Lyon, his home city. One of his former teachers, Gisele Reynaud,

said: " He was a nice guy. He was brilliant. "

 

 

Kerviel worked for five years in his Paris bank's " back office " which

monitors trading and two years ago won promotion to the Delta One

trading desk. Kerviel's boss Daniel Bouton described him as

an " imprudent employee " . He said: " We analysed his methods - it was

impossible for him to work with other people. " He had to set up fake

positions in real time. I am convinced he was acting alone. " It

doesn't seem that he was able to benefit from these colossal

trades. " He's not received a bonus this year, and probably won't be

asking for one. "

 

Mr Bouton said financial controllers at the bank - which has an

office in London employing more than 2,000 staff - had

found " something fishy " last Friday night and by Saturday

realised " an exceptional fraud " had taken place. He said Kerviel had

set up a fictional company to allow him to carry out rogue

deals. " The ghost trader had in-depth knowledge of the control

procedures resulting from his former employment in the middle

office, " said Mr Bouton. " He managed to conceal these positions

through a scheme of elaborate fictitious transactions. " " He

constructed a fictitious company and was intelligent enough to get

around all controls. He acted very subtly but was trapped when he

made a mistake. "

 

On Saturday night, Kerviel was grilled for six hours by his bosses

but news of the astonishing fraud was suppressed until yesterday. On

Monday when markets opened the bank desperately set about cancelling

his bets. But the unexpected global meltdown of markets that day

meant the losses were even more disastrous than they had feared.

 

 

When asked if he regretted not calling in the authorities

immediately, Mr Bouton said: " Perhaps we made a mistake in that

respect, but the authorities will pass judgment on it. " My duty was

to avoid adding to the terrible consequences of this fraud. " The bank

said it was just bad luck that the fraud was discovered amid this

week's market turbulence. Mr Bouton said " We were really unlucky but

we had to settle these positions as fast as we could and we did so

during the three-day market crisis. "

 

 

Initially, the bank's losses were put at £1.2billion but, with global

markets in freefall on Monday, those losses jumped to £3.7billion. If

the bank had held out a little longer before cancelling the bets, the

losses might have fallen because the markets bounced back. The Bank

of France has said an inquiry will be conducted by the Banking

Commission.

 

The case comes less than six months after fellow French bank Credit

Agricole unearthed unauthorised trading at its New York subsidiary,

which cost the group 250 million euros (£187 million). Shares in

Societe Generale dived 6 per cent yesterday after the fraud was

revealed, but meanwhile the London market staged a dramatic

turnaround as improved trading on Wall street boosted UK blue chips.

 

The FTSE 100 Index surged 4.8 per cent as positive investor sentiment

returned to stock markets globally. At one point the index surged as

much as 273 points leaving it within touching distance of last

Friday's close before this week's turbulence began. This morning the

FTSE gained almost 100 points in early trading - taking the benchmark

index back above the 5,901.7 level at which it began a week of

turmoil.

 

Martin Slaney, head of derivatives at GFT Global Markets,

said: " After an undeniably extraordinary week for the markets, we

face the real possibility of finishing up on the week. You would have

got good odds for that on Monday. "

 

Using the bank's funds, traders like Kerviel take positions - or

bets - on which way they think the world stock markets will move.

Unfortunately for Societe Generale, their man completely misjudged

the markets in January and kept betting the wrong way - that markets

would rise. Societe Generale has been hit for record fraud by a rogue

trader When his bosses found out what he had been up to - and what he

stood to lose - they immediately decided to pay financiers to take on

their " positions " at a cost of £3.7billion.

 

Societe Generale said Kerviel - described as a " computer genius "

trading at the lower end of the scale - had confessed to fraud during

interviews and had been suspended.

 

Some investors wondered whether the bank's manouevres had contributed

to Monday's worldwide market fall, and to the U.S. Federal Reserve's

decision to cut interest rates. But Far East financial sources, where

the market rout began, said there had been no knowledge of the

problems. And in Washington a Fed source said the central bank had

not been aware of the French bank's problems in advance. The Bank of

France, the country's central bank, is investigating the trades.

 

Christian Noyer, its governor, said Societe General had been able to

overcome the crisis because it was so solid. " There was a glitch in

the system that was exploited by someone who I think got round five

successive risk control systems so who was without doubt a genius of

fraud, " Mr Noyer said.