Jérôme Kerviel – Crook or Scapegoat? Politicians Recall Dreyfus Affair As Rogue Trader is Jailed
Marine Le Pen and Jean-Luc Mélenchon heading diametrically opposite poles of French politics have found rare agreement in opposing a jail sentence imposed on rogue bank trader Jérôme Kerviel, detained and whisked off to start a three-year prison term on Sunday May 18.
18 MAY 2015 IMPORTANT UPDATE BELOW ALL THE TRUTH MAY NOT HAVE BEEN REVEALED
The young Breton who hails from a modest background, had spent the past two months walking home from Rome where he had gone to meet the Pope, as part of a protest against “the tyranny of the markets” which also helped raise the profile of his 6-year effort to overturn a conviction his lawyers claim is unsafe.
According to the French news agency AFP: “Kerviel was tramping through Tuscany in March when France’s top Appeals Court upheld his 2010 conviction for breach of trust, forgery and entering false data in relation to unauthorised deals that nearly brought his former employer down. The ruling left Kerviel, who served 41 days in pre-trial detention in 2008, liable to be imprisoned at any time within five years of the verdict. Kerviel’s defence lawyers asked the state prosecution to suspend the application of his sentence. ‘There is no urgency in jailing him, other than to silence him,’ said the statement.”
Kerviel, 37, insists his bosses at France’s second-biggest bank, Société Générale, were aware of his trading activities and practices but turned a blind eye while he was making a profit – claims a bank with a reputation for being litigious has vehemently denied.
Kerviel insists it was inconceivable that line managers and senior Société Générale bank executives were in the dark about his highly risky trading activities in the days before the GFC – Global Financial Collapse of 2007. He, his legal team and numerous supporters insist he is a scapegoat, a viewpoint now endorsed by right-of-right Front National leader Marine Le Pen and her counterpart, the left-of-left Front de Gauche leader Jean-Luc Mélenchon.
Interviewed on Sunday by BFMTV Jean-Luc Mélenchon drew a parallel with the Dreyfus affair: “We support him because we think he is innocent, and we and others on the Left are like that ever since the Dreyfus affair. Dreyfus was not one of ours but we supported him nevertheless. Kerviel is innocent, so we support him too (…) The bank claims that this man caused a 5 billion euro loss, yet it has always refused any independent audit by experts to establish the level of the loss. We think he was turned into the guilty party as part of (bank) manoeuvring(…) for us to defend this trader in his dispute with his bank is as unexpected as was our defence of a monarchist captain (Dreyfus) at the beginning of the last century against the closed ranks of the military,” he added.
Marine Le Pen speaking on the same programme agreed with Mélenchon: “They (prosecutors) have been very proactive (in prosecuting) this man but have not challenged the speculation indulged in by the banking system which allows banks to gamble at the casino with the savings of their depositors,” she said. She also turned her fire on French Economy Minister Michel Sapin who had earlier called Jérôme Kerviel a “crook”. “One thing of which I am sure it is Sapin who is guilty of a political scam, for it was his party that pledged to separate high street banking from casino banking when François Hollande was on the campaign trail (for the presidentials elections in 2012) a pledge the government has not kept. So each to his own scam then”.
On June 20 2013 Jean-Luc Mélenchon, a former journalist, wrote an extensive and exhaustive blog in support of Kerviel, whom he insisted was “innocent”. His closely argued piece made very serious charges of cover-ups, political and legal connivance and financial skulduggery on a grand scale resulting from the vast sub-prime losses attributed to Société Générale in the aftermath of the US-banker-led global meltdown and concern in Paris to shore up a bank regarded as a pivotal player in the global banking system.
(See details of these losses here: “Société Générale said Thursday that the rogue trading scandal uncovered last month, combined with significant write-offs of U.S. sub-prime mortgage investments, had pushed it to a record quarterly loss. The French bank declared a €3.35 billion, or $4.95 billion, net loss for the fourth quarter of 2007, compared with a gain of €1.18 billion a year earlier. Société Générale – which has blamed the bulk of its troubles on an “exceptional fraud” by a 31-year-old junior trader, Jérôme Kerviel – reported an 82 percent plunge in net profit for the year, to €947 million. The bank also said it had booked write-downs and provisions worth €2.6 billion linked to its holdings of collateralized debt obligations and mortgage-backed securities. The results followed the publication late Wednesday of an independent report that found that Société Générale had failed to follow up on at least 75 alerts raised by its risk control officers, compliance officers and accountants over the course of two years.”)
As summarised by Politis.fr of the same date Mélenchon proclaimed Kerviel’s innocence: “In a lengthy blog Mélenchon defends Jérôme Kerviel, convicted of causing Société Générale a 4.9 billion euros loss an amount (which the court also) ordered him to repay. Mélenchon puts forward a number of ‘abnormalities’ he considers the prosecution investigation to be guilty of – no independent audit of the amount of losses reported by Société Générale – which he accuses the bank of having ‘loaded’ onto the junior trader so as to hide losses made in the (2007) sub-prime crisis and so as to obtain 1.7 billion euros compensation from the state. This compensation (writes Mélenchon) was paid promptly without verification of any kind, by Christine Lagarde, (then) Minister of Economy.”
As far as French-News-On-Line has been able to establish Mélenchon has not been pursued by Société Générale through the courts for any of the details in his published account which is now almost a year old.
Here then is a short excerpt from Mélenchon’s blog setting out why he regards the trader as innocent: “But the story is just too simple. When the Kerviel affair began in January 2008 it was at the time of the sub-prime crisis. Société Générale was one of the hardest hit French banks: In 2007 alone, it was forced to report a loss of 2 billion euros related to sub-prime mortgages. The bank was in danger of suffering considerable damage if it were to lose investor and depositor confidence. It might collapse. This bank was however deemed “systemic” so cannot and must not fail as failure would affect the entire global banking system. So how to absorb a 2 billion euro loss fast? Not easy. But they found a way.
“The bank announces its ‘sub-prime’ associated loss on the same day as it blames Kerviel for a 4.9 billion euro trading loss. So Kerviel becomes a rogue who cheated the bank, and the bank can now ask the State to offset a portion of its loss. Indeed there is a mechanism in France that allows a bank to recover some of its losses (33%) if they result from a fraudulent action. The bank opted to record the expected loss forthwith. No problem. In 2008, the Ministry of Economy and Finance refunded 1.7 billion euros to Société Générale because the bank could show that as expected, losses for 2007 were not attributable to it but due to fraud. Yes you say but the bank must still absorb a loss of 4.9 billion euros which it holds Kerviel alone responsible for! Of course. And herein lies the final trick. Kerviel is ordered (by the court) to repay 4.9 billion euros to the bank! So the bank can therefore include this amount in its losses… a pure accounting play allowing it to record a loss and offset it without further ado.”
Before turning himself in to the French police on the Franco-Italian border on Sunday the former trader told AFP he wanted: “to detail to (President) Hollande ‘the serious failings’ that led to his conviction, following the loss of 4.9 billion euros through wildly risky trades and ask Hollande to grant immunity to potential witnesses who could testify in his favour.” Contacted by AFP, Hollande’s office said no meeting was on the agenda and stressed that the president would “respect the decisions taken by French courts”.
The appeal to Socialist President Francois Hollande was designed to cause maximum embarrassment to the man who as candidate in the presidential elections two years ago promised root and branch reform of the banking system responsible for the current economic and monetary disaster in Europe and who once admitted he doesn’t like rich people. The meagre outcome of the former pledge can be read here.
Story: Ken Pottinger
In January 2008, French bank Société Générale announced it had lost 4.9 billion euros through the reckless actions of one of its traders, Jérôme Kerviel, claiming it had been unaware of his actions. Kerviel, who maintained from the start that his hierarchy knew what he was doing, received a jail sentence for forgery, fraud and hacking, and was ordered to pay the bank, in damages, the huge sum it lost. But last month, Mediapart can reveal, the former head of the French police’s financial crime squad, who led its investigation of the events and who was once convinced of the bank’s claims that Kerviel acted on his own, has given a statement to a French judge in which she details why she later became convinced, during her second investigation into the affair in 2012, the trader’s bosses knew of his actions. Commander Nathalie Le Roy said she now feels she had been “used” by the bank in the 2008 investigation, how it later held back key evidence she requested, of witness accounts that Kerviel’s superiors were already made aware in 2007 of his extravagant trades, of allegations that Société Générale staff were made to sign gagging agreements and revealed that its claimed losses have never been independently verified. Martine Orange reports on a dramatic turnaround in the affair which appears bound to reopen the case. Read more at the Mediapart site
- French Trader Arrested After Fraud, Odyssey (abcnews.go.com)
- Rogue trader Jerome Kerviel held in France to face jail – BBC News (bbc.co.uk)
- The Biggest Financial Crisis in 75 Years
- Kerviel: ‘Ordinary’ Guy Behind France’s Record Rogue Trade, But For Some A Scapegoat
- Bring them to Book (2008) – Who’s Won (2013)?
- Scapegoat or Rogue – a 4.9bn Euro Question
- You Have 177,000 Years to Pay, Mr Kerviel
- SocGen Staff Demand Kerviel Kompensation
- Storming the Bastille Version 2.011
- Banks as Parasites – You’ve Been Warned