Former Societe Generale trader Jerome Kerviel testified that he was “encouraged” by his bosses to take risks, on the first day of his trial over the multi-billion-euro scandal at the French bank.
The Frenchman is accused of gambling away 4.9 billion euros (six billion dollars) in risky stock market trades and of hiding these actions from his employers at Societe Generale, one of France’s three biggest banks.
In an emotional hearing that several times broke down into squabbling between the lawyers in the room, Kerviel denied he was to blame for reckless trading, insisting his bosses knew the risks he took and backed him.
‘Lack of self-control’
Dressed in a dark suit and a pink and blue striped tie, Kerviel answered questions from presiding judge Dominique Pauthe who pointed to psychological assessments showing a “lack of self-control” that led to his risky behaviour.
But the 33-year-old Kerviel responded: “The daily encouragement from my superiors did not stop me. Rather they encouraged me to continue.”
Kerviel risks a maximum sentence of five years in prison and a fine of 375,000 euros if convicted on charges of breach of trust, falsifying and using fake documents and entering false data into company computers.
The court must decide whether he is solely responsible for the losses in a case seen as a symbol of the banking excesses blamed for the financial crisis.
Kerviel seen as scapegoat
Branded a crook by his ex-employer but seen by others as a scapegoat for those higher up, Kerviel faces criminal charges along with civil suits by the bank and other plaintiffs, including employees and shareholders.
Kerviel looked tense and solemn as he stood before the judges at the start of the trial and identified himself as a “single, computer consultant” earning 2,300 euros per month.
He later spoke of the stressful long days working at Societe Generale.
“Every day I would arrive at 7:00 am. Lunch would be a sandwich at my desk,” he said.
‘Turning a blind eye’
Societe Generale revealed in January 2008 that it had been forced to unwind 50 billion euros of unauthorised deals it says Kerviel made.
In a memoir published last month, Kerviel wrote that bosses turned a blind eye to possible breaches of trading limits as long as earnings were high.
He told the court it would be “impossible” to make the trades he did without others knowing, “not for more than a day, in any case”.
Checks not in place
His lawyer Olivier Metzner showed the court a projection of the seating plan in Kerviel’s office to illustrate the point and said that bosses could also view his trades via the computer system at any time.
He also projected a spreadsheet recording the transactions of Kerviel’s trading team, saying it showed that his activities were easily traceable. The bank’s lawyers contested this claim.
Societe Generale’s lead lawyer Jean Veil told reporters afterwards that he would show a video that demonstrates how traders did stressful work on several screens and could not be expected to monitor their neighbours’ activities.
Metzner retorted that this was a “fantastical” claim.
“It seems that Societe Generale is either blind, or it doesn’t want to see,” he told reporters.
Bickering broke out several times in the hearing as the combative Metzner questioned Claire Dumas, a senior manager at the bank who was in charge of getting to the bottom of the losses in the days after they came to light.
Kerviel working in Paris
About 40 witnesses will be called to the stand over the coming weeks including Eric Cordelle, who was Kerviel’s immediate superior at the time. He is due to testify on June 21.
The first witnesses testify at Wednesday’s hearing, which will examine the trading limits Kerviel was supposedly subject to.
Kerviel spent 38 days in custody after his arrest in 2008 and has since started a job at a small IT company in a suburb of Paris.
Trial hearings are set to end on June 25 and the court is expected to take several weeks to deliberate before delivering a verdict.