Jérôme Kerviel – fall guy | The Spoon

When it comes to corrupt banking practices, the buck does not stop with one French rogue trader

Talking to the press today after his client's sentencing for forgery, breach of trust and computer abuse, Jérôme Kerviel's lawyer said, "I hope you all will donate a euro to Jérôme Kerviel." When he said "all", he didn't mean everyone on the planet – just about two-thirds of them.

Société Générale trader Kerviel was sentenced to five years in prison and a fine of €4.9bn. Do you think that the judge put his little finger to his mouth and did a Dr Evil voice as he passed judgement?

He was actually sentenced to three years in jail, two years of his five-year sentence having been suspended. His lawyer said after the verdict: "When you have employees or staff members, you don't check in the evening to make sure they're not leaving with the cutlery or your belongings; you trust them." I don't know of many office managers who leave stationery cupboards unlocked – or anyone who trusts a lawyer at all, for that matter.

I don't mind the prison sentence so much – it puts a price over and above financial losses on traders acting irresponsibly and dangerously – but a €4.9bn fine? That's the GDP of Monaco! Bruno Quentin, a French lawyer, explains it quite clearly; "Kerviel will never be able to repay this sum, but the fact that the punishment was imposed vindicates [SocGen's] position." I thought the financial crisis had taught us that the problems in the international trading systems are endemic and in need of a major overhaul, but if one man is allowed to take the fall, nothing has to change.

Apparently Kerviel told his bosses nothing was wrong, which would lead most to suspect that something probably was. Were they unable to find out what he was doing? Or did they not want to look, safe in the knowledge that they would profit far more than Kerviel if the market turned around – and be able to deny all responsibility for the losses if not? Aside from his direct superiors, all banks are supposed to have risk departments and oversight systems that should have meant he was caught sooner.

Kerviel, we are told, balanced his trade with fictitious transactions. But if that is the case, how were the risk management teams and his superiors unable to tell the difference? Kerviel can't be the only one pulling this trick. Maybe a large proportion of transactions in banks are fictitious. We can't know, but surely the guys at the bank can.

Alongside a jail sentence for a man who was a market bounce away from a decent bonus is the fact that he must repay the amount he lost. Would he have been entitled to even 1% of the profit had he made it? As a rule, traders aren't personally accountable for their losses, so why is this one? How is it that Kerviel, who lied and hid his losses from his bosses, is now and for the foreseeable future destitute, while Dick Fuld, the ex-boss of Lehman Brothers, who has been accused of misleading potential investors, shareholders and staff, is serving no time, and has had none of his personal fortune taken from him?

Even Nick Leeson, whose transgressions in the 90s (a time when doing a "Leeson/Kerviel" only involved having to open up a secret account) has voiced surprise that this could happen today. His crime supposedly ushered in a new world of accountability so that the Barings disaster couldn't happen again. We should probably also note that it was the bank unwinding the positions that cost them €4.9bn; for all we know they got out with as much tact and skill as Kerviel got in.

The sentence reflects the bank's view that the entire episode is the fault of one man. Its good for the stock price that this virus of an employee has been purged from the bank. Most people agree that he isn't innocent but that "he has done the world a service by exposing the insanity on the trading floor". A service that has been withdrawn by this sentencing.


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