As is the case with most corporations, someone needs to take the fall when bad events transpire. In Goldman Sach’s case it was Fabrice Tourre, and in Société Générale’s it was Mr. Jérôme Kerviel. The story for SocGen is an old one, a rogue trader who accrued large positions, large losses and was able to conceal the losses from the bank’s naive eyes. In Jérôme’s case it was about €50 billion of positions with total losses of €4.9 billion. To put that in perspective, SocGen’s current market cap is about €30 billion today.
As a result, the courts and SocGen had their say when Mr. Kerviel:
“was sentenced to three years in jail by a Paris court on Tuesday for his role in a trading scandal and ordered to pay the French bank 4.9 billion euros ($6.8 billion)“
Mr. Kerviel received a salary of €74,000 in 2006 from SocGen with a bonus of €60,000. How he had the clout to hoodwink one of the world’s largest banks is anyone’s guess. Mr. Kerviel suggests that all of his superiors knew of the hidden trades, but I find it more frightening if no one at the bank actually knew about the trades. If the media is correct and everyone was caught off guard then the board of directors, all executives, and the entire trading compliance department should have been terminated.
The story does not stand on firm ground, but the fact that a court would fine an individual an amount that would take 170,000 years to pay off is highly amusing…or disturbing. This court action does not seem very French.
If you would like to watch a highly entertaining look at a rogue trader in action, then I suggest that you watch “Rogue Trader” with Ewan McGregor. It is a much underrated and under-appreciated movie.