‘Genius of Fraud’
January 29, 2008
Source: http://www.newsweek.com/id/105640
‘Genius of Fraud’
French authorities have rogue futures trader Jérôme Kerviel in custody … and a lot of questions for him.
By Tracy McNicoll | Newsweek Web Exclusive
Jan 26, 2008 | Updated: 4:22 p.m. ET Jan 26, 2008
For Jérôme Kerviel, the rogue futures trader the Société Générale bank says cost it $7.2 billion, justice isn't coming merely at the hands of the French police who are questioning him this weekend. Pranksters on the virtual networking site Facebook are getting in on the act, as well. As his name bounced around the world online Thursday afternoon, the man who'd allegedly just committed the most spectacular rogue trading fraud in history had 11 friends. By evening, eight had deserted him. Overnight, two more. Then, his profile--Jérôme Kerviel, Banque Société Générale, born Jan. 11, 1977--was spoofed on the site by a handful of phony Jérômes, fraudulent fraudsters. Using Kerviel's SocGen Web photo, the phonies had dozens of new "friends," in on the joke. Their numbers rattle up in real time, like Kerviel's phony trading positions. On Friday night, the real Jérôme's profile disappeared and the fraudster Jérômes were shut down only for new ones to pop up.
Instant global notoriety seems a far cry from Kerviel's picturesque hometown of Pont l'Abbé, a hamlet of 8,000 with a 14th century castle and church on the Atlantic Coast of Brittany. Like many Bretons, he sailed. His father was a teacher; his mother ran a hair salon in town. Jérôme left after high school for degrees in finance in Nantes and Lyons and landed his first job out of school at the Société Générale in Paris in August 2000, a month before he graduated. He maintained links with his hometown, even running as a bit-parter on a municipal government list the year after he'd moved to the capital. "He was a composed young man, quiet, reflective. A little reserved," the mayor of Pont l'Abbé, Thierry Mavic, told the local newspaper, Le Télégramme. "This news stuns me, really very much." Indeed, Kerviel's neighbors in the affluent Parisian suburb of Neuilly-sur-Seine, near his bank in the office tower quarter of La Défense, barely seem to have noticed him before the TV crews came calling. Hardly a screenwriter's dream profile for the billion-euro man the head of the French central bank calls "a genius of fraud."
Kerviel made less than 100,000 euros ($147,000) a year, bonuses included--junior wages for a trader. But bank officials say he gained intimate knowledge of trading controls in his entry-level position in an office that monitored trades, before becoming a trader himself in 2004. Over a period of months, he was able to gamble tens of billions of euros of SocGen's money hedging on European equity market indices. Today, he reportedly could face five to 15 years in prison.
But the sheer magnitude of the losses Kerviel is said to have caused the SocGen have primarily been met with disbelief. And the reactions from the SocGen and Banque de France haven't helped. "His motivations are completely incomprehensible. It doesn't seem he profited from this gigantic fraud. Not directly, we're sure. But we'll need deeper investigation to see whether or not he profited indirectly," said SocGen CEO Daniel Bouton. Another bank boss said it was impossible he'd worked with accomplices.
From analyst pundits to the man on the street and even bank colleagues quoted anonymously, a surprising degree of the chatter has taken Kerviel's defense--implying that a man acting alone couldn't rack up such losses, or that the magnitude of loss attributed to Kerviel is merely a cover-up for sub-prime related losses greater than the two billion euros the SocGen also announced. On Friday, Bouton was on the defensive. "Let's think! We would have transferred into a new hole losses coming from another hole? That doesn't hold up, not technically, not accounting wise," he told Le Figaro's Web site Friday. Others held that even if Kerviel did treat his trader's desktop like a video poker machine, the bank is at fault for weak security controls. "How could a bank of this caliber, vaunted for its market experience, come upon this sort of misfortune? Why did it take so long for it to discover the extent of the damage?" railed French economic daily, La Tribune. The bank took out full-page apology ads in Friday's French papers.
Another conspiracy theory making the rounds originated from an unnamed American source, quoted widely, who claims that Fed chief Ben Bernanke's massive rate cut earlier this week was a direct reaction to SocGen's sell-off of Kerviel's positions. Bouton called that accusation "absurd." "The Asian markets set the pace Monday. Everyone can calculate our contribution to the markets over the past days." Indeed, even on news of the biggest loss by a rogue trader in history, with the news making headlines through an entire market day, France's own CAC40 closed up 6 percent on Thursday. Privately, one French finance official tells NEWSWEEK she "burst out laughing" when she first heard the rate-cut theory. "That story seems completely crazy to me," she says.
One French Facebooker calls Kerviel "Le Lee Harvey Oswald Français." "Scapegoat" is another top traded comment. One Facebook virtual group orders "Tar and Feathers for Jérôme Kerviel," but another declares "Jérôme Kerviel Should Be Offered the Nobel Prize in Economics." One group wants to "Save" him, one says "Bravo Jérôme," and still another curiously wants to make him the manager of Southampton Football Club. The group called "If 5 billion Persons Join This Group and Give 1 Euro, We Can Save Jérôme Kerviel's Career" had 364 members as of Saturday. And a long way to go.
© 2008 Newsweek, Inc.
‘Genius of Fraud’
French authorities have rogue futures trader Jérôme Kerviel in custody … and a lot of questions for him.
By Tracy McNicoll | Newsweek Web Exclusive
Jan 26, 2008 | Updated: 4:22 p.m. ET Jan 26, 2008
For Jérôme Kerviel, the rogue futures trader the Société Générale bank says cost it $7.2 billion, justice isn't coming merely at the hands of the French police who are questioning him this weekend. Pranksters on the virtual networking site Facebook are getting in on the act, as well. As his name bounced around the world online Thursday afternoon, the man who'd allegedly just committed the most spectacular rogue trading fraud in history had 11 friends. By evening, eight had deserted him. Overnight, two more. Then, his profile--Jérôme Kerviel, Banque Société Générale, born Jan. 11, 1977--was spoofed on the site by a handful of phony Jérômes, fraudulent fraudsters. Using Kerviel's SocGen Web photo, the phonies had dozens of new "friends," in on the joke. Their numbers rattle up in real time, like Kerviel's phony trading positions. On Friday night, the real Jérôme's profile disappeared and the fraudster Jérômes were shut down only for new ones to pop up.
Instant global notoriety seems a far cry from Kerviel's picturesque hometown of Pont l'Abbé, a hamlet of 8,000 with a 14th century castle and church on the Atlantic Coast of Brittany. Like many Bretons, he sailed. His father was a teacher; his mother ran a hair salon in town. Jérôme left after high school for degrees in finance in Nantes and Lyons and landed his first job out of school at the Société Générale in Paris in August 2000, a month before he graduated. He maintained links with his hometown, even running as a bit-parter on a municipal government list the year after he'd moved to the capital. "He was a composed young man, quiet, reflective. A little reserved," the mayor of Pont l'Abbé, Thierry Mavic, told the local newspaper, Le Télégramme. "This news stuns me, really very much." Indeed, Kerviel's neighbors in the affluent Parisian suburb of Neuilly-sur-Seine, near his bank in the office tower quarter of La Défense, barely seem to have noticed him before the TV crews came calling. Hardly a screenwriter's dream profile for the billion-euro man the head of the French central bank calls "a genius of fraud."
Kerviel made less than 100,000 euros ($147,000) a year, bonuses included--junior wages for a trader. But bank officials say he gained intimate knowledge of trading controls in his entry-level position in an office that monitored trades, before becoming a trader himself in 2004. Over a period of months, he was able to gamble tens of billions of euros of SocGen's money hedging on European equity market indices. Today, he reportedly could face five to 15 years in prison.
But the sheer magnitude of the losses Kerviel is said to have caused the SocGen have primarily been met with disbelief. And the reactions from the SocGen and Banque de France haven't helped. "His motivations are completely incomprehensible. It doesn't seem he profited from this gigantic fraud. Not directly, we're sure. But we'll need deeper investigation to see whether or not he profited indirectly," said SocGen CEO Daniel Bouton. Another bank boss said it was impossible he'd worked with accomplices.
From analyst pundits to the man on the street and even bank colleagues quoted anonymously, a surprising degree of the chatter has taken Kerviel's defense--implying that a man acting alone couldn't rack up such losses, or that the magnitude of loss attributed to Kerviel is merely a cover-up for sub-prime related losses greater than the two billion euros the SocGen also announced. On Friday, Bouton was on the defensive. "Let's think! We would have transferred into a new hole losses coming from another hole? That doesn't hold up, not technically, not accounting wise," he told Le Figaro's Web site Friday. Others held that even if Kerviel did treat his trader's desktop like a video poker machine, the bank is at fault for weak security controls. "How could a bank of this caliber, vaunted for its market experience, come upon this sort of misfortune? Why did it take so long for it to discover the extent of the damage?" railed French economic daily, La Tribune. The bank took out full-page apology ads in Friday's French papers.
Another conspiracy theory making the rounds originated from an unnamed American source, quoted widely, who claims that Fed chief Ben Bernanke's massive rate cut earlier this week was a direct reaction to SocGen's sell-off of Kerviel's positions. Bouton called that accusation "absurd." "The Asian markets set the pace Monday. Everyone can calculate our contribution to the markets over the past days." Indeed, even on news of the biggest loss by a rogue trader in history, with the news making headlines through an entire market day, France's own CAC40 closed up 6 percent on Thursday. Privately, one French finance official tells NEWSWEEK she "burst out laughing" when she first heard the rate-cut theory. "That story seems completely crazy to me," she says.
One French Facebooker calls Kerviel "Le Lee Harvey Oswald Français." "Scapegoat" is another top traded comment. One Facebook virtual group orders "Tar and Feathers for Jérôme Kerviel," but another declares "Jérôme Kerviel Should Be Offered the Nobel Prize in Economics." One group wants to "Save" him, one says "Bravo Jérôme," and still another curiously wants to make him the manager of Southampton Football Club. The group called "If 5 billion Persons Join This Group and Give 1 Euro, We Can Save Jérôme Kerviel's Career" had 364 members as of Saturday. And a long way to go.
© 2008 Newsweek, Inc.
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