Wednesday, May 5, 2010

Jerome Kerviel - the guy who has been left to hang!

Just watched an interesting news report on CNN International covering the trial of Jérôme Kerviel, the French trader who has been charged in the January 2008 in the Société Générale trading loss incident, resulting in losses valued at about $ 7 Bn.

The Bank has painted Kerviel as a rogue trader who made these trades alone and more importantly without any authorization. The trader, of course, denied this and has claimed that that such activites are widespread and that as long as his trades were generating big profits, everyone in the hierarchy turned a blind eye.

I do not know the truth of the matter and I guess no one ever will. But the trial will surely unearth some skeletons, especially the extent of oversight required within Banks driven by an obsessive drive among Bank managements to deliver extra-ordinary profits, quarter over quarter, to feed the excessive greed of shareholders and investors.

Although, not recognized as a ‘Star’ trader, Kerviel was expecting a big 2007 bonus of about a Million Dollars had he not been caught out! However, everyone recognizes that he did not personally benefit from the alleged fraud.

But given the fact that he was part of a team, an entire heirarchy above him, who were responsible for oversight of such trading activity, would have also benefited by way of recognition and the dirty ‘B’ word. However, when the time came to catch the crooks, the Bank, (aided by the Prosecutors), seem to have let off his supervisors, without charging them for acts of negligence and ommission (if not ‘commission’)! Self preservation appears to be the main motivation for this.

In the past, Kerviel has been apparently cooperative with the investigation, and has told prosecutors his actions were common across the company. Clearly, he did exceed his limits, but so long as he was making profits everyone seems to have a turned a blind eye. At worst, whenever abnormal volumes were noticed, his supervisors seemed to have bought his argument that they were erronneous trades and allowed him to reverse the same. To me it appears that Kerviel is being made a scapegoat in the whole episode – maybe to hide the heavy losses that the Bank was incurring at the time.
His comment on today’s CNN news report, which triggered this blog post, was really telling and went something like this: “While I accept my share of the blame, I am sad that I am the only one being prosecuted.” He went on to add: ‘I was the prostitute at the banking orgy!’