A French appeals court has ordered “rogue trader” Jerome Kerviel to pay €1mn to Societe Generale over the nearly €5bn he squandered through his reckless risk-taking.
But the court in Versailles, outside Paris, laid the lion’s share of the blame for the €4.9bn ($5.5 billion) loss at the feet of the French banking giant, citing its “woefully inadequate” internal checks.
Kerviel, 39, was “partially responsible for the loss” that brought Societe Generale to the brink of bankruptcy in 2008, the court said.
But “regardless of (Kerviel’s) wiles and determination, or the sophistication of the procedures he used, such a loss could not have been incurred without the woefully inadequate oversight systems at Societe Generale”, the court said.
The deficiencies and “managerial choices ... gave an ill-intentioned employee such as Jerome Kerviel a wide scope of action”, it added.
In a civil case, Kerviel was first ordered to repay the entirety of the enormous losses but that was quashed on appeal.
Despite yesterday’s verdict that he must now pay €1mn, Kerviel said: “I still believe I owe nothing to Societe Generale.”
He said the decision gave him the “energy to continue the struggle” and would go on fighting for a retrial.
His lawyer David Koubbi, while trumpeting that the Versailles court “wiped out 99.98% of the sum” hanging over his client, said he would oppose “any effort to recover” the €1mn.
Jean Veil, a lawyer for Societe Generale, had called the ruling “completely satisfactory”.
Koubbi said yesterday’s decision would be “excellent fodder” for three lawsuits that are pending against the bank as well as the bid for a retrial.
The decision did not bear directly on a €2.2bn tax break that the French state awarded to the bank in compensation for the losses – a protection that is available in fraud cases.
But the government said it would review Societe Generale’s tax situation in view of the ruling that the bank was overwhelmingly responsible.
Kerviel, who was convicted of breach of trust, forgery and entering false data for the trades, was sentenced to five years in prison, two of which were suspended.
In total he actually spent only 150 days in prison.
Kerviel has always maintained his bosses turned a blind eye as long as the profits kept rolling in.
His colleagues said he was generally well thought of by his bosses, but Societe Generale’s then-chief executive described Kerviel as a “crook, fraudster and terrorist” after the scam fell apart.
Yesterday’s verdict follows hearings at the Versailles appeal court in June in which lawyers for Societe Generale made a fresh attempt to claw back the cash.
The bank said it had “always recognised the weaknesses and faults in its system of checks”, but that Kerviel was responsible for the trades.
In June, a Paris labour tribunal ordered Societe Generale to pay him €450,000 in damages, saying that he had been fired “without genuine or serious cause”.
The bank has appealed.
Kerviel, the son of a village blacksmith from the far west of rural Brittany, divides opinion in France.
Many believe he is a scapegoat while others think he should pay the price for his actions.
He has never denied taking risks – at one point staking €50bn of the bank’s money – but maintains that his bosses were just as much at fault as he was.
Although his annual salary of some €100,000 was modest compared with that of some of his fellow traders, Kerviel reportedly generated €1.9bn for the bank before the financial crisis accelerated his losses.
Since his release from prison, Kerviel has reinvented himself as a computer security consultant and a trenchant critic of “casino capitalism”, even meeting Pope Francis after making a pilgrimage to Rome to protest against the “tyranny of the markets”.