Probe at SocGen finds no conspiracy
French bank investigation finds no complicity behind big trading loss, says trader acted alone.
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| Securities trader Jerome Kerviel out of jail but facing charges in $7B French bank fraud case. Jim Bittermann reports |
An internal investigating committee said Wednesday night that it found no evidence that anyone helped futures trader Jerome Kerviel hide his positions or that he may have made personal monetary gains through the allegedly unauthorized positions.
Societe Generale has said Kerviel began trading illicitly in 2005 for modest amounts, which became more substantial from March 2007 and built up to bets totaling €50 billion ($73.28 billion) discovered on Jan. 18, which the bank then liquidated.
The bank revealed almost €5 billion ($7.33 billion) in losses from closing the positions on Jan. 24, saying Kerviel forged documents and emails to suggest he'd hedged his positions.
Critics of the bank's version of the events say Kerviel couldn't have amassed such large positions without attracting the attention of his colleagues.
In an interim report, the investigators at France's No. 2 bank said control procedures failed to stop Kerviel, 31, because the bank didn't follow up on warnings.
"At this stage of the investigations, there is no evidence of embezzlement or internal or external complicity," according to a report by a committee charged with investigating the losses.
The bank failed to identify the fraud due "to the efficiency and variety of the concealment techniques employed by the fraudster, secondly to the fact that operating staff did not systematically carry out more detailed checks, and finally to the absence of certain controls (that) might have identified the fraud."
Investigations are continuing and will be enlarged to cover the activities of other traders, the report said.
Headed by board member Jean-Martin Folz, former CEO of PSA Peugeot Citroen, the committee of three independent directors is being helped by more than 40 bank inspectors and auditing firm PricewaterhouseCoopers to examine the causes and sizes of the trading losses and look into whether the bank accurately communicated information about the scandal.
The committee said it is declining to make any conclusions about any responsibility of Kerviel's superiors at this stage. It said it plans to deliver a full report before the bank's shareholders meeting May 27.
The case is also being investigated by the France's market authority, its banking commission and a French court.
Several weaknesses in Societe Generale's procedures have been identified, and correcting them right requires tightening computer security, reinforcing controls and taking more account of the possibility of fraud, the committee said. 
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