Jérôme Kerviel yesterday lost his appeal against the sentence he was handed down in 2010. The net result is that he owes his bank, Société Générale, 4.8 Billion Euros and faces the threat of spending three years in jail if his next and final appeal is again refused.
However, some extraordinary facts emerge from this whole sorry saga which suddenly exploded in the French press on 24 January 2008. Kerviel had permission to trade in the name of the Société Générale, but with a total desk limit of 125 million Euros.
He exeeded this limit several times, in spite of the internal bank controls. The directors turned a blind eye when he made huge profits, particularly in 2007 when a profit of 1.7 Billion euros was achieved !!!
When finally it was discovered that he had engaged his Bank with contracts for as much as 50 Billion euros, which approximates to about 1.8 times the net worth of his Bank, it was decided to close out all the contracts as quickly as possible. The net loss was 4.8 Billion euros (i.e. 6.5 Billion loss minus the 2007 profit of 1.7 Billion euros).
If one is realistic, to want to close out 50 Billion euros of specialized contracts in the space of 3 days trading, is not a realistic timescale to avoid high losses or to ensure low losses !!!
Can Kerviel really be "clobbered" (accused) of making these huge losses ? Is it not the fault of the "Real Directors" who suddenly realized they must act, and be seen to act, and quickly, to save their Bank ?
The Directors "closed out very quickly" and made a loss of 6.5 Billion euros. Was this really professional on their part ? Kerviel has now been judged and held responsible for the net loss of 4.8 Billion euros !!! Is this reasonable ?
When high powered directors do not know how to control, they must recognize their shortcomings and arrive at a suitable arrangement with Kerviel !!!
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