SocGen Knew of Kerviel Deals: Report

PARIS (Reuters) – An official from a German market watchdog has said French bank Societe Generale (SOGN.PA: Quote, Profile, Research) "could not possibly have been unaware" of rogue deals carried out by junior trader Jerome Kerviel, a French newspaper said.

Le Canard Enchaine cited German market watchdog official MichaelZollweg as saying SocGen must have been aware of Kerviel’s deals whenZollweg alerted authorities to unusual volumes on Germany’s Eurexderivatives exchange.

The paper said Zollweg works for Germany’s Trading SurveillanceOffice (TSO), which regulates Eurex. The paper added that Zollweg hadgiven his version of events to French authorities investigating theKerviel debacle.

The Paris public prosecutor has already said Eurex questioned SocGen about Kerviel’s trading activities in November 2007.

Asked to respond to the Canard Enchaine article, SocGen said Eurex’squestions did not concern Kerviel’s margin calls or his overall tradingposition.

"SocGen had told Eurex that it could give it any further informationthat it so required, but Eurex did not reply to this offer."

Officials at the German Trading Surveillance Office could not be immediately reached for comment.

SocGen on January 24 unveiled 4.9 billion euros ($7.8 billion) oflosses which it said were caused by unauthorized deals conducted byKerviel. The ex-trader has been placed under formal investigation forbreach of trust, computer abuse and falsification.

Societe Generale has consistently said Kerviel acted alone and thatit only became aware of the extent of his unauthorized deals in lateJanuary, by which time he had built up a position worth nearly 50billion euros.

In January, the Hesse Economics Ministry which supervises Eurex saidthat although Eurex tipped off SocGen in November about Kerviel, it didnot inform German regulators about its concerns, as a major incidentwould have required.

(Reporting by Thierry Leveque and Sudip Kar-Gupta; Editing by David Holmes)