SocGen Court Hearing to Weigh Freeing Jailed Trader

 
 
By Reuters -  |  Posted 2008-03-14
 
 
 

PARIS (Reuters) - A Paris court is due to decide on Friday whether or not Jerome Kerviel, the trader accused of causing record losses at French bank Societe Generale, should be allowed to leave prison.

A ruling is expected sometime after 9:00 a.m. EDT.

In January, SocGen unveiled 4.9 billion euros ($7.64 billion) of losses which it said were caused by rogue deals carried out by Kerviel, a 31-year-old who had a junior trading position at the bank.

Kerviel has been placed under formal investigation for breach of trust, computer abuse and falsification.

He has been held for a month in Paris' La Sante prison. His lawyers have appealed for Kerviel to be released while prosecutors say he should remain in custody.

SocGen has carried out an internal investigation into the Kerviel affair. Its report, published on February 20, supported the bank's previously expressed view that Kerviel acted alone.

The internal report reiterated that Kerviel started building up non-authorized trading positions in 2005 and 2006 for "small amounts," but that they got bigger from March 2007 onwards.

By the time SocGen discovered what was going on in late January, Kerviel had amassed a position worth 49 billion euros, which SocGen unwound between January 21 and January 23 in an already falling stock market.

SocGen's losses have made it vulnerable to a takeover bid. France's biggest listed bank, BNP Paribas, has said it is looking at SocGen. In 1999, BNP narrowly failed to buy its rival.

The bank has also come under pressure from leading politicians and regulators.

Bank of France Governor Christian Noyer criticized SocGen's risk control systems.

French President Nicolas Sarkozy has said SocGen Chairman Daniel Bouton should "assume his responsibilities" for the affair, although Bouton has said he has a mandate to keep his job and continue with the bank's standalone strategy.

(Reporting by Sudip Kar-Gupta; Editing by Jason Neely)