SocGen trader 'cooperating' with police
The junior trader blamed for causing a $7 billion loss at French bank Societe Generale faced a second day of questioning on Sunday by finance police, who said he was cooperating with their inquiry.
Jerome Kerviel, 31, handed himself over to the authorities on Saturday, three days after the venerable SocGen unveiled the world's biggest investment banking fraud in history that it blamed on a lone and lowly dealer.
Police have an initial 24 hours to question Kerviel, but a judicial source said it was likely that prosecutors would extend that period by a further full day.
At that point, they will have to decide whether to launch legal proceedings against him, probably by placing him under formal examination which could lead to charges, or release him for lack of evidence.
"All is going well. He is co-operating and is ready to explain what happened," Jean Michel Aldebert, the head of the financial section of the Paris prosecutors office, told reporters late Saturday.
SocGen has accused its trader of taking "massive fraudulent" positions in 2007 and 2008 on European equity market indices, which left them nursing huge losses as they unwound the positions in plunging markets at the start of last week.
On Friday, police visited the gleaming Societe Generale offices where Kerviel used to work, poring over his computer records, and also searched the apartment where he lived on the western outskirts of Paris.
Kerviel's family say he is being made a scapegoat for the world's worst rogue trading scandal.
A lawyer acting on behalf of small SocGen shareholders, who has filed a complaint tied to the losses, said it was impossible that Kerviel could have acted alone or without leaving any trace of his activities. He accused the bank of negligence.
"Traders' positions are limited according to seniority. He had a junior rank and every evening you have about 10 people involved in checking up everything that has happened," lawyer Frederik-Karel Canoy told Reuters.
SocGen's Executive Chairman Daniel Bouton was quoted at the weekend as saying Kerviel was able to keep one step ahead of his supervisors for months by manipulating fictitious trades and evading checks like "a mutating virus".
Jean-Pierre Mustier, head of SocGen's investment banking unit, told the Financial Times the rogue trader was managing hundreds of thousands of concealed deals and an equal number of fake hedges to give the appearance that any loss was offset.
The scandal looks certain to have political implications with French President Nicolas Sarkozy demanding changes to the way international financial markets are run.
"We have to put a stop to this financial system which is out of its mind and which has lost sight of its purpose," Sarkozy said on Saturday during a visit to India.
SocGen has lodged a complaint with police based on three main charges - fraudulent falsification of bank records, fraudulent use of such records and computer fraud. A group of small SocGen shareholders have also filed a complaint, which includes accusations of fraud and breach of trust.
The various charges carry maximum prison terms of between 2 and 5 years, plus fines of up to 375,000 euro ($550,000). (Reuters)
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