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French bank Societe Generale vowed Friday to mount a "vigorous" challenge to a New York lawsuit accusing it of misleading investors and failing to clamp down on a rogue trader who ran up massive losses. The bank -- one of the largest in Europe -- said it "took note" of the class action law suit filed March 12 in a federal court in New York. "These complaints relate principally to alleged failures of Societe Generale concerning information provided on its exposure to the (US) subprime crisis and to internal controls regarding the recent fraud of which Societe Generale was a victim," the bank said in a statement. "Societe Generale intends to defend itself vigorously against these legal actions." The class action lawsuit alleges that Societe Generale and its chairman Daniel Bouton "misled investors regarding its activities and exposure in the subprime mortgage markets," according to a statement from the law firm representing the plaintiffs. Banks in the United States and Europe have sustained huge losses on mortgage-backed securities undermined by a wave of foreclosures by subprime, or high-risk, US homeowners. Societe Generale was also accused of insufficient controls and failure to act on information regarding unauthorised trades by its Delta One derivative trading desk, handled by junior trader Jerome Kerviel. The complaint was filed on behalf of all purchasers of American Depositary Receipts of Societe Generale, traded on the US market, and all US purchasers of the bank's shares on overseas exchanges, between August 1, 2005 and January 23, 2008. US and European investors "have suffered significant losses" as a result of the actions of Societe Generale, the second-biggest bank in France, the statement from the law firm said. Kerviel, 31, is under investigation here in connection with losses of $7.1 billion, which were disclosed by the bank in mid-January. Societe Generale blames Kerviel for the mammoth losses incurred after it was forced to unwind more than 50 billion euros of unauthorised deals he is alleged to have made. Kerviel is facing charges of breach of trust, fabricating documents and illegally accessing computers. (AFP)
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