Rogue trader prepares for prison term

Steve Dinneen
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JEROME Kerviel emerged from court yesterday sharp-suited and ashen-faced, like a lost member of the Reservoir Dogs cast, knowing he was about to swap his black tie for a set of prison overalls. He will wear the new outfit for around two years, after being handed a five-year prison term for blowing €4.9bn (£4.3bn) of Societe Generale’s money.

His conviction for forgery, unauthorised computer use and breach of trust was the inevitable conclusion to an almost unbelievable chain of events, in which one man threatened to bring down the entire French banking system.

Almost as implausible has been Kerviel’s personal journey. A bright but never gifted student, he graduated from an average university before starting his career at SocGen as, ironically, a compliance officer. As a banker he was largely overlooked, a tiny cog in a sprawling machine, his hands tied when it came to making the big trades he craved. After eight years he was still earning a relatively meagre £75,000 a year.

Then, like a true gambler, he hit upon a system: a system that would prove to be the least effective in banking history. He masked vast trades with fake hedge bets, allowing him to risk billions on his market hunches. More than €50bn was tied up in his crackpot plan. And eventually it all came crashing down.

Since his arrest Kerviel, 33, has been lauded by the French public as an anti-hero of the financial crisis, a man who superficially appeared to prove the public belief that the financial system was dangerously out of control.

He became a celebrity. Websites sprang up lionising the rogue trader; he released a book about his experiences (albeit to modest sales); t-shirts bearing his name sold in their thousands. As the face of the financial crisis, Kerviel was perfect. Young, handsome, stylish and arrogant.

He goes to prison as one of the most famous men in France, a pin-up boy for people opposing the system he loved. A movie of his life is a racing certainty.
But it’s not all good news. Kerviel is still liable for the €4.9bn he blew. Going by his last salary, it will take him nearly 50,000 years before he is back on even terms.

For SocGen it is the start of a very different journey. After being cleared of turning a blind eye to Kerviel’s actions (not “responsible for the creature that it had created”, in the words of the judge) it can start to rebuild its reputation. It will be a long road for both parties.

Why was Kerviel sentenced to four years when Madoff received 150?

Last night Kerviel’s five year sentence, of which two were suspended, was already being branded paltry. For a man who blew a staggering sum of money, a term that could last less than two years seems remarkably generous.

Certainly when compared to the dizzying 150 years handed to Bernard Madoff for his $20bn ponzi scheme it seems like a walk in the park. He will only be 35 on his release – Madoff would be 222. Nick Leeson, the banker behind the Barings Bank collapse in 1995, served four years of a 6 1/2 year sentence in a Singaporean jail. And Allied Irish Banks’ John Rusnak was hit with a 7 1/2 year stretch in the US for concealing a relatively insignificant $691m.

In many ways, Kerviel is lucky he committed his crimes in his home country, where sentences are more lenient: he could have faced 20 years if tried in the US. However, his time is not likely to be easy. French prisons have the highest suicide rates in Europe and there are numerous reports of breaches of human rights.