5 ms·

Ex-French trader must pay $6.7 billion for fraud

39 points by edw519 16y ago

frisco 16y ago
I'm confused by this title. Was being kicked out of France part of his punishment, but he's still a trader? Or is he a French ex-trader? This could be rephrased for clarity.
- bambax 16y ago
  Ex-(French trader). This ruling is crazy (pay back everything (how??) and go to prison for three years). I very much doubt it can stand on appeal.
  - randomtask 16y ago
    I don't get why the parent was downvoted. Since when does HN get up in arms about grammar nazis? ;) The term "Ex-(French trader)" implies that he could now be, for example, a German trader. I think the proper nomenclature should be "French ex-trader" with the "ex-" prefix being most tightly bound to the thing that the subject was formerly. I may well be wrong about that and I'm fully willing to accept the consequences of the Law of Prescriptive Retaliation. :) http://languagelog.ldc.upenn.edu/nll/?p=337 http://languagelog.ldc.upenn.edu/nll/?p=337
agravier 16y ago
This nonsense ruling allows the bank to avoid responsibility.
- tfh 16y ago
  This is the message the french court is giving: "As long as you make money, risk taking is ok. If you screw up, it's your fault. You pay everything back."
  - milkshakes 16y ago
    Yeah, he's working in the wrong country. Here in the land of the free, when they screw up we pay everything back.
  - demallien 16y ago
    Which is not a bad thing, in my opinion. One of the structural problems that the global financial crisis has revealed is that financial institutions take risks with other peoples' money. If the gamble works, they get a good slice, if it doesn't they don't have to pay anything. It would appear that the French government is opting for gaol time and enormous fines to make individual traders act responsibly, even when their employer refuses to. This is not a bad idea, it makes people self-governing, rather than having a government organisation trying to run audits on companies and detecting how their best accountants have cooked the books.
    - tfh 16y ago
      > It would appear that the French government is opting for gaol time and enormous fines to make individual traders act responsibly, even when their employer refuses to. It's difficult enough to find a job as a trader now. The banks would simply choose the traders with the most risk taking potential. I personally think it's a step in the wrong direction. It's the employer who has to be made act responsibly, not the individual traders.
danielnicollet 16y ago
I am from France and have friends working at Societe Generale. For those interested in the case, the big question is not why Kerviel was condemned to pay a fine he will clearly never pay but why his boss and execs from the bank were never bothered. How could they say that they ignored a few single very risky fraudulent trades had generated the bulk of the billions in profits they made during two years prior to the blow up of the affair?!
- randomtask 16y ago
  Comment on dit "scapegoat" en Français?
  - guylhem 16y ago
    bouc-émissaire. Official apology : we didn't know what he did. It's hard to believe no-one knew what was happening. If they are that incompetent, it may be wise to use competitors.
- waytooold 16y ago
  >why his boss and execs from the bank were never bothered. Some were let go. Not the Big big boss though. he cheated the system. By moving up through the ladder he gains good knowledge how to bypass security (that was poorly designed, but again 12 years ago that wasn't the focus), he became an insider threat and use his knowledge to abuse the system. I don't think they (bosses) were aware they were making profits.
  - danielnicollet 16y ago
    In 2007 he made them the bulk of their 1.4 Euros net income. That's inexcusable for a CEO and his board not to know where the bulk of their net income comes from. Especially when it's from one single trader!
lefstathiou 16y ago
What a joke. How could they not realize that this ridiculous ruling gives the impression that the courts arent taking themselves, the law or society seriously? They could have slapped him with a million dollar fine or something along the lines of 5-7 years worth of income to make everyone start paying attention.
- anigbrowl 16y ago
  Everyone seems to be paying attention now. It's a reflection of the damage he did, not his ability to pay.
T_S_ 16y ago
The only real story here is whether the sentence would hint at criminal culpability by bank. It didn't, but they weren't actually on trial. The bank already got fined for lax controls by the regulator--a civil matter, but they were not left unpunished. The trader will never pay restitution, cannot be jailed for that, and everybody including the court knew that. People always waste energy wanting to demonize or glorify when they should analyze. It is not hard for me to believe that bank managers could be clueless rather that criminal. Let's hear one suggestion that will prevent such cases in the future. This case strikes me as similar to the Joe Jett/Kidder Peabody case a few years earlier. Self-deluded trader, weak accounting system, lax controls, clueless manager. Result: A big loss that destroyed the bank. Banks have far more privacy in their financial life than individuals. I think we need to rethink how well closed information systems (like a bank) serve us as individuals and society.
- yummyfajitas 16y ago
  Let's hear one suggestion that will prevent such cases in the future. Banks already listened to many suggestions and implemented them back in 2008/2009. One very well known example, which wasn't specific to any individual bank: every US bank now has 2 contiguous weeks of mandatory vacation (i.e., someone not under your control will be managing your books for 2 weeks).
known 16y ago
Govt is not smart enough to monitor day-to-day illegal & immoral activities of big corporations. It is better to breakup these corporations into smaller entities to promote competition and solve unemployment crisis.
- anigbrowl 16y ago
  Perhaps, but Bernie Madoff managed to steal an enormous sum despite having a tiny firm. Various hedge fund disasters also started small.
chegra 16y ago
I'm ok with everything here, except why wasn't his bosses charged? 74 Alarms triggered and no one said anything or did anything. I'm more inclined to believed that they were happy when he made money but also would not be taking the blame if it went sour, which it did. They effectively looked the other way that is my only conclusion. Yea, I know someone is going to say don't attribute to malice what can be explain with incompetence, but it is hard for me to believe that they didn't know and just looked the other way. In my opinion, his bosses should be culpable.
nphase 16y ago
How is he Ex-french? Was his nationality stripped from him? That would be a bit of a insult after injury, wouldn't it? Shouldn't it be "French ex-trader"?
- danielnicollet 16y ago
  Funny mistake. The French (led by President Sarkozy) are actually talking about stripping nationality from certain types of criminals. See: http://www.france24.com/en/20100730-sarkozy-looks-strip-citizenship-threaten-security-forces-french-immigration http://www.france24.com/en/20100730-sarkozy-looks-strip-citi... I am a Franch-American dual national, maybe I will be just American after making this comment... Liberté, égalité, fraternité! ;-)
kevinelliott 16y ago
Wait, so he's been charged $6.7 billion, and "no one realistically expects him to pay it" ... "it's more symbolic" Hogwash. I smell foul play. How would a $6.7 billion fine prevent people from doing this any more than $100 million? They made this number big so that the PUBLIC would see it and think "yay, someone has taken responsibility for it all" but allows the bank to get away scot free. He was definitely a fall guy.
adulau 16y ago
Usually in the banking sector, it's not uncommon to have a private agreement before going into court case. Especially when this is a mutual benefit between the employee and the employer (the bank). As the "fraud" within the bank has always a negative impact on the bank's credibility (a key factor for operating a bank), a private agreement is usually better for everyone. But the period was bad for the trader, Société Général was in a bad shape due to their subprime losses. So it was easier for SG to charge the insider trader than willing to find an agreement. Especially that would cover the current subprime losses as not originating (even if the banks lacks controls or auditing) from the bank itself but more from the "evil" trader. The surprise is now more coming on the judgment itself where the internal bank operation was not deeply analyzed. If you are old enough, you may remember the Crédit Lyonnais fire in Paris destroying the whole archive in 1996. Maybe the appeal would go more in the archive of SG and re-balance a bit the judgment...
Timothee 16y ago
Couldn't one argue that the 5 billion euros lost were lost only because the Société Générale execs sold everything when it was discovered? Had it been "discovered" (or acted upon) at the right time, I suppose it could have made the bank the same amount of money.

39 points by edw519 16y ago

I'm confused by this title. Was being kicked out of France part of his punishment, but he's still a trader? Or is he a French ex-trader? This could be rephrased for clarity.

bambax 16y ago
Ex-(French trader). This ruling is crazy (pay back everything (how??) and go to prison for three years). I very much doubt it can stand on appeal.
- randomtask 16y ago
  I don't get why the parent was downvoted. Since when does HN get up in arms about grammar nazis? ;) The term "Ex-(French trader)" implies that he could now be, for example, a German trader. I think the proper nomenclature should be "French ex-trader" with the "ex-" prefix being most tightly bound to the thing that the subject was formerly. I may well be wrong about that and I'm fully willing to accept the consequences of the Law of Prescriptive Retaliation. :) http://languagelog.ldc.upenn.edu/nll/?p=337 http://languagelog.ldc.upenn.edu/nll/?p=337

agravier 16y ago

This nonsense ruling allows the bank to avoid responsibility.

tfh 16y ago
This is the message the french court is giving: "As long as you make money, risk taking is ok. If you screw up, it's your fault. You pay everything back."
- milkshakes 16y ago
  Yeah, he's working in the wrong country. Here in the land of the free, when they screw up we pay everything back.
- demallien 16y ago
  Which is not a bad thing, in my opinion. One of the structural problems that the global financial crisis has revealed is that financial institutions take risks with other peoples' money. If the gamble works, they get a good slice, if it doesn't they don't have to pay anything. It would appear that the French government is opting for gaol time and enormous fines to make individual traders act responsibly, even when their employer refuses to. This is not a bad idea, it makes people self-governing, rather than having a government organisation trying to run audits on companies and detecting how their best accountants have cooked the books.
  - tfh 16y ago
    > It would appear that the French government is opting for gaol time and enormous fines to make individual traders act responsibly, even when their employer refuses to. It's difficult enough to find a job as a trader now. The banks would simply choose the traders with the most risk taking potential. I personally think it's a step in the wrong direction. It's the employer who has to be made act responsibly, not the individual traders.

danielnicollet 16y ago

I am from France and have friends working at Societe Generale. For those interested in the case, the big question is not why Kerviel was condemned to pay a fine he will clearly never pay but why his boss and execs from the bank were never bothered. How could they say that they ignored a few single very risky fraudulent trades had generated the bulk of the billions in profits they made during two years prior to the blow up of the affair?!

randomtask 16y ago
Comment on dit "scapegoat" en Français?
- guylhem 16y ago
  bouc-émissaire. Official apology : we didn't know what he did. It's hard to believe no-one knew what was happening. If they are that incompetent, it may be wise to use competitors.
waytooold 16y ago
>why his boss and execs from the bank were never bothered. Some were let go. Not the Big big boss though. he cheated the system. By moving up through the ladder he gains good knowledge how to bypass security (that was poorly designed, but again 12 years ago that wasn't the focus), he became an insider threat and use his knowledge to abuse the system. I don't think they (bosses) were aware they were making profits.
- danielnicollet 16y ago
  In 2007 he made them the bulk of their 1.4 Euros net income. That's inexcusable for a CEO and his board not to know where the bulk of their net income comes from. Especially when it's from one single trader!

lefstathiou 16y ago

What a joke. How could they not realize that this ridiculous ruling gives the impression that the courts arent taking themselves, the law or society seriously? They could have slapped him with a million dollar fine or something along the lines of 5-7 years worth of income to make everyone start paying attention.

anigbrowl 16y ago
Everyone seems to be paying attention now. It's a reflection of the damage he did, not his ability to pay.

T_S_ 16y ago

The only real story here is whether the sentence would hint at criminal culpability by bank. It didn't, but they weren't actually on trial. The bank already got fined for lax controls by the regulator--a civil matter, but they were not left unpunished. The trader will never pay restitution, cannot be jailed for that, and everybody including the court knew that. People always waste energy wanting to demonize or glorify when they should analyze. It is not hard for me to believe that bank managers could be clueless rather that criminal. Let's hear one suggestion that will prevent such cases in the future. This case strikes me as similar to the Joe Jett/Kidder Peabody case a few years earlier. Self-deluded trader, weak accounting system, lax controls, clueless manager. Result: A big loss that destroyed the bank. Banks have far more privacy in their financial life than individuals. I think we need to rethink how well closed information systems (like a bank) serve us as individuals and society.

yummyfajitas 16y ago
Let's hear one suggestion that will prevent such cases in the future. Banks already listened to many suggestions and implemented them back in 2008/2009. One very well known example, which wasn't specific to any individual bank: every US bank now has 2 contiguous weeks of mandatory vacation (i.e., someone not under your control will be managing your books for 2 weeks).

known 16y ago

Govt is not smart enough to monitor day-to-day illegal & immoral activities of big corporations. It is better to breakup these corporations into smaller entities to promote competition and solve unemployment crisis.

anigbrowl 16y ago
Perhaps, but Bernie Madoff managed to steal an enormous sum despite having a tiny firm. Various hedge fund disasters also started small.

chegra 16y ago

I'm ok with everything here, except why wasn't his bosses charged? 74 Alarms triggered and no one said anything or did anything. I'm more inclined to believed that they were happy when he made money but also would not be taking the blame if it went sour, which it did. They effectively looked the other way that is my only conclusion. Yea, I know someone is going to say don't attribute to malice what can be explain with incompetence, but it is hard for me to believe that they didn't know and just looked the other way. In my opinion, his bosses should be culpable.

nphase 16y ago

How is he Ex-french? Was his nationality stripped from him? That would be a bit of a insult after injury, wouldn't it? Shouldn't it be "French ex-trader"?

danielnicollet 16y ago
Funny mistake. The French (led by President Sarkozy) are actually talking about stripping nationality from certain types of criminals. See: http://www.france24.com/en/20100730-sarkozy-looks-strip-citizenship-threaten-security-forces-french-immigration http://www.france24.com/en/20100730-sarkozy-looks-strip-citi... I am a Franch-American dual national, maybe I will be just American after making this comment... Liberté, égalité, fraternité! ;-)

kevinelliott 16y ago

Wait, so he's been charged $6.7 billion, and "no one realistically expects him to pay it" ... "it's more symbolic" Hogwash. I smell foul play. How would a $6.7 billion fine prevent people from doing this any more than $100 million? They made this number big so that the PUBLIC would see it and think "yay, someone has taken responsibility for it all" but allows the bank to get away scot free. He was definitely a fall guy.

adulau 16y ago

Usually in the banking sector, it's not uncommon to have a private agreement before going into court case. Especially when this is a mutual benefit between the employee and the employer (the bank). As the "fraud" within the bank has always a negative impact on the bank's credibility (a key factor for operating a bank), a private agreement is usually better for everyone. But the period was bad for the trader, Société Général was in a bad shape due to their subprime losses. So it was easier for SG to charge the insider trader than willing to find an agreement. Especially that would cover the current subprime losses as not originating (even if the banks lacks controls or auditing) from the bank itself but more from the "evil" trader. The surprise is now more coming on the judgment itself where the internal bank operation was not deeply analyzed. If you are old enough, you may remember the Crédit Lyonnais fire in Paris destroying the whole archive in 1996. Maybe the appeal would go more in the archive of SG and re-balance a bit the judgment...

Timothee 16y ago

Couldn't one argue that the 5 billion euros lost were lost only because the Société Générale execs sold everything when it was discovered? Had it been "discovered" (or acted upon) at the right time, I suppose it could have made the bank the same amount of money.