Word: soci
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...could have been the plot of a thriller: A young lone trader secretly concocts bogus transactions for months, in an attempt to cover his spiraling losses, until he has siphoned off billions of euros from under the noses of one of France's most venerable institutions. For Société Générale - France's second-biggest bank - the details were all too real, however, as stunned executives attempted to explain on Thursday how a mid-level employee lost 4.9 billion euros ($7.2 billion) in a rogue operation without anyone noticing...
...what could be one of the biggest inside frauds in banking history, French futures trader Jérome Kerviel, 31, effectively created his own trading firm within the bank's market rooms, according to Société Générale CEO Daniel Bouton. "He succeeded in building this hidden firm, in building his positions by hiding them by other positions that were totally fictional," Bouton told reporters at a Paris news conference on Thursday. "That is what is so extraordinary about this case." Bouton's offer to resign was rejected by the bank's administrators this week...
...began trading far beyond his responsibilities, racking up debts as global markets gyrated. To cover his losses, he created complex fictitious trades, until the losses appeared to spiral out of control. Said Kinner Lakhani, a London-based analyst for the Dutch bank ABN Amro, who covers Société Générale: "It was out of the realms of anyone's expectation...
Bank executives said they finally realized their mammoth problem last weekend. Société Générale chief executive of corporate and investment banking Jean-Pierre Mustier told reporters that he was "convinced [Kerviel] acted alone." Kerviel confessed to the elaborate fraud during a six-hour grilling by bank officials on Saturday night, according to the Daily Telegraph, which posted a photograph online of a slender, dark-haired man. Despite the weekend revelations, three days lapsed before executives suspended trading of Société Générale shares. They declined to tell reporters...
...proving executives had inside knowledge that motivated their stock deals at the time of transaction. Maréchal says that has often been difficult to do under French law, explaining why there have thus far only been two major insider trading convictions: cases involving canning group Pechiney, and bank Société Général in the late 1980s. Maréchal says sentencing in those cases suggests anyone eventually condemned for illegal trading of EADS stock will face stiff fines rather than actual jail time. "But the maximum financial penalties can run up to 10 times...