Report slams French bank’s management on giant fraud

May 23rd, 2008 - 4:26 pm ICT by admin  

Paris, May 23 (DPA) An internal report on the biggest fraud in financial history will say that a rogue trader at a French bank was able to bypass internal security mechanisms because of failures by his superiors, the English-language daily The International Herald Tribune reported Friday. Basing its story on the statements of a person who had read the report, the newspaper says that its conclusions that Jerome Kerviel was not the only employee at Societe Generale responsible for the 4.9-billion-euro ($7.7-billion) loss could make the bank vulnerable to a class-action lawsuit filed in the United States.

The report, which was written by internal Societe General auditors, is to be officially released later Friday, after trading closes on the Paris Bourse.

It implicates two of Kerviel’s direct supervisors on the bank’s Delta One trading desk for being negligent in the affair.

Although the report does not name them, the newspaper says they are Kerviel’s direct supervisor, Eric Cordelle, and Martial Rouyere, who heads the Delta One desk, and that Societe Generale will fire both.

The report also concludes that on several occasions Kerviel’s assistant, Thomas Mougard, may have made unauthorized trades for him, suggesting that he was an accomplice in the scheme. Mougard is also said to be losing his job.

Kerviel, who is under investigation on charges of forgery and breach of trust, said he did not carry out the scheme for personal gain but merely to make money for the bank and impress his superiors.

The bank discovered the scheme in January of this year, after Kerviel had secretly exposed it to a risk of 50 billion euros through his unauthorized trades.

According to the newspaper, nothing in the report suggests that anyone more highly placed in the bank’s management than Rouyere was implicated in the scandal.

Rouyere’s boss, Pierre-Yves Morlat, who was head of trading, and the bank’s former head of securities and derivatives, Luc Francois, resigned in the wake of the affair.

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