Trader gets away with 4.9 billion euro fraud by Claudia Sonea

On Thursday a 4.9 billion euro fraud went public. Bank Societe Generale, a French banking giant, stated to the press that one of their traders, 31-year-old Jerome Kerviel, who had worked at Societe Generale in Paris since 2000 and had been on the trading desk since 2005, committed one of the biggest fraud in the financial history. That was a blow in the already unstable situation of the bank. Societe Generale chief executive and Chairman Daniel Bouton said the trader managed to pass through all control procedures using sophisticated measures. As one of the three biggest banks in France, BRD sued Kerviel with the allegations of falsifying bank documents, using falsified bank documents and unauthorized computer access. However, they will have to deal scores of shareholders that sued them for fraud and misconduct, while Bouton and his deputy Philippe Citerne, whose resigns were rejected, will give up their salaries for the next six months and all bonuses from 2007. At the bank's requests all trading in its shares was suspended (stock closed 4.14 percent down on news of the fraud and a 2.05 billion euro loss in the US subprime mortgage market) and the amount of losses leaves them with a 600-800 million euros profit, thus they will actually need a capital increase of 5.5 billion euros to restore its balance sheet. French Prime Minister Francois Fillon stated at the World Economic Forum in Davos that even though the fraud is a serious matter, it does not affect in any way he current situation on the global financial markets. Finance Minister Christine Lagarde confessed that she predicted something like this happening and that is why she requested the country's banking regulator to bring in tougher controls in response to the scandal. Still, no one thinks the trader was acting on his own and that he managed to get away so much time. Elie Cohen, a professor of economics at the Paris Institute of Political Studies, Arnaud Riverain from the private firm Arkeon Finance and other financial experts were rather against the idea of a trader acting alone, especially after the human resources official added that he was rather frail and lacked in imagination. It is not a unique case; the international finance industry registered a decade of rogue in 1998 trading which cost the Sumitomo Corporation of Japan 2.6 billion dollars, while in Britain Nick Leeson caused the bankruptcy of Britain's Barings bank. Allied Irish Bank faced the fraud of 2002 when John Rusnak, a trader, got away with 750 million dollar and a 7 and-a-half years of imprisonment. All is old and all is new, said a Romanian poet. You should start worry if you have money at BDR. Until next time, take care.

related story: http://news.yahoo.com/s/afp/20080124/bs_afp/francebankingsocietegeneralecrime_080124210445;_ylt=AsjbAKkcY3s9yp0gje.sFLys0NUE

by Claudia Sonea for PocketNews (http://pocketnews.tv)

PocketNews is a new real-time news broadcaster delivering the latest and hottest news right to your pocket ! With global clients who want to be kept up to date, PocketNews is everyone's way of keeping in touch with the World.