(AFP) – Jan 26, 2008
PARIS (AFP) — Police have raided the apartment of the Societe Generale dealer at the heart of a seven-billion-dollar rogue trader scandal that the French bank's chairman described Saturday as an "accidental fire."
French prosecutors confirmed the raid on the apartment in the western Paris suburb of Neuilly of Jerome Kerviel, the 31-year-old blamed for amassing the losses which cost the banking giant 4.9 billion euros (7.15 billion dollars),
Police officers also went Friday to the bank's Paris headquarters to seize Kerviel's computer files, the prosecutors said, adding that "some items useful to the inquiry" were handed over voluntarily.
Kerviel's whereabouts were unknown, but his lawyer told AFP he was "not on the run." Neighbours said he had not been seen for weeks at the Neuilly flat, which some suggested he might have been sub-letting.
In an interview published Saturday in the daily Le Figaro, Societe Generale chairman Daniel Bouton denied that the bank's management had made any strategic errors which led to the scandal.
"What happened at Societe Generale is certainly not a disaster that resulted from our strategy. It is more like an accidental fire which destroys a large factory at an industrial plant," Bouton said.
He also rejected any suggestion that the bank had sought to hide the losses.
The French government on Friday demanded a full accounting of the scandal, which President Nicolas Sarkozy insisted had not affected the "solidity and reliability of France's financial system."
A top French presidential advisor revealed that Kerviel had held positions of more than 50 billion euros -- more than the bank's current market capitalisation of 35.9 billion euros.
"Questions will have to be asked about the internal controls of the banking systems," Raymond Soubie told French television, saying it was "amazing" the trader had not caught.
The head of the European Central Bank, Jean-Claude Trichet, called for tighter self-regulation by banks after the scandal.
Prime Minister Francois Fillon demanded a finance ministry report within a week on the bank losses, the biggest of their kind in financial history.
The scandal is a fresh blow to investor confidence as global banks reel from multi-billion dollar writedowns over the subprime crisis.
US media suggested the trader may have helped push the US Federal Reserve into an unprecedented rate cut on Tuesday.
"Was the Fed tricked?" wrote Wall Street Journal commentator David Gaffen, asking whether Societe Generale's high-volume sales of tainted positions at the start of the week -- when global stock markets were in turmoil -- helped set the stage for the emergency cut of 0.75 points.
Bouton rejected the proposition as "absurd," arguing that it was Asian bourses which had "set the tone" for falls on financial markets and the Fed decision.
The Kerviel case dwarfs that of Nick Leeson, the "rogue trader" who lost 1.5 billion dollars at Barings, causing the failure of the venerable British bank in 1995.
Within a day of Societe Generale's announcement, France's "rogue trader" had become a cult figure on the Internet, his photograph plastered over newspaper front pages around the globe.
Described by work colleagues as a shy, hesitant character, Kerviel's resume depicts him as a judo and sailing fan who once ran for municipal office in his hometown of Pont l'Abbe in Brittany, western France.
His aunt, who lives in Pont-l'Abbe, told AFP that her nephew "must have been manipulated."
"They are an honest family, who have nothing to reproach themselves for. The young man has always been serious, reserved," Sylviane Le Goff said.
"In my opinion, it is his bosses and employers who should be looked into," she said, adding that her sister had gone to Paris on Thursday to try and "comfort" her son.
Many experts said it was difficult to believe a lone trader could have successfully hid such colossal losses, which slashed the bank's 2007 profit to 600-800 million euros from 5.2 billion in 2006.
Societe Generale announced at the same time as the fraud that it had lost about two billion dollars on its subprime exposure.
But the Bank of France governor said he was certain Societe Generale had not sought to disguise losses made in the subprime mortgage crisis.
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