Bank's Loss of $7.2B Could Mean Big Bucks for Rogue Trader
Jerome Kerviel’s career in the securities industry appears to be at an end after the stunning news late last month that the junior trader allegedly cost one of France’s biggest and best-known banks a record $7.2 billion in losses. Meanwhile, he appears likely to be criminally prosecuted, and the French finance minister is calling for increased bank regulation there and elsewhere.
But all of that shouldn’t prevent the once-little-known Société Générale employee from doing very well indeed in his future endeavors, based on his newfound notoriety as a rogue trader—especially if he is represented by the right lawyers, a Bloomberg column suggests.
Following in the footsteps of the infamous Nick Leeson, whose trading losses of $1.4 billion brought down the London-based Barings bank in 1995, Kerviel can hope to sign similar book and movie deals—that, as in Leeson’s case, could lead to a lucrative career as a speaker. (Leeson now commands nightly appearance fees of between $11,900 and $19,900, the news agency reports.)
Of course, Leeson did have to serve several years in a Singapore prison first, so Kerviel might aspire instead to emulate former Kidder, Peabody & Co. trader Joseph Jett, the article notes. Accused by the Securities and Exchange Commission of “creating the illusion of profit,” his work reportedly led Kidder to take a $210 million charge against 1994 earnings but led to no criminal charges against Jett. Plus, based on his contention that he had done nothing wrong and Kidder knew how he was accounting for trades, an arbitration panel sided with Jett when Kidder tried to freeze $1 million in his personal account.
“The Jett model seems to make for a solid rogue road map—cause a disaster, blame it on the firm and walk away a free man,” the article states. “Kerviel’s lawyers look like they already have taken a step down this path. Société Générale, they say, is using Kerviel’s trading as a ‘smokescreen’ to divert attention from the bank’s subprime problems.”
Kerviel is out on bail, and is facing preliminary charges of forgery, breach of trust and unauthorized computer activity, apparently based on his efforts to conceal his unauthorized trading in stock index futures, according to the Financial Times and the Associated Press.
As discussed in earlier ABAJournal.com posts, Kerviel, according to SocGen, didn’t personally profit from his alleged rogue trades but placed them in an effort to help the bank do well and enhance his career there. The bank is being advised, in this matter, by a French boutique, Lussan & Associes.
Wall Street Journal: “How to Lose $7.2 Billion: A Trader’s Tale”
Wall Street Journal (sub. req.): “France Faults Société Générale’s Controls in Report”
