French investigators looking for a third trader
A possible third person linked to $7 billion scandal at Societe Generale
PARIS - Investigators are trying to confirm the existence of a third person with possible links to a $7 billion trading scandal at French bank Societe Generale SA.
A trader and a broker who have been the focus of the investigation made multiple references to a mysterious third trader — known simply as Mat — whom investigators have so far been unable to locate, Isabelle Montagne, a spokeswoman for the Paris prosecutors’ office, said Tuesday.
Trader Jerome Kerviel has said he was working alone but that his bosses at Societe Generale must have been aware of his massive positions, and turned a blind eye as long as he was making money for the bank.
Investigators are searching for others who could have known about, or participated in, what the bank says was Kerviel’s unauthorized activity. They have questioned broker Moussa Bakir, an employee of Newedge, a joint venture between Societe Generale and Calyon bank, through which Kerviel passed some of his trades.According to internal company exchanges between the two, Kerviel said he was in contact with Mat, a London-based broker, who covered some of his positions, Montagne said.
Le Parisien newspaper reported Tuesday that initial findings suggest Mat never existed, and that Kerviel invented him to justify some of his operations.
“We haven’t found him for the moment,” Montagne said. “It’s too soon to say he’s a imaginary accomplice because investigations are not finished.”
Christophe Reille, a spokesman for Kerviel, did not return a message on his cell phone.
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Kerviel was jailed earlier this month to prevent him from contacting possible accomplices. His lawyers are seeking his release.
Kerviel is being held on preliminary charges of breach of trust, forgery and unauthorized computer activity. If convicted on those charges, he faces up to three years in prison and hefty fines.
On Jan. 24, Societe Generale reported losses of nearly 5 billion euros (more than $7 billion) when it was forced to liquidate 50 billion euros ($73.18 billion) in what it says were unauthorized futures positions taken by Kerviel. The bank said Kerviel hid his positions with fake hedges.
Societe Generale’s Fimat unit — which combined last month with Credit Agricole’s futures unit to form Newedge — began investigating suspicious trades four months before the announcement about Kerviel’s trades, Newedge spokesman Jean-Christophe Huertas said.
Fimat managers initiated a review after noting “an unusual increase in commissions,” he said.
Huertas said initial findings of the internal probe showed an increase in commissions for cash equities between mid-September and the start of November, not the futures trades that led to Societe Generale’s losses.
Senior management asked for further investigation, which was delayed by the deal to form Newedge. The findings were passed to Societe Generale in January.
Societe Generale spokeswoman Joelle Rosello declined to comment.
Bakir has been on sick leave from Newedge since French judges named him as a material witness in their investigation, said Huertas.
Bakir filed a legal complaint Friday saying the exchanges between he and Kerviel were made by the media to appear as if he was more involved than he actually was, Montagne said.
Kerviel, 31, was a junior trader charged with “plain vanilla” trading — or the more basic forms of futures trading. He took home a relatively modest salary of 47,500 euros ($69,470) last year — excluding bonuses.
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