Charges Sought Against French Trader

1. Charges Sought Against French Trader

2. By JAMEY KEATEN, AP Writer

3. PARIS (Jan. 28) - A Paris prosecutor on Monday asked for preliminary charges of forgery, breach of trust and fraud against Jerome Kerviel, accused by SocieteGenerale bank of causing the largest-ever trading fraud by a single person.

4. France's second-largest bank blames rogue trader Jerome Kerviel for a bank fraud that cost the company more than $7 billion in losses. The bank said Kerviel did not appear to have profited personally from the transactions and likely worked alone.

5. If confirmed, Kerviel's breach would be the biggest-ever trading fraud by a single person. When it was uncovered, the huge loss ratted the global banking sector.

6. The prosecutor, Jean-Claude Marin, also for the first time gave an inkling of what motivated the low-level trader. He said the 31-year-old did not seek personal profit and had not sought to despoil the bank but wanted to be "an exceptional trader" and earn performance bonuses.

7. Jean-Michel Aldebert, head of the financial section of the Paris prosecutor's office, said Kerviel was cooperating with police and that the investigation was "very fruitful." Kerviel's lawyer said the accusations of wrongdoing against his client were being used to hide bad investments by the bank related to subprime mortgages in the United States.

8. "It's always a bit for money, I'm not sure that was his prime motive," said the prosecutor. "It functions a bit like a drug, it's an addiction, ... there's a sort of spiral you can't get out of."

9. Marin was speaking as police wrapped up nearly 48 hours of questioning Kerviel. The trader was to appear before a judge who would decide whether to proceed with preliminary charges.

10. Under French law, filing preliminary charges means the judge has determined there is strong evidence to suggest involvement in a crime. It gives the investigator time to pursue the probe before deciding whether to send the suspect for trial or drop the case.

11. Once the scandal was uncovered, the bank alerted market regulators and moved immediately to close the trader's positions, incurring heavy losses amid sharp declines on world markets.

12. The prosecutor said Kerviel could face a maximum seven years imprisonment if convicted under the charges he was seeking.

13. SocieteGenerale revised downward slightly the amount Kerviel allegedly lost - from $7.21 billion to "just over" $7.09 billion. CEO Daniel Bouton said the bank, thought by some experts to be vulnerable to a takeover, has not been approached by any suitor.

14. CEO Daniel Bouton called Kerviel's motivations "irrational." Several executives were fired as a result of the scheme but Bouton's offer to resign was rejected by the board.

15. The bank, however, was struggling. SocieteGenerale shares were trading down 6.6 percent at $101.43 at midday Monday amid generally falling shares.

16. Bouton rejected suggestions from Kerviel's lawyers that SocieteGenerale was using Kerviel to hide big losses linked to the U.S. subprime mortgage crisis.

17. "How could you want to imagine that we would have been able to hide a hole by another hole? It's completely stupid," Bouton told Europe-1 radio. He called Kerviel a "remarkable concealer" who had managed to outwit the bank's risk control systems.

18. Elisabeth Meyer, one of Kerviel's defense lawyers, said he was "bearing up to the shock." She disputed SocieteGenerale claims that he had committed fraud, saying he was in the black with his trades as of Dec. 31.

19. "In my view, he was thrown to the lions before being able to explain himself," said Meyer. "It's a lynching." SocieteGenerale alleges that Kerviel hacked computers and "combined several fraudulent methods" to build up positions worth $73.53 billion - more that the bank's market worth.

20. Jean-Pierre Mustier, head of the bank's corporate and investment banking arm, told reporters Sunday that Kerviel appeared to have acted alone, but added: "I cannot guarantee to you 100 percent that there was no complicity."

21. Even before his allegedly massive fraud came to light Thursday, Kerviel's trading apparently triggered occasional alarms at SocieteGenerale - France's second-largest bank - but not to a degree that led managers to investigate further. Kerviel had explained away the red flags as mistakes, according to Mustier.

22. The bank says Kerviel built up futures positions worth $44.12 billion into the Eurostoxx index, another $26.47 billion on Germany's DAX and euro2 billion on the London FTSE.

23. Since the bets greatly exceeded the amount of capital he was allowed to risk, Kerviel entered fake and offsetting trades in SocieteGenerale's computer system that appeared to minimize the odds of big losses, the bank said. The trades were purposely chosen to avoid detection because they did not require cash contributions nor were subject to margin calls, which would require putting up more money if the fake bet soured, it said.

24. SocieteGenerale said Kerviel's positions were unwound last week over three days in a "controlled fashion."

25. SocieteGenerale said Kerviel used other people's computer access codes, falsified documents and used other methods to cover his tracks - helped by his previous experience in other offices at the bank that monitor traders.

26. Kerviel's downfall started in the days before Friday, Jan. 18, when SocieteGenerale tightened lending restrictions on one of its customers, an unnamed large bank. He apparently had used that bank's name for one or more of his fictitious trades, and it led to what SocieteGenerale described as having "additional controls" put in place.

27. Kerviel's superiors in SocieteGenerale's equity trading division reviewed that day an e-mail from the large bank supposedly confirming trades he had booked. But they were suspicious about where the e-mail came from and launched an emergency investigation.

28. Kerviel then was called to SocieteGenerale to explain. Bank investigators confirmed that the large bank did not know about the trades. Kerviel did not provide a clear explanation at first but eventually confirmed he had entered fictitious trades, the bank said.

29. The SocieteGenerale fraud renews memories of the 1995 trading scandal that bankrupted British bank Barings. Nick Leeson, the bank's Singapore general manager of futures trading, lost $1.38 billion on Asian futures markets, wiping out the bank's cash reserves.