Judges ordered Kerviel to pay €1 million to his former employer, overturning a previous ruling which ordering him to pay €4.9 billion to Societe Generale.
The ruling is a qualified victory for Kerviel and a setback for Societe Generale, because it establishes that responsibility for the lion’s share of the losses ultimately lies with the French lender, not its former employee.
Kerviel was sentenced in 2010 to three years in prison for making the unauthorised trades that led to the losses. Friday’s appeals ruling, however, determined that Kerviel’s criminal actions don’t leave him on the hook for the bank’s financial fallout.
Deficiencies in the bank’s control systems also contributed to the loss and “limits Societe Generale’s right to compensation,” judges said.
Still, the one million euros in damages may sting Kerviel. Societe Generale had initially said it wouldn’t attempt to recover any money from Kerviel after he was ordered to pay back €4.9 billion. Friday, Societe Generale said that by ordering Kerviel to pay €1 million instead, “the court made a realistic decision with regard to his capacity to reimburse.” The bank added it was “satisfied” with the ruling.
The ruling also means that the French government could reclaim a €2.2 billion tax deduction that the bank received after unwinding Kerviel’s trade and posting a massive loss.
Finance Minister Michel Sapin and Budget Secretary Christian Eckert said in a joint statement they “had asked tax authorities to examine the consequences of this ruling on Societe Generale’s fiscal situation.”
Jean Veil, a lawyer for Société Générale, brushed off the idea saying he didn’t believe that the government could claim the money back given that the bank hadn’t committed a “deliberate” or “excessive” fault.
“Personally, I don’t think this is something you need to worry about,” Veil told reporters.
As he stepped out of the courtroom on Friday, Kerviel told reporters that he was “delighted that French authorities were getting back €2 billion.”
Friday’s ruling could mark the end of a long legal battle between Kerviel and his former employer, after the trader made huge bets that brought the bank to the verge of collapse.
Kerviel was put under investigation in January 2008 after Societe Generale disclosed the magnitude of the loss by unwinding a series of bets placed by him.
During an 18-month probe by magistrates, Kerviel said he engaged in and covered up many unauthorised trades. Managers were aware of his activities and turned a blind eye as long as he made money for the bank, he claimed. Societe Generale has always rejected this claim.
Back in 2010, Kerviel was found guilty on charges of forgery, breach of trust and unauthorised computer use. He was ordered to repay his former employer €4.9 billion. A year later, an appeals court upheld that ruling, and Kerviel took the case to the Cour de Cassation, France’s highest appeals court.
In 2014, as he awaited the Cour de Cassation’s decision, Kerviel walked to Paris from the Vatican in Rome, to “protest against the tyranny” of financial markets.
Days later, the Cour de Cassation upheld his prison sentence, but it overturned the award in civil damages and referred the case back to an appeals court. Kerviel went to prison and was released later in 2014.
“Justice is advancing,” Kerviel said.
Write to Noemie Bisserbe at email@example.com
This article was published by The Wall Street Journal