White Collar Criminal: Jerome Kerviel

White Collar Criminal: Jerome Kerviel

In what has come to be regarded one of the largest trading frauds in recent times, a trader by the name Jerome Kerviel ended up costing his employer a total loss of 4.9 billion Euros. For this, Kerviel, who was until then an employee of Societe Generale, was according to Reuters sentenced to three years in prison. He was also asked to pay his former employer a total of $6.8 billion -- a representative figure of the loss he caused (Reuters). This decision was on October 2012 upheld by a Paris appeals court. The question I seek to address in this text is: can Kerviel's sentence be regarded agreeable?

Before analyzing the said sentence, it would be prudent to first take into consideration the specifics of the offence for which Kerviel was accused. In the words of Clark, "Mr. Kerviel's fraud, according to the bank, consisted of placing sizeable, real purchases in one portfolio but creating fictitious sales transactions in the second, offsetting portfolio." From the onset, it seems unlikely that a lone trader would engage in irregularities such as the ones Kerviel is accused of undetected. According to Societe Generale, its risk managers had on several occasions questioned Kerviel's activities (Clark). However, the bank as the author further points out explains that no investigations were instituted as Kerviel's "explanations diffused any suspicions" (Clark).

In my opinion, Kerviel's sentence is not only unfair but also disproportionate. The sentence is in my view a clear indicator that in the eyes of the law, Societe Generale played no role whatsoever in a lapse that came close to bringing it down. However, taking all the specifics of the case into consideration, the sentence smacks of a serious miscarriage of justice. To begin with, it could not have been reasonably possible for Kerviel to 'gamble away a fortune' without the bank's knowledge and/or authorization. In this case, the bank's systems were either faulty or its managers were aware of Kerviel's dealings. Either way, Societe Generale was complicit in Kerviel's dealings. In that regard, letting a single individual shoulder the entire blame comes across as being rather unusual. For this reason, I remain convinced that the blame was in this case wrongly apportioned.

It is important to note that as Chrisafis points out, the trader was at some point "gambling with up to €50bn…" This in the opinion of the author was at the time larger than his (Kerviel's) employer's worth. If this is indeed the case, where were the bank's safeguards? How could a junior trader bypass such a major institution's safeguards without the knowledge of and perhaps the encouragement from senior managers? According to Reynolds, Societe Generale had on several occasions been warned of irregular dealings originating from Kerviel (70). The bank however chose to ignore the said alerts.