Trial opens for accused French rogue trader

By ANGELA DOLAND Associated Press Writer

PARIS (AP) - Accused rogue trader Jerome Kerviel went on trial Tuesday in Paris, accused of gambling tens of billions of euros (dollars) of Societe Generale's money in outrageous secret trades that humiliated the French banking powerhouse and exposed a need for tighter risk controls.

The scandal led to euro5 billion (more than $7 billion) in losses once the bank unwound Kerviel's positions in January 2008. The case broke ahead of what would become a spiraling series of crises in the finance world, from the fall of Lehman Brothers to the Bernard L. Madoff multibillion-dollar Ponzi scheme.

Kerviel, 33, who is now working at a computer technology company earning euro2,300 ($2,700) a month, plans to argue that he was a scapegoat for the bank, that risky betting practices were commonplace among traders, and that higher-ups knew what he was doing and said nothing as long as he was making money for the bank.

Societe Generale denies those claims.

Kerviel, with dark circles under his eyes, stood before the court and answered questions about his identity and current status, wiping sweat from his brow at one point. A judge read out the charges against him: forgery, breach of trust and unauthorized computer use.

Kerviel's superiors were questioned in the probe, but none of them face charges. A few bank executives resigned in the scandal's aftermath, including longtime Chairman Daniel Bouton.

Kerviel has told investigators that the weight of money lost meaning for him, that he was living in a virtual world and had disconnected from reality. Prosecutors and the bank have said he did not appear to profit from his massive unauthorized trades.

The former futures trader risks five years in prison as well as a fine of euro375,000 if convicted. The bank is also expected to ask for euro4.9 billion in damages - symbolic because it is the amount lost in the scandal's aftermath, though it's a sum Kerviel could never pay.

Kerviel has argued that Societe Generale was trying to deflect attention from subprime-related losses by making him a scapegoat.

The bank says Kerviel made bets of euro50 billion on futures contracts on three European equity indices. Societe Generale secretly began unwinding his positions on Jan. 21, 2008, when U.S. markets were closed, putting massive pressure on futures markets and exacerbating its losses.

The bank revealed its actions three days later, when it also announced subprime-related writedowns and provisions of euro2.05 billion. Societe Generale's legal team has said it is absurd to claim the bank was seeking to hide its subprime exposure.

Since the scandal, Societe Generale has tightened computer security, reinforced controls and taken more account of the possibility of fraud. Amid economic crisis and other scandals, better generalized financial regulation is still high on today's agenda for governments worldwide.

Societe Generale has had its ups and downs since the Kerviel affair exploded. This year the bank has faced another challenge - euro3 billion in exposure to Greek government debt - but reported euro1.06 billion in profit for the first quarter and is forecasting a profitable year.

The trial is expected to last through late June.