French rogue trader damages slashed to 1 million euros

VERSAILLES, France — Former French rogue trader Jerome Kerviel will not have to pay 4.9 billion euros ($5.5 billion) in damages to the bank that used to employ him, but a more modest 1 million euros ($1.1 million), a court ruled Friday.

The court said Kerviel was "partly responsible" for huge losses suffered in 2008 by Societe Generale through his reckless financial trades. But it also ruled that the bank's "deficiencies" in its management, controls and security systems contributed to the losses, which Kerviel would have had no realistic way of reimbursing.

"I'm hoping to get to zero (civil damages) in the end because I still think I do not owe anything to Societe Generale. The battle continues," Kerviel told reporters following the ruling. His lawyer David Koubbi said they will decide later whether to appeal Friday's decision.

Societe Generale's lawyer Jean Veil said the bank was satisfied with the ruling. He said that the court's decision means the damages are now realistic and "enforceable."

In one of the biggest ever trading fraud cases, Kerviel was sentenced to three years in prison for nearly bringing down the bank with the losses, just before the financial market meltdown in 2008.

The 39-year-old was found guilty of forgery, breach of trust and fraudulent computer use for covering up bets worth 50 billion euros — more than the market value of the entire bank at the time.

In 2014, France's highest court upheld Kerviel's criminal conviction and three-year sentence, but annulled the 4.9 billion euros in civil damages, saying they were "disproportionate" and that the bank had its share of responsibility in its own losses.

The initial amount of damages, which were equivalent to the total losses reported by the bank in the fraud, was so huge that Kerviel wouldn't have been able to pay them anyway.

As a result, the top court ordered a new civil trial.

Kerviel says his managers were aware of his risky operations, which had initially earned the bank 1.4 billion euros ($1.6 billion) in 2007, weeks before turning sour in early 2008.

He claims the bank had quietly welcomed his unauthorized trades when they made money, but dropped him when they began making losses.

The lawyers for Societe Generale have said Kerviel used his computer, financial skills and fake documents to conceal his unauthorized trading from managers.

Also at stake for the bank in the new civil trial are big tax credits it received from the French state in compensation for the losses incurred from Kerviel's fraud. If Societe Generale is ultimately found responsible for faults in handling the Kerviel case, the French government could ask the bank to pay back the tax credits, reportedly worth 2.2 billion euros ($2.5 billion).

In a statement, Finance Minister Michel Sapin said he has asked tax authorities to look into the consequences of Friday's ruling for Societe Generale's tax situation and to "fully safeguard the interests of the state."

Societe Generale argued in a statement that the court decision "has no effect" on its tax position. Veil, its lawyer, said "it is ruled out" that the bank pay back the tax deduction to the state.

Kerviel's legal saga is expected to go on, with his lawyer now trying to have his client's criminal conviction overturned.

The battle is also about image and reputation, both for the bank and Kerviel, who has tried to portray himself as a victim of an improperly regulated banking sector and a crusader against the ills of the financial world.

___

Sylvie Corbet in Paris contributed to this report.