Jerome Kerviel: convenient scapegoat?
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Version 0 of 1. The story of Jérôme Kerviel is more than a media gift that keeps on giving. It’s a riot that keeps on rioting. Kerviel, since his release from a three-year jail term last September, has been on protest walks (good exercise for released prisoner and attendant press hordes alike), been the subject of fiercely contested civil lawsuits launched with the object of reclaiming the lost billions for which he, as a trader at Société Générale (SocGen) was held solely responsible, and generally created the kind of permanent disruption of France’s financial and political establishment that the hardest-nosed Marxist could only dream of. What makes it worse for the establishment is that, following recent revelations in the press, Kerviel is gaining in popularity (and credibility). According to a poll on Friday, 53 per cent of the French public now have a positive opinion of him. Perhaps strangely, the Odoxa poll for the CQFD television programme finds him more popular with right-wing voters than those of the left. Kerviel’s popularity with the right is even stranger when one considers his background as an outsider. He was a back-office boy from Brittany, the son of a hairdresser, who was competing for star-trader status with the brilliant mathematical minds of graduates of the Grandes Ecoles, the ultra-elite of an elitist education system. But it all went wrong in the end. Some 10 years ago, Kerviel, who had muscled his way on to the trading desks with the classic combination of acuity, aggression and luck, began making unauthorised, but successful trades (bets, by any other name). And then his judgement deserted him – or maybe his luck just changed. In any event, it all began to go very badly wrong and the process of cover-up began, even as the losses deepened. The Affaire Kerviel, as it was originally styled in French press in January 2006, chronicled losses of some €9bn (£6.5bn), later settled at €4.9bn. Immediately, one of the immutable laws of banking came into play: success has a thousand fathers (and bonus-claimers); losses and failures are the responsibility of the few – or in this case, one: Jérôme Kerviel. The ring-fencing and tethering of Kerviel had its precedents, as “rogue trader” Nick Leeson of Barings Bank, 1995 vintage, would doubtless testify. Criminal investigations ensued. He was the only one held culpable, was convicted and sent to jail. Now Kerviel, who has always insisted that he is a scapegoat – culpable, but not the only one to blame – is out on conditional release, forced to wear an electronic bracelet at all times and to stay at home on workday evenings. His sympathisers in the French media argue that the multi-billion civil suit for damages against him is a further attempt at punishment, and to ensure his silence. The story is hot because of the latest revelations from the investigative journalism boutique Mediapart. Mediapart produced a report, widely carried in the French media, purporting to reprise the sworn testimony from a senior police officer at the heart of the criminal inquiry. Mediapart claims that police commander Nathalie Le Roy made a sworn testimony before a judge in April that the evidence she had received from a former SocGen employee completely changed the way the original criminal inquiry should be viewed. Mediapart quotes Le Roy as saying: “During the various interviews and because of various documents I have handled, I had the feeling, then the certainty, that Jérôme Kerviel’s higher-ups could not have been unaware of the positions he took.” Le Roy went on to adduce evidence offered by a former employee in the operational risks department of SocGen. Mediapart reports that this employee claimed to have warned his superiors about Kerviel’s activity by sending an email emblazoned with a piratical skull “to attract their attention”. Le Roy was unable to trace the email – and received no reply to a demand to see the employee’s superior, its alleged recipient. Finally, it is alleged in Mediapart’s so far largely uncontested report that investigations in 2008 found that there had been several dozen alerts about Kerviel, and that the bank had ignored them. We are then, if you’ll forgive the pun, in media res. This one will run and run. But I feel I may have an idea of where this is going, that we may be entering the end game of this story. It is one I have been following closely for years – for personal and professional reasons. The bizarre fact is that a week before the Kerviel story broke, I published a novel about a Paris-based financier who was scapegoated as a rogue trader whose actions nearly brought down his bank, and with it the entire financial system. Samuel Spendlove, the hero of Meltdown, was innocent of these crimes. But he was isolated, and forced to go on the run to prove his innocence in the fictional world of the book. Commentators at the time were astonished by the luck of my timing. But, actually, it wasn’t really luck. Until recently I was a full-time journalist, and had spent seven years as the investment editor of The International Herald Tribune (now The International New York Times) in Paris. I felt that I knew that abuses and massive risk-taking were going on – but the legal constraints meant that I couldn’t write the story. Consider this: I was constantly being nagged by PR officers to interview an alleged mathematical genius with an algorithm that always made a profit. Then, after a market downturn, I called him – only to be put straight through to the bank’s press office. The rumour was that the “genius” has been making losses, covering them up – and got sacked, leaving a $1bn black hole. The bank he worked for was (at that time) state-owned, and it all got hushed up. How could that happen? I chose to tell that truth in the creative space of a novel. It requires collusion, connivance and scheming. It is impossible to keep such things secret, to act alone – certainly to manipulate billions alone. When Kerviel was trading I believe there were hundreds of compliance officers at SocGen – some say as many as 2,000. What were they doing? So as an empathetic outsider, I see no surprise in Mediapart’s revelations. Moreover, I believe it’s our duty to think about these things. Scapegoats are convenient excuses for not embracing what financial “gurus” get up to. If we don’t take a little bit of interest in their activities then we, all of us, have to accept some of the blame (in the way that bankers don’t) when the next Kerviel appears. ‘Meltdown’ is the first in the Samuel Spendlove trilogy. Its sequel, ‘Version Thirteen’ is published by Unbound. unbound.co.uk/books/version-thirteen |