Second Broker Questioned in SocGen Case

A French inquiry into a record 4.9 billion euros ($7.17 billion) trading loss at Societe Generale widened to a second broker on Friday as investigators sought to establish whether rogue trader Jerome Kerviel acted alone.

The news emerged as a court prepared to rule on whether Kerviel, the 31-year-old trader blamed by Societe Generale for huge unauthorised dealings, should be taken into custody.

AP Societe Generale

A legal source familiar with the matter said police were questioning a trader at a brokerage that executed orders on behalf of Kerviel. The source said an initial 24-hour detention period had been extended by another day.

The brokerage is a SocGen subsidiary formerly known as Fimat but renamed this year as Newedge after it merged with Calyon Financial. The brokerage's offices were raided by police on Thursday.

If the investigation establishes that others were involved in Kerviel's illicit trades, prosecutors may have new grounds to press fraud charges.

Societe Generale lawyer Jean Veil said it was "premature" to comment on the developments in the probe.

Formal Investigation

Kerviel has been placed under formal investigation for breach of trust, computer abuse and falsification, but was freed under judicial supervision on Jan. 28 after investigating magistrates dropped fraud accusations from the charge sheet.

The Paris prosecutor's office appealed against that decision, and the appeal hearing is due to be heard from 1300 GMT on Friday.

The prosecutor first said he feared for Kerviel's psychological state but has asked the court to put Kerviel in  detention because of concern he could abscond.

"It is necessary to verify whether Kerviel profited personally," Ulrika Weiss, spokeswoman for the prosecutor, said on Thursday.

Societe Generale accuses Kerviel of unauthorised trades which led to a record 4.9 billion-euro loss when it closed out his positions.

Kerviel told Agence France Presse news agency in an interview on Tuesday that he accepted his share of responsibility for the losses but did not want to be made a scapegoat.

He said he conducted the trades to make money for the bank but was not seeking to enrich himself.

Societe General is working on a 5.5 billion-euro rights issue to repair its balance sheet after the trading losses and write-downs linked to the U.S. subprime mortgage crisis. The rights issue is expected to be launched next week.

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