Ex-SocGen Executive Accuses Kerviel of Lying

Jean-Pierre Mustier, the former head of Société Générale's investment bank, lashed out at Jérôme Kerviel yesterday, accusing the former trader of lying and endangering the livelihoods of the French bank's 135,000 employees.

French former trader at Societe Generale bank, Jerome Kerviel poses on May 20, 2010 at his lawyer's office in Paris.
Thomas Coex | AFP | Getty Images
French former trader at Societe Generale bank, Jerome Kerviel poses on May 20, 2010 at his lawyer's office in Paris.

Mustier was visibly angry as he turned towards Kerviel in the packed Paris courtroom and raised his voice to say: "You lied to me all the time."

The former trader, 33, is blamed by SocGen, his ex-employer, for losses of 4.9 billion euros ($5.8 billion), after exposing France's second-biggest bank to 50 billion euros of unhedged positions on futures markets in January 2008.

He faces up to five years in prison, a 375,000 euro fine and damages of up to 4.9 billion euros if found guilty of charges of breach of trust, computer abuse and forgery.

Mustier denied Kerviel's defence that his management knew about his risky trades and turned a blind eye while he was making money.

Kerviel booked the bank net profit of 1.5 billion euros in December 2007 on the back of some of these trades. Mustier, when asked by Jean Veil, SocGen's lawyer, how he would have reacted had he known this, replied: "I would have fired him."

Mustier, seen before the scandal as the most likely person to succeed Daniel Bouton as head of SocGen, was calm as he told the court he had "no profession".

He described the 50 billion euro exposure as "enormous . . . inhuman . . . incomprehensible" and said he was "revolted" when he heard Kerviel say he had taken such risks to make money for the bank.

"He can't say that management knew," Mustier said. "Jérôme Kerviel is the trader who lost the most money in the world."

While at SocGen, Mustier questioned Kerviel when alerted to the discovery of an unhedged risky position on January 18, 2008.

But Mustier said he had not wanted to put Kerviel under too much pressure. This was because of the discovery of a text message from Kerviel to a friend talking about throwing himself under a train. One of SocGen's traders had killed himself shortly before the scandal erupted, he said.

"I do not usually accompany young boys to the toilet, but I was worried about him," Mustier said.

He acknowledged "weaknesses" in the bank's control system. "I did not attend enough to the risk of fraud," he told the court.

SocGen was given a record fine by the Commission Bancaire, the banks regulator, after the scandal for serious weaknesses in its controls.

Mustier was moved aside to head SocGen's asset management unit and resigned in August 2009 after France's markets regulator opened an investigation against him over allegations of insider dealing. A decision is expected soon.