Societe Generale fined for cracking down on fraud

In the eight years since he was fired by the French bank Societe Generale, Jerôme Kerviel has never denied making Euro 50 billion worth of unauthorised trades or committing forgery and fraud to cover them up. The scale of his audacious derivatives trades nearly brought about the demise of the big bank.

And the intricacy of the rogue trader's financial subterfuge was enough to persuade the country's highest court that he deserved the three-year prison sentence he received in 2010. But in a strange turn of rogue trading events, Kerviel has persuaded a French labour tribunal that he should not have been fired.

On Tuesday, the tribunal ruled that his illegal actions presented ''no real and serious cause'' for his dismissal, his lawyers said. The panel ordered Societe Generale to pay Kerviel roughly €450,000. The ruling, by a panel of employers and trade union representatives, is covered by French confidentiality laws so it has not been made public.

Yet it appears to accept, at least in part, Kerviel's argument from the start: namely, that his managers - many of whom quietly left the bank after the scandal - turned a blind eye to his activities and even tacitly encouraged them, as long as his deals were profitable.

A lawyer for Kerviel, David Koubbi, said that Societe Generale was ordered to compensate the former trader for damages, including the conditions of his departure as well as unused vacation days and other items that were part of his original employment contract.

The majority of Kerviel's award - €300,000 - represents a performance bonus for 2007. The sum was linked to a €1.4 billion profit that the bank booked in the fourth quarter of that year from his rogue dealings. ''This is a huge victory,'' said Koubbi. ''It is recognising for the very first time that Societe Generale knew everything about his activities, which is a very big thing.''

Societe Generale, which lost €4.9 billion unwinding Kerviel's trades in early 2008, said it would appeal the labour court's ruling, which the bank dismissed as ''incomprehensible'' and ''counter to the facts.''

The decision represents a potential legal turning point for Kerviel, 39, who was barred for life from working in financial services and who could still face billions of euros in damages to the bank. France's Court of Cassation in 2014 threw out a lower court's order that he compensate Societe Generale for the full €4.9 billion that it lost in the affair. It argued that the lower courts had failed to take proper account of the weaknesses in the bank's own risk-management procedures at the time.

The high court ordered a new trial to determine how much Kerviel should pay the bank in restitution.

That proceeding will begin next week before an appeals court in Versailles, south of Paris. Beyond the civil damages, lawyers said that the ruling on Tuesday could also give fresh ammunition to Kerviel's lawyers, who are seeking to have his criminal conviction reviewed.

Kerviel spent five weeks in pre-trial detention in 2008, and after his appeals were exhausted, he went back to jail for around four months in 2014. He was then released on probation for the remainder of his three-year sentence.

''The entire legal underpinning of the criminal case against Jerôme Kerviel, which found him guilty of fraudulent trading activities, may have been called into question,'' said Christopher Mesnooh, an international business lawyer at Fieldfisher in Paris.

The exploits of Kerviel briefly placed him at the top of the leader board of the world's most notorious rogue traders, that is, before the financial crisis exposed a series of other, more spectacular banking transgressions.

His travails - including a meeting with Pope Francis and an epic trek from Rome to the French border - have also helped make him a sort of folk hero in France. He has inspired T-shirts with his image, a loyal following on social media and even a song.

On Tuesday, Kerviel's labour court victory drew online admiration from another convicted rogue trader: Nicholas Leeson, the former derivatives trader whose fraudulent deals led to the collapse of the British bank Barings in 1995.

''Anyone know a good employment lawyer?'' Leeson posted on Twitter. ''If only I had a bank left to sue!''

©2016 The New York Times News Service