Jérôme Kerviel case: why is it so rare to see a banker behind bars?
Published: 06 Oct 2010Jérôme Kerviel's financial folly put him in prison, but others get away with it, says Tracy Corrigan.
Has Jérôme Kerviel, the trader who nearly bust Société Générale, received his just deserts? France's answer to Nick Leeson has been sentenced to three years in prison and ordered to pay his former employer damages of approximately £4.2 billion – roughly what it cost the bank to unwind the £40 billion of exposure he had accumulated. He was found guilty of abuse of trust, forgery and computer abuse (I am working on the assumption that this implies rather more than the habitual hurling of insults at the screen when the keyboard freezes or the internet won't connect; in any case, it is the only charge he didn't contest).
According to his lawyer, Kerviel plans to appeal, and is "revolted that those that created him put all responsibility on him. Prison is unacceptable for a man who didn't make a penny." This depiction of him as a victim, both of his bosses and of the financial system within which he operated, has been the main strand of his defence. Only one former colleague backed him up in court, but did so rather effectively: "It's as if Jérôme Kerviel had a mandate to buy 10 tons of strawberries but bought 100 tons of potatoes and the supervisor passes through the hangar every day and says nothing."
Kerviel himself claimed that his superiors were aware of the risks he was taking, but turned a blind eye until things went wrong. He suggested that he was caught up in a perverse financial system that put huge pressure on traders to make short-term profits.
It's true that Kerviel held a fairly junior position, and that SocGen's failure to have spotted what was going on earlier was shameful; it's probably also true that he was motivated primarily by a desire to impress, and then by a desperate scramble to conceal. But none of that absolves him of guilt. In fact, I find the characterisation of Kerviel as a victim only marginally less irritating than the fact that many in France view the youthful rogue trader as a latter-day Robin des Bois – albeit one who neither stole any money, nor gave it to the poor.
Most of the executives who bust their banks, or whose institutions had to be rescued by the state during the financial crisis, are moving on with their lives smoothly enough. The Securities and Exchange Commission is pursuing civil fraud charges against Angelo Mozilo, the former boss of Countrywide, one of the leading sub-prime mortgage lenders. But it seems unlikely that he – or anyone else – will do time. Meanwhile, Bank of America has settled charges relating to its acquisition of Merrill Lynch at the height of the financial panic, and Goldman Sachs has reached a settlement over fraud charges relating to a sub-prime mortgage transaction (Kerviel has pointed out that, unlike SocGen, Goldman stuck by its suspect Frenchman, "Fabulous" Fabrice Tourre – but then Tourre did make the bank an awful lot of money, rather than lose it).
In fact, the only man who looks as if he may go to jail over the financial crisis is Geir Haarde, the former Icelandic prime minister, who has been indicted for economic mismanagement after leading his island from boom to bust in short order.
Ultimately, there is something unsettling about the prospect that the perpetrators of the financial crisis who profited from a bubble they helped to inflate have walked away with their wealth and even their careers largely intact. In contrast, those punished for breaking the law begin to look like small fry......(cont'd)