Everyone has the right to a fair and just trial. Jérôme Kerviel, convicted in 2010 as a “rogue trader” after apparently losing his bank Société Générale around 4.9 billion euros, has not had that right. For six years he has come up against a justice system that has been both blind and deaf, which in particular did not want to see, hear or take note of its own failings and weaknesses. Now that the highest appeal court the Cour de Cassation has quashed the civil part of the case, showing that the bank's own responsibilities in the affair have not been taken into account, and that a single man could not owe 4.9 billion euros in damages and interest - starkly highlighting all the problems in the case – the prosecution is ready to make Kerviel start his three-year jail sentence without waiting for the conclusion of another judicial case that could sweep away all the assumptions of the Kerviel affair. It is as if they want to silence him quickly, hiding behind a thick prison wall this democratic scandal involving a justice system that has failed.
The sole visible face of the financial tumult that has swept through France in recent times is that of Jérôme Kerviel. Yet there is no shortage of other bankers who have ruined their institutions and cost the country and its local authorities billions. A case in point is Pierre Richard, the former president of the Dexia bank – whose failings and toxic loans have cost France's councils 6.6 billion euros up to now – who is enjoying a peaceful life with a large pension in hand, without ever having once had to answer to the law for his actions. Yet Jérôme Kerviel was brought to account and quickly. He was the “rogue trader”, the one who had taken his bank to the edge of the abyss, costing thousands of jobs. This was how he was painted by his employers from the very start. And the justice system has never sought to look beyond this image constructed by PR experts.
Enlargement : Illustration 1
For from the very start, everything in this affair has been done under the influence of Société Générale. During the media frenzy at the beginning, which was orchestrated by the bank itself, the first judicial investigators began their work. For them, it was like landing on Mars. They understood nothing of this strange world, where the talk was of 'warehouse warrants' and 'click options', or 'Elliott Wave trading' and 'brokers'. But the judicial system does not like to admit its own ignorance. It did not look for help from outside experts. Instead, Société Générale's word was enough.
The bank itself was in a position to look after everything. It took the investigation in hand and shaped it. It suggested to the investigators where they should look and the people they should question. It designated the computers that could be seized, selected the emails that could be examined and prepared the documents that the investigators could take away with them.
What the investigators did not know was that at the same time Société Générale was putting in place a mechanism to impose silence at all levels of the organisation. Jérôme Kerviel had to be seen as the lone trader, carrying out his gigantic trades alone and in secret, entering the system fraudulently and completely unknown to the hierarchy. Ready-made replies were prepared to respond to the investigators. In the silence of the bank's offices, managers at all levels were closeted away to sign confidentiality agreements. They agreed to say nothing about what had happened, including to their families, to reveal nothing about the bank to the judicial system.
Later, as the appeal hearings into the affair took place, an executive would speak several times about the scenes of tension and fear in those early days. But he did not dare to break the wall of silence and give evidence openly. He was one of many witnesses who, right through the investigation, would speak off the record in the secrecy of a café or an office, and describe the workings and practices of the bank, a part of the story or things they had experienced, but who would never dare to speak publicly.
The justice system did not really look to breach this wall of silence constructed by the bank. For despite what the bank likes to claim, the Kerviel affair has not been played out in the courtroom. There are outside parties involved, witnesses, the trail of the movement of shares and money. The clearing house Eurex has accounts on all of it. Kerviel's crazy trading positions had a cost: 25 billion euros in margin calls in 2007. Is Société Générale so badly run that it didn't notice anything? Eurex knows precisely the positions held by Jérôme Kerviel before January 18th, 2007, the ways in which Société Générale unravelled them, and what the real cost to the bank was. Everything is traced, written, listed.
Société Générale's word and its alone
When you legally force someone to pay 4.9 billion euros in damages, you should at the very least first go and check the reality of the facts, and not simply be guided by the alleged victim's word. But seven years later and the judicial system is still unable to say if the losses announced by the bank are real or not. There was no visit to Eurex, no data was asked for, absolutely no expert analysis was carried out. And if the judicial system does now finally wake up and try to recover the data to evaluate Société Générale's losses, as the Cour de Cassation asked it to, there is a real risk that it will find nothing. At the end of December all of Eurex's archives for this period will be destroyed. But isn't this what the judicial system actually wants? That there remains no trace of the internal emails, of Kerviel's trading positions, and those of the bank, so it can continue to investigate the case blindly?
A senior Eurex executive, Michael Zollweg, was indeed questioned in 2012 by officers from the fraud squad, the brigade financière, in the context of another preliminary investigation, following a complaint filed by Jérôme Kerviel for forgery and use of false documents. He stated that Kerviel's trades represented 90% of the bank's activities on Germany's DAX stock exchange. He also said that on January 18th, 2007, Eurex was ready to launch a new investigation into Société Générale's trading positions, taking into account their size both “long and short”. In other words, it was clear that the bank was both buying and selling on the DAX, which would suggest that Kerviel's positions were being covered elsewhere. But this evidence was never taken into account, as the prosecution decided to take no further action in that case.
Should we be surprised at the lack of curiosity shown by the examining magistrate investigating this aspect of the case, Renaud Van Ruymbeke? At the time he was under the threat of serious disciplinary action from the judges' body the Conseil supérieur de la magistrature over the controversial Clearstream affair, a financial case which involved a clearing bank. In making him the sole judge in the Kerviel affair, was this not a way of ensuring that the judicial investigation would never go and examine that other side?
In the Kerviel affair it does not look as though everything possible was done to ensure the whole truth came out. The examining magistrate Renaud Van Ruymbeke had Jérôme Kerviel's confession, and that was enough. Yes, Kerviel admitted to his crazy trading positions, in which he got his fingers burnt and made him lose control, like a gambler in a casino which is open all hours, and to his attempts to conceal them in the system. But he had also explained to his bosses, from the weekend of January 19th, 2007, that all of that cannot have gone unnoticed.
In the trading rooms, where the traders work less than half a metre from each other, where all conversations are recorded, all emails kept, nothing can remain hidden for long. The numerous alerts sent by other sections in the bank – the treasury department, accounts, compliance – to his superiors prove that all of Kerviel's hierarchy knew, were covering his positions, encouraging him. The targets set for Kerviel by his bosses show it: requiring someone to make profits of 55 million euro profits in 2007 in an area of trading which at best usually makes 10 million euros per team is recognition of the cheating. It's an incitement.
Yet this section of Kerviel's “confessions” never came out. The judicial system was happy to accept the paper version of the confessions, those re-transcribed by Société Générale and which they helpfully provided to the judge. The full confessions were in the recordings contained in sealed evidence for the case. But these seals were never broken and examined during the judicial investigation. Worse still, on several occasions the judge Renaud Van Ruymbeke refused the defence access to them. It was only in the middle of 2012 that the senior judge at the court of appeal allowed Kerviel's lawyer David Koubbi to have access to these tapes – scarcely a month before the appeal hearing. What did the legal team eventually discover? They found that the tapes had pieces cut out, excised, with some sentences cut off half-way through.
Expert analysis confirmed the cuts and censoring. A second opinion sought by Société Générale claimed, however, that the recordings were absolutely normal, that there had been no sleight of hand or damage. It was one side against the other, standard stuff for a judicial investigation. What happened on this occasion? There was no attempt even to get an independent expert analysis, and the issue was not pursued; all this on the eve of the appeal that Jérôme Kerviel lost.
The sound of silence
The story of the recording is an illustration of what has happened throughout the Kerviel affair. At each step the former trader's lawyer has been obliged to carry out an investigation on behalf of the defence, to find the evidence and witnesses that didn't feature in the case. There were people who could recount what they had seen in the bank, or about what they knew about the investigation, the things they saw that went wrong. Like, for example, the person working for the financial regulator the Autorité des marchés financiers (AMF) at the start of the whole affair. She told how the regulator had been warned even before the unwinding of the whole affair, how the fact that unravelling operations on Martin Luther King Day – the third Monday in January, in 2007 this was January 15th – one of only three days when the American financial markets were closed, allowed you if you were clever to carry out manoeuvres on the markets, and how in the corridors the talk was of Société Générale's losses on the subprime market.
There were meetings, or occasions where collateral witnesses came to report what was being said, in the secrecy of the investigation process. There was a lot of talk in prosecution circles and in the corridors of the law courts. It was said there that some considered that the new information produced by the defence at least deserved to be examined, that officers in the fraud squad were astonished at how quickly the prosecution decided not to pursue Jérôme Kerviel's first formal complaint about forgery and the use of false instruments. There was talk, too, in those same legal circles of “pressures, of the orders coming from above, from the hierarchy” to decide not to go ahead with that case, to refuse even to investigate the complaints, to avoid the whole affair being reopened.
Who was giving the orders? The successive ministers of justice, or others? And why? In any case it is one of the great faults of the justice system. When something doesn't work, the system prefers to hide its mistakes – in the name of protecting the institution – rather than to recognise them. And there is absolutely no mechanism to put the system back on track.
The concerns of former investigating magistrate and now Green politician Eva Joly, who knows how the system works, about possible mistakes in the affair, and the interventions of a handful of politicians such as Jean-Luc Mélenchon, Julien Bayou and François Bayrou, have been isolated voices in the desert. The state has itself helped facilitate this secrecy, refusing to explain the details of the 1.7 billion euros of tax credit accorded to Société Générale since 2008 following the Kerviel affair, pleading tax confidentiality. A tax confidentiality that was, incidentally, so well-guarded that it was spelled out in the bank's own annual report. In the same year the bank paid out precisely the same amount to its shareholders in dividends and share buybacks.
One can therefore understand why these witnesses speak in private but refuse to do so openly. Why would they give evidence, putting their jobs, their livelihoods on the line, when their evidence might not even be taken into account? Those who have taken the risk up to now have paid dearly for it, and their courage has had no effect. One of the witnesses, working for Fimat, a brokerage firm owned by Société Générale, saw his life destroyed for having dared to speak, and having dared to say that Jérôme Kerviel could not have acted alone. Another witness, Sylvain Passemer, spoke out yet has been generally ignored. During the five weeks of the appeal hearing he came to each sitting in the hope he would be asked to give evidence. The judges never called him.
This is another of the big failings of the Kerviel case. At no time has the judicial system wanted to listen to dissenting voices, to take account of awkward evidence which could shake the official truth that was established in the early hours of January 24th, 2007, by the president of Société Générale at the time, David Bouton, and never subsequently questioned by the judicial system. At no point did the judicial system seek out people who had seen or knew another piece of the story. At no point did they provide assurances and guarantees to these witnesses, who might have wanted to speak. At no time did investigators seek to break down the wall of silence and money. Even worse, the judicial system supported the system of silence set up by the bank. The head of the court of appeal, Mireille Filippini, did not react when one of Jérôme Kerviel's former bosses told her that he could not speak, for fear of financial penalties. On that day, the judicial system confirmed in front of witnesses that it had surrendered arms to the world of finance.
Justice minister Christiane Taubira, can you allow your name to be associated with this injustice? President François Hollande, you identified finance as your enemy, are you going to let this crime be perpetrated against a single man to save the face of this financial industry that threatened to ruin the world?
--------------------------------------------------------------
The French version of this article can be found here.
English version by Michael Streeter