Police question second trader in Societe Generale fraud

Publish date: 08-02-2008
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PARIS - French police were holding a second person for questioning Friday in a probe of massive losses at bank Societe Generale, a judicial official said.
The person, from a brokerage part-owned by Societe Generale, was taken into custody Thursday and was still being held Friday, said the official, who refused to be identified discussing the sensitive case. The official gave no other details. Police refused to comment.

The daily Le Monde said the broker was being questioned about his relationship with Jerome Kerviel, the futures trader accused by Societe Generale of making huge, unauthorized bets on European markets that the bank said cost nearly 5 billion euros (more than $7 billion) to unwind.

Le Monde said police suspect that the new trader being held was aware of Kerviel's activities. It said the broker was taken into custody after a search of his company offices Thursday.

Societe Generale has said it believes Kerviel had no accomplices. Spokespeople for the bank, one of France's biggest, did not immediately return calls seeking comment.

Kerviel was in custody for two days last month, and judges filed preliminary charges against him but released him during the investigation.

Joelle Rosello, a Societe Generale spokeswoman, confirmed that an employee of Newedge, a 50% owned affiliate, was in police custody in the Kerviel probe. "We are cooperating closely with police," Rosello said.

Le Monde said new evidence provided by Societe Generale for the legal probe into Kerviel's actions included a message sent by the second trader to Kerviel over the bank's computer system. The newspaper said the message, sent Nov. 30, read: "You have done nothing illegal in terms of the law."

Societe Generale announced Jan. 24 that it lost 4.82 billion euros ($7.09 billion) in cleaning up unauthorized transactions by 31-year-old Kerviel. It said Kerviel overstepped his authority and bet 50 billion euros ($73 billion) — more than the bank's market value — on futures in European equity markets. It also said he did not appear to have profited personally from the trades.

Since the case broke, Societe Generale has faced questions about its future, amid speculation it could be bought or broken up, and about how Kerviel's activities went unnoticed or ignored.

Judges on Friday were to weigh a request from prosecutors that Kerviel be jailed while the investigation continues. The judges could rule immediately on the prosecutors' request or delay their decision to a later date.

A spokeswoman for the prosecutors' office, Ulrika Weiss, said Kerviel should be held in prison to ensure that he cannot contact any accomplices, if he had them.

Investigating judges have filed preliminary charges against Kerviel for forgery, breach of trust and unauthorized computer activity. Such preliminary charges allow judges time to further investigate and decide whether to send the case to trial.

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