|The following are selected extracts from a report that appeared on 2010/05/25 in the New York Times
of the trial of a Société Générale trader, Jérôme Kerviel:
|The SocGen Trader Affair:
Clues to its Causes from the Players' Language
(c) 2010 by
Principal, Authentix Coaches
|The unwinding of an estimated 50 billion euros in open positions on Mr. Kerviel’s trading book in late
January 2008 cost Société Générale 4.9 billion euros, the equivalent of about $7 billion at the time.
Mr. Kerviel, 33, acknowledged to the court that he had falsified documents and entered fake trades to
hide his rogue bets, but he maintained that his bosses had deliberately turned a blind eye and tacitly
encouraged his activities as long as they were earning profits.
“It wasn’t me who invented these techniques — others did it, too,” Mr. Kerviel said, though he never
named names. “These practices were known and recognized by management.”
Jean-Pierre Mustier, 49, the former chief executive of the investment banking division that employed
Mr. Kerviel, said he was dumbfounded by the trader’s sang-froid: “I can’t understand how his nerves
could have handled the pressure of that much risk,” said Mr. Mustier, who himself spent six years as a
Mr. Mustier, who left the bank in 2009 amid an unrelated insider trading investigation, argued that
rather than having fostered a culture of excessive risk-taking, Société Générale had failed in creating
an environment where there was “too much trust.” “I take responsibility for that,” he said.
The testimony of Mr. Kerviel’s former direct superior, Eric Cordelle, was in many ways emblematic of
the simple and yet intractable question underpinning the trial: not so much who knew about Kerviel’s
activities, but who could, and should, have known? And where should the line between negligence
and tacit endorsement be drawn?
“If you’re not looking for anything,” Cordelle said, “you don’t find anything.” Moussa Bakir, a futures
dealer who made more than 1 million euros in commissions in 2007 on several large trades he
brokered for Mr. Kerviel, disclosed the lengths to which the former trader had gone to hide his
activity. Mr. Bakir, 34, testified that when he had asked who had been behind the trades, Mr. Kerviel
had told him they had been on behalf of a client called “Mat,” a 35-year-old, rugby-loving hedge-fund
manager in London. Mr. Kerviel spoke often of Mat, describing him as a demanding customer whose
aim was to make 1 billion eurosin profit, Mr. Bakir said.
Mr. Kerviel conceded to the court that Mat did not exist and that he had invented him to discourage
Mr. Bakir, who was also a friend, from investigating further.
“I believed Jérôme Kerviel without any doubt,” Mr. Bakir said. “From beginning to end.”
Frédérik-Karel Canoy, a lawyer representing shareholders seeking civil damages from the bank in the
case, dismissed the bank’s claims that its ignorance of Mr. Kerviel’s activities absolved it of
responsibility for the losses. “Société Générale was responsible for the acts of its employee,” Mr.
Canoy said. “It had an obligation to monitor him.”
Judge Pauthe’s verdict is expected on Oct. 5. But whatever he decides, it is unclear whether his
deliberations will yield a new understanding of the man behind the biggest rogue-trading loss in
"So we know everything there is about you, then?” the judge asked Mr. Kerviel. “There is no ‘mystère
“Not from my point of view,” Mr. Kerviel replied, his voice just above a whisper.
|Reading this case, my blood froze and boiled alternately: What kind of people live inside derivative
trading organizations? We can get quite an illumination of that by considering closely the linguistic
form of the answers given in the Paris Tribunal by three of the personalities at the centre of the trial.
Let’s consider first the testimony from Kerviel's supervisor, Eric Cordelle. According to the New York
Times report, Mr. Cordelle, 38, was appointed head of the Delta One desk in April 2007, and is one of
two managers who were fired for incompetence immediately after the scandal. An engineer with no
trading experience, Mr. Cordelle said he had never suspected that Mr. Kerviel was operating outside
his mandate. He added that because his desk had been understaffed, he had had no time to scrutinize
traders one by one and said:
“If you’re not looking for anything, you don’t find anything."
Who's "you"? That’s my question to Eric Cordelle. Mr. Cordelle used the word "you" to describe what
was going on in his own mind, perhaps confused as to whether it was his own thinking or thoughts of
what he pre-supposed would be in everyone else’s if they were “in his shoes”. Why did he not say "If
*I* am not looking for anything, *I* don't find anything."?
How many times, dear Reader, do you use the word "you" in the way that Cordelle did? Each time
we use the word "you" instead of, less presumptively, using the word "I", we are either cheating
linguistically – seeking sympathy and not taking responsibility for our own behaviour – or else some
other explanation is to be found. The pretentious "you" is not something to model to others!
Could the outrageously irresponsible behaviour inside SocGen be a simple mirror of the habitually
irresponsible way we have come to use the word "you" when, in truth, we would only be speaking
authentically in the circumstances if we used the word "I"? Or, given the evidently deliberate hiring of
a supervisor for Kerviel who had no experience of trading, does it point to something more sinister, as
Kerviel’s testimony claimed?
Next, let’s consider the exchange that Judge Pauthe had with Kerviel:
"So we know everything there is about you, then?” the New York Times reports the judge asking Mr.
Kerviel. “There is no ‘mystère Kerviel’?”
“Not from my point of view,” Mr. Kerviel replied, his voice just above a whisper, according to the New
York Times report.
Kerviel’s modulation of the volume of his reply suggests he made it from a state of trepidation, and
obviously also that was not his normal mood. Of what, then was he afraid? The judge will be likely, I
suspect, to consider both the substance of the language chosen by Kerviel and the witnesses who
testified and also the emotions with which that substance was delivered.
A friend of mine has asked the probing question as to how Kerviel got such a phenomenally powerful
freedom to commit his employer. Here's how I visualize it happened. The futures desk to which
Kerviel got hired was very, very profitable -- surging in the heady days of the unregulated derivative
bubble. The principals hiring wanted, as most smart-arse hirers do, someone of their kind: smart,
impatient, conscienceless. Jérôme appears, and the obviously logical response was: "Hire that go-getter!"
My friend's question: "How many other smart, savvy, go-getters profited from Jérôme's earlier actions?"