LexInter | October 8, 2010 | 0 Comments


Correctional Court (11th chamber) Paris



Part one: statement of facts and procedure

– Referral to the court

  1. A)Jérôme KERVIEL’s operational framework

1) The structures

¤ Société Générale Corporate Investment Banking

¤the “Global Equities and Derivative Solutions” division

2) The scope of the trader’s “front office” activity

¤ processed products

¤ areas of activity of the trader

3) Front office activity relays

¤ the middle office

¤ the back office

4) Monitoring and control of the trader’s activity

¤ daily checks

¤ checks at the end of the month (except end of January and end of July)

¤ cash flow monitoring

¤ risk monitoring

–   market risks

–   counterparty risks

  1. B)The denounced modus operandi

1) The process which led to the discovery of disputed depositions

¤ the detection of an excessive allocation of own funds on a counterparty

¤ the continuation of internal investigations and the establishment of a “task force”

2) The revelation of fictitious operations intended to mask out-of-range directional positions , and the results achieved

¤ the use of technical counterparties

¤ the choice of types of operations

3) Analysis of the responses provided by Jérôme KER VIEL to the discrepancies observed during the monthly and quarterly closings

¤ the differences observed in March and April 2007

¤ the difference observed in May 2007

¤ the difference observed on the June 2007 decree

¤ anomalies from August to December 2007

  1. C)Initiatives taken by Société Générale

1)      The unwinding of positions

2)      The intervention of the general inspectorate


II – Investigations

  1. A)The preliminary investigation

1)      searches

2)      The hearings of Jérôme KERVIEL in police custody

  1. B)Openness of information

1)      The indictment of Jérôme KERVIEL

2)      Civil departed constitutions

Page n ° 1


  1. C)Continuation of investigations

1)      On the search for personal enrichment

2)      On the professional practices of Jérôme KERVIEL

¤ within the scope of Jérôme KERVIEL

¤ on the existence of common instructions for the entire desk

¤ the hierarchy

¤ the indications contained in the EUREX survey

¤ highlighting the privileged relationship between DELTA ONE and FIMAT, notably through the payment of significant commissions

3) The search for complicity

¤ outside: Moussa BAKIR, financial intermediary (broker) at FIMAT

¤ within Société Générale

  1. D)The report of the banking commission and the decision taken against SociétéGénérale

III – Present theses

  1. A) On the scope of Jérôme KERVIEL ‘s mandate
  2. B) On the reality of his directional positions

1)      The year 2005

2)      The year 2006

3)      The year 2007

4)      The year 2008

  1. C)On exceeding the limits

1)      On the existence of limits

2)      Informing the hierarchy on exceeding limits

  1. D)On the alerts that the hierarchy would have ignored

1)      The incompatibility of the declared result with the mandate entrusted

2)      Cash balances

3)      On the obviousness of EUREX alerts

4)      On the importance of the volumes processed via FIMAT

  1. E)On fictitious transactions

1)      On the techniques used

2)      The monthly decrees of March and April 2007

3)      The end of 2007 and the first days of 2008

  1. F)On fake emails
  2. G)On unwinding

IV – The submissions filed at the hearing by the defense

Page n ° 2


Judgment n ° 1

Part two: court reasons

I – On criminal proceedings

  1. A) On the crime of breach of trust
  2. B) On the crime of fraudulent entry of data
  3. C) On the offenses of forgery and use of forgery
  4. D) On the penalty

II – Civil action

  1. A) On the withdrawals of Xavier KEMLIN and Gérard COSCAS
  2. B) On the conclusions of nullity and inadmissibility of Société Générale


  1. C) On the admissibility of the association Halte à la Censure, à la corruption, au Despotisme, à l’Arbitrraire (HCCDA) represented by its President Joël BOUARD
  2. D)On requests from Société Générale shareholders
  3. E)On requests from employees and retirees of Société Générale
  4. F)On requests from Société Générale

Page n ° 3


First part: presentation of the facts and the procedure:

On January 24, 2008, following two complaints filed almost simultaneously by Société Générale on the one hand and one of its shareholders on the other hand, the present case was referred to justice .

These complaints concerned facts attributed to one of the bank’s employees as a trader, named in one of the complaints in the person of Jérôme KERVIEL who was more particularly involved in dealing with futures contracts on European stock indices . He was accused of having concealed his positions by mounting fictitious transactions, and of having escaped the internal control procedures put in place by the bank by providing false explanations and falsified documents .

The investigation carried out by the Financial Brigade of Paris consisting of a series of searches, hearings of some executives of the bank and the hearing in custody of Jérôme KERVIEL led, from the following January 28, to the opening information and the indictment of the person concerned.

The continuation of the investigations within the framework of a rogatory commission delivered to the same service, the multiple hearings of witnesses by the investigating judges and the numerous interrogations and confrontations of the indicted with the officials of the bank and some of his colleagues as well that the findings made on the documents seized or communicated by Société Générale led the investigating magistrates to order the referral of Jérôme KERVIEL to this court.

The accused must answer for facts retained under the qualifications of fraudulent entry of data into an automated processing system, forgery and use of forgery in writing and breach of trust.

In the context of this presentation, it is first necessary to define the factual scope of the referral to the court (I) and to describe the state of the proceedings at the end of the information (H) for then recall the theses supported by the various speakers (III) and the content of the conclusions filed by the defense of Jérôme KERVIEL (IV).

I- Referral to the court :

On January 24, 2008, René ERNEST, shareholder of Société Générale, filed a complaint with the public prosecutor of Paris against an unnamed person on the counts of breach of trust, swindles, forgery and use of forgery, complicity and concealment of these offenses.

He exposed that Société Générale had been the victim of a massive fraud on the part of one of its traders, discovered on January 19, 2008 and announced on January 24 , that the latter, in charge of hedging activities on futures contracts on European stock indices, had been able to conceal its positions thanks to an elaborate structure of fictitious transactions and that the resulting loss suffered by the shareholders could reach 50% of their investments.

The same day, the public prosecutor entrusted the investigation to the Financial Brigade .

The next day, the public prosecutor of Nanterre received the complaint from Société Générale, whose head office is located in Paris and the administrative headquarters at La Défense, 17 Cours Valmy, denouncing the actions of Jérôme KERVIEL, negotiator on the market for warrants, “whose uncovered fraudulent activity was carried out in violation of the definition of its responsibilities and the arbitration mandate entrusted to it”.

Page n ° 4


Judgment n ° 1

It explained that the front office service of Société Générale had been alerted on January 18, 2008 by the counterparty risk measurement system of the existence of a very significant exposure to a small German broker called BAADER.

According to the complainant, the first internal investigations were completed on January 21 and had made it possible to identify mechanisms implemented by Jérôme KERVIEL, based on different types of operations:

  •  taking unauthorized positions on “futures”, outside the mandate and outside the limits set for the trader;
  •  seizures of fictitious transactions with characteristics chosen to be more difficult to detect, thus masking the position, the result and the risks involved;
  •  cancellations of fictitious transactions before they are detected;
  •  seizures of new fictitious transactions.

It was specified that the fictitious transactions were calculated in such a way that they perfectly compensated the hidden position in terms of positions, results and risks.

This complaint was joined to the previous one.

The investigation by the Financial Brigade and the information provided by Société Générale made it possible to specify the operational framework within Société Générale in which the facts denounced and the operating mode as it had been updated by the complainant.

  1. A) Jérôme KERVIEL’s operational framework

1) The structures :

¤ Société Générale Corporate Investment Banking :

The facts denounced fell within the framework of Jérôme KERVIEL’s trader activities within Société Générale’s investment bank, Société Générale Corporate Investment Banking (SGCIB), one of the group’s six poles of activity. Societe Generale located in La Défense and whose activity was oriented towards a selected clientele of companies, financial institutions and investors.

It appeared, moreover, that the group has six functional departments report directly to the presidency, ensuring cross missions to notammen t of “ensuring compliance with safety rules inherent in the banking business” (D73 / 11), among which were:

  •  the finance and accounting department (DEVL) ;
  •  the Risk Department (RISQ), which was responsible for setting up a risk control system and, as such, was responsible for managing risk portfolios, monitoring cross-functional risks as well as forecasting management of the group’s risk, divided into two entities:


–   RISQ / CMC, responsible for counterparty risks on market products and activities and all counterparties,

–   RISQ / RDM, responsible for the group’s market risks, ensuring permanent and independent monitoring by the “front offices” of the positions and risks generated by all of the group’s market activities by comparing them to the limits in place;

  • the general secretariat (SEGL) onwhich depended:

–   the deontology department (“compliance”) whose mission was to ensure the protection of the activities and the image of the group and its employees by ensuring, within the various entities, compliance with the laws and regulations specific to the activities banking and financial practices and the principles and standards of professional conduct,

–   Inspection of Société Générale.

Page n ° 5


Judgment n ° 1

The activity of the SGCIB investment bank revolved around a “business” pole and a “resources” pole.

The “business” pole brought together the “business” functions of the bank. These functions were relative:

–    financing of large companies and issuance activity (CAFI),

–    interest rate, foreign exchange and commodity (FICC) products,

–    equity index products and equity and index derivatives (Global Equities and Dérivative Solutions – GEDS).

The “resources” pole brought together “support” functions within different departments, including:

  •  the IT department (ITEC),
  •  the operations department in which the “middle office” and the “back office” were located (Operations Department – OPER),
  •  the finance department (Finance and Accounting Department – ACFI).

¤ the “Global Equities and Dérivative Solutions” division :

Jerome KERVTEL was hired by Société Générale on 1 st August 2000, assigned initially to the middle office repository GELS, then became assistant trader. From January 2005, he joined the team of “Delta One Listed Products” traders which was one of the front office components of GEDS ‘ Trading activity .

At the end of December 2007, the Global Equities and Dérivative Solutions (GEDS) division, headed by Luc FRANÇOIS, employed nearly 1,400 people in four main types of business:

–     the sale of structured products and flows ( “Corporate derivatives” and “Derivatives sales”),

–     the sale of cash stocks and research (“Cash & Research”),

–     engineering (“Financial engineering”),

–     volatility or arbitrage trading bringing together activities for own account and those dedicated to clients.

Pierre-Yves MORLAT supervised the Arbitrage activity which counted 385 people and on which depended the Equity-Finance subdivision headed by Philippe B ABOULIN, within which the Delta-One desk was located .

In 2005, the “Delta One Listed Products” team was led by Alain DECLERCK, senior trader, under the authority of the head of Delta-One, Richard TAYLOR, himself supervised by Nicolas BONIN until the arrival of Martial ROUYERE in December 2005.

Alain DECLERCK, having left Société Générale in February 2007, was replaced by Eric CORDELLE, who arrived the following April.

Thus the hierarchy of Jérôme KERVIEL was composed in January 2008 as follows:

–   N + l: Eric CORDELLE (manager of the Delta-One Listed Products team),

–   N + 2: Martial ROUYERE (head of the Delta-One desk),

–   N + 3: Philippe BABOULIN (head of Equity-Finance regrouping all the financing activities “collateralised” in securities and the activities of Delta-one),

–   N + 4: Pierre-Yves MORLAT (head of the Arbitrage division within the Trading activity of GEDS),

–   N + 5: Luc FRANÇOIS (Director of GEDS),

–   N + 6: Christophe MIANNE (head of market activity within GEDS),

–   N + 7: Jean-Pierre MUSTIER (Deputy Managing Director of Société Générale, in charge of investment banking).

The team consisted of traders at 1 st January 2008 Jerome KERVIEL, Taoufik Zizi, Ouachel Meskine Thierry RAKOTOMALALA Sébastien and GERS

Page n ° 6


Judgment n ° 1

Mathieu BESNARD.

2) the scope of the trader’s “front office” activity:

As a market operator, Jérôme KERVIEL was the front office of the investment bank. He spent his orders from the trading room located at 7 th floor of the tower building located east of Valmy Course of Defense which was hosted all the bank’s services.

Like each of his trading counterparts, he had a trading station made up of six computers and recorded messaging and audio communication equipment. This market access tool was unique to him. He stored there all the deals he had processed and whose data was fed in real time into the ELIOT database.

The activity of each trader gave rise to the opening of operating groups (GOP) which themselves included several portfolios making it possible to group together deals relating to the same trading strategy. The GOP was the unit of reference for recording trades of traders and calculating economic and accounting results .

Thus Jérôme KERVIEL was working on GOP 2A, 2C, D3, WU, XE, 2B, 1G.

The location of this workstation was indicated to the examining magistrate during his first transport to the scene on June 10, 2008 at the request of the civil party Société Générale (D540).

The scope of intervention of the trader on the markets was defined with regard to, on the one hand, the nature of the products processed and, on the other hand, the commercial practices developed, as defined by his hierarchy. Jérôme KERVIEL held a large number of licenses allowing him to access most of the European markets on which derivative products were traded.

¤ processed products :

Jérôme KERVIEL mainly worked on two types of derivative products : options (warrants and turbo-warrants from Société Générale and the competition) and forward contracts (futures and forwards). These products were most often established on stock market indices (Dax, Eurostoxx, Footsié) used as underlyings.

These trades are based on the expected upward or downward movement of these indices so that by committing the trader takes a directional position. It can naturally be hedged by performing the reverse operation called “hedging”.

The option grants the right to buy (call option: calt) or sell ( put \ put option ) forward a certain quantity of the underlying at a price fixed in advance, called the strike price. or strike.

Turbo-warrants, options issued by a bank and called “call down and ouf (call option) and ” put up and ouf ‘ (put option), are characterized by the existence of a deactivating barrier whose The effect is to make the product non-existent and therefore to deactivate it when the underlying reaches a certain threshold (downward in the event of a call down and out or up in the event of a put up and out). The barrier constitutes the risk limit for the client whose loss cannot exceed the amount of the option price, the premium initially paid, while the bank is covered by a reverse transaction, either by buying or selling the underlying in question.

The forward contract is a contract for the purchase or sale of a financial product entered into between two counterparties, all of the characteristics of which are fixed in advance, in particular the date of settlement and delivery as well as the forward price. The official reference, the future date of reading this reference, the price of the futures contract , the quantity of the underlying and the payment instructions must be defined in the contract .

Page n ° 7


Futures are placed on regulated markets, these are so-called standardized contracts processed on markets which themselves ensured the successful completion of operations through the various stages of the contract’s life (initial payment of a security deposit). “depository * mainly in the form of securities, and subsequent payment of daily margin calls depending on market trends being made in cash) through a clearing house whose books contain an account for each bank and a sub-account for each trader.

The “forwards” past futures OTC {over the counter), are of this dual perspective riskier products in that it does not enjoy the safeguards inherent in the future. However, to limit their risks, the large banks have set up collateral contracts (Collatéral Sécurity Agrément or “CSA”) between themselves, allowing margin calls to be made between the banks bound by this agreement.

¤ areas of activity of the trader :

Jérôme KERVIEL’s mandate originally included two branches:

– the market-making {market-making) Societe Generale products
(turbo-stock index warrants), which was originally his main activity.

This activity in the service of the bank’s customers was to generate minimal risk . For each sale, it involved taking cover by a reverse transaction on the same underlying in the form of the purchase (or sale) of shares or futures. These operations were carried out automatically by the automaton equipping the trader’s station . The latter could find itself in a directional position at the maturity of the warrant, or when the deactivating barrier was reached or if the option was exercised. He had to find new cover as soon as possible. He could also prefer to keep the open position (spiel) until the end of the day (intraday)or even beyond (overnight) for several days.

– the trading of competitor turbo-warrants, a proprietary activity which
supplanted the former from 2007.

This activity consisted of buying turbocalls from the competition, hedging them by selling or buying futures or forwards on the same underlyings, either the DAX (90% of the deals) or the Eurostoxx (10%). The strategy deployed was based on the implementation of the deactivating barrier (knock out) and on the hope of a “gap”, a price difference that occurred after-market (after the closing of the quotation of the underlying at 5.30 p.m. and before the opening the next morning), knowing, for example, that futures continued to quote until 10 p.m. As soon as the product was deactivated,delay of a few minutes to 2 hours.

At the same time, Jérôme KERVIEL took directional positions known as “ab initia” unwound during the day (intraday) or even beyond (overnight).

3) Front office activity relays:

The support functions took over from the front office in the development and monitoring of transactions processed. Within the “OPER” support department, the “OPER GED” service, headed by Raymond BUNGE, provided middle office and back office support for GEDS.

¤ the middle-office:

The main function of the middle office was to ensure the link between the front office and the back office. He carried out the standardization of transactions processed by traders by transmitting them to the back office for their accounting and administrative processing (confirmation with the counterparty, payment, delivery-receipt, accounting).

Within the middle-office, it is the assistant trader, who produced daily

Page n ° 8


Judgment n ° 1

the P&L “, (profit and loss), the trader’s result. The BACARDI system thus output every morning the result of the entire Delta-One activity from the valued data appearing in the ELIOT database. each trader came out in the same table The BACARDI applications then flowed into the CRAFT application, the official results tool that had to be validated daily by the manager of Delta-One.

Also, the middle office was subdivided into three sectors:

  • the operational middle office which:

ensured the management of the ELIOT information system in which all the operations processed by the front office were listed (daily tasks : entry, risk analysis, valuation),

checked that the trades were correctly described in the trader’s portfolio.

  • DLM middle office (deal management):

guaranteed the correct modeling of operations (compliance with documents received from brokers and counterparties) and compliance with internal modeling standards (depending on risk procedures and procedures emanating from the finance department),

ensured that the data entered in ELIOT flowed correctly into the “GMI”, “EOLE” and “THETYS” systems of the back office or, if applicable, to the “buffer base”.

  • therepository middle office:

created and controlled products (futures, options)

managed the “buffer database”.

¤ the back office:

The back office’s mission was:

  •  to reconcile the transactions contained in its own databases and with the clearer (broker), which could reveal discrepancies,
  •  to ensure that the event reports are translated into accounting entries, and to proceed with the payment of deposits and margin calls; a dedicated back office was responsible for making daily a global payment of all margin calls due by Société Générale to each clearing house, such as FIMAT for example.

4) Monitoring and control of the trader’s activity:

The trader’s activity was therefore subject to the crossed eyes of the support functions in a set of monitoring and control processes:

_____ ¤ daily checks:

integration into the basics of the back office:

– monitoring of “buffer bases” carried out by back office teams and DLM middle office teams ;

– daily reconciliation by DLM middle office teams between the ELIOT database (front office) and the EOLE, GM and THETYS databases (back office);

on the occasion of payment on the value date of the transaction,

on the occasion of confirmations by the back office in the case of OTC transactions.

_____ ¤ checks at the end of the month (except end of January and end of July):

Secondly, the operation was shifted from the back office to SGCIB’s accounting. It was at this stage that a “bridge” control took place, consisting in reconciling the accounting result with the front office result (from ELIOT). This reconciliation was carried out by the P & L / RCG (accounting-management reconciliation) service, which was also responsible for explaining any discrepancies observed and, if applicable,

Page n ° 9


to validate them after correction.

At the end of the “bridge” reconciliation, an intra- group accounting reconciliation is carried out in the accounts of Société Générale.

cash flow monitoring :

The P & L / REC team was also tasked with monitoring cash positions on a daily basis on the basis of reports issued for this purpose, as well as producing and disseminating cash balances.

The forecast cash flow was managed by a specific IT application called SAFE. Every day, the middle office sent the cash balances of each of the operating groups to the front office . It was an Excel file which indicated for each GOP and each currency the cash balances at 75 dates around the date of sending (60 historical and 15 forecast).

These balances could be used by each trader and the front office manager of the room’s forecast cash flow, responsible for ensuring that the limits were respected.

When a business line exceeded its implicit cash limit, the front office cash flow manager had to ask the trader at the origin of this overrun to make an explicit loan / borrowing transaction with other GEDS desks or with Societe Generale cash flow.

_____ has risk monitoring:

– market risks

Whatever the framework in which the directional positions intervened, they exposed the bank to a risk. These market risks were managed and monitored on a daily basis.

The principle was that “the control of risks in market activities was primarily the responsibility of the front offices in the day-to-day management of their activity and the permanent monitoring of their positions 1 ‘ (directive no 28 cited in the report of the banking commission D592 / 85) The function of “risk manager” was entrusted to activity managers .

However, market risks were monitored by a specific department which observed, by activity and by business line, compliance with bank risk limits linked to market variations. To do this, it had indicators such as “stress tests” and “VaR” (value at risk).

Various limits were established such as the “replication limit” (sum of the absolute value of the net position per underlying).

The so-called replication limit for the Delta-One desk was set at € 75 million until January 12, 2007, when it was raised to € 125 million . Positions could indeed offset each other and, since no limit was set on the actual magnitude of the positions, only the residual position was measured and could give rise to an “alert”.

The information relating to the management of limits was done in two stages:

–   a first calculation was launched in the morning on the existing positions at the end of D- day (at 11:00 pm) and communicated to the desk managers ;

–   a second final calculation was carried out at the beginning of the D + 1 afternoon, the result of which was communicated to management.

The “risk managers” were the recipients of excess emails. In the event of overruns, they had to be immediately regularized either by returning to the limit or by requesting and obtaining an increase in the limit (D164 / 4).

The analyzes carried out on the bank’s archives showed that numerous overruns had been recorded over the years 2006 and 2007. These

Page n ° 10


exceedances could reach, over the month, 50% of the limit.

– counterparty risks:

Another department of the Risk Department assessed the counterparty risk on market transactions (RISQ / CMC / RDC). This risk corresponded to the amount of the loss to which the bank was exposed in the event of default by the counterparty in question.

This daily analysis mainly concerned over-the-counter negotiations (in organized markets, each counterparty dealing with the clearing house which was responsible for the successful completion of transactions, the risk was very low).

The back office application flowed into another application fed by back office tools (including the THETYS database for OTC contracts) carrying out, portfolio by portfolio, the exposure risk calculation.

At D + 1, this resulted in a risk indicator that provided overall results by counterparty.

The files were sent by the back office applications around 6 p.m. to the computing machines which were set in motion during the night and delivered the results the next morning.

These files were consulted by the team of application managers (RDC / GAP) who analyzed the overruns and communicated them to the front office for analysis and clearance. The alerts indeed led to the identification of the trade and the desk concerned, then the trader who was invited to provide explanations.

The management of counterparty risk was primarily the responsibility of front office operators .

As with market risk, overruns, whether passive (resulting from market trends) or active (resulting from a voluntary action by the trader or an entry error) forced the trader to choose between giving up. the operation or request a one-off authorization for overrun. A control took place on D + 2 in order to ensure the regularization.

  1. B)The denounced modus operandi

In its initial complaint, Société Générale listed the types of transactions on which the fraud it attributed to Jérôme KERVIEL was based. She mentioned:

  •  unauthorized positions taken on “futures”,
  •  entry of fictitious transactions with characteristics chosen to be more difficult to detect, thus masking the position, the result and the risks involved,
  •  cancellations of fictitious transactions before they are detected,
  •  seizures of new fictitious transactions,

it being specified that the fictitious transactions were calculated in such a way that they perfectly compensate the hidden position in terms of positions, results and risks.

It was specified that Jérôme KERVIEL had acquired within Société Générale since 2000 a very fine knowledge of middle office and back office systems which he had updated regularly since his transfer by maintaining excellent relations with the support functions.

It was also noted that the trader had usurped the access of a middle office agent and that he had falsified emails to further conceal the fraud.

Finally, it appeared that the RISQ / RDM teams analyzed the risk and followed the sensitivity of the position to a whole series of parameters and a “Value atRisfc ‘ which allowed a regulatory calculation quantifying the maximum exposure of the bank in relation to its positions. under extreme market conditions This “VaR” was calculated daily and allowed risk monitoring in the dealing room.

Page 0 11


1) The process which led to the discovery of disputed depositions:

¤ the detection of an excessive allocation of own funds on a counterparty :

As of December 31, 2007, the Societe Generale group had to calculate and publish an adequacy ratio between the bank’s own funds and the risks it was taking on its counterparties.

It was on this occasion that a set of eight massive operations of purchase-sale of forwards of total assets 80 billion deal with a German broker Baader appeared anomaly. This set of operations assumed an allocation of 2.4 billion in equity.

This had led Richard PAOLANTONNACI, project development manager within GEDS, to be alerted by the management of the risks of excessive ERC (Equivalent Risk Credit) exposure.

Identified as being at the origin of these operations, Jérôme KERVIEL had been questioned and, on this occasion, had indicated that they were data entry errors on his part and that in reality these operations were carried out in the face of a another counterparty, Deutsche Bank.

He had successively produced, to justify it, a first confirmation email allegedly received from the broker BAADER, dated January 17, 2008, then a second, at the head of Deutsche Bank, dated the following day, which were one and the other revealed to be false documents produced for the occasion by Jérôme KERVIEL.

The continuation of the investigations during the day of January 18 revealed that it was originally four transactions to buy and four other transactions to sell forwards on European stock indexes passed on the same day, either on December 12, 2007, at the initiative of Jérôme KERVIEL who had changed the counterpart three times (a first internal counterparty, Click-Options, was initially entered, then the BAADER counterpart, entered on the following December 31, and finally Deutsche Bank).

These transactions then generated an unrealized loss of 1,471,275,772 euros.

The Deutsche Bank trader whose name appeared in the header of the email, Christophe de la CELLE, formerly of Société Générale, questioned on this point by Martial ROUYERE (N + 2 of the Société Générale trader), had assured n ‘have processed none of these transactions.

Questioned again by his superiors in the afternoon of January 18, Jérôme KERVIEL had admitted to having made fictitious transactions to hide a gain made within the framework of his mandate, arguing of his desire to keep the gain that he could externalize the following years in order to achieve the profit objectives assigned to it.

¤ the continuation of internal investigations and the establishment of a “task force” :

The first elements of the file made it possible to take cognizance of the conclusions of the investigative team formed on January 18, 2008 by Claire DUMAS, assistant to Raymond BUNGE, responsible for operations of GEDS, and formed the basis of the terms of the two initial complaints.

This “taskforce” was mainly composed of Martial ROUYERE, Luc FRANÇOIS, Pierre-Yves MORLAT, Christophe MIANNE and Jean-Pierre MUSTIER. She had managed to find in Jérôme KERVIEL’s portfolio traces of the operations of 2007 which established the materiality of the directional positions taken ultimately denounced.

Jérôme KERVIEL had been summoned by telephone while he was in Normandy, to report urgently to the premises of Société Générale in La Défense, where he had gone on the evening of January 19.

A series of interviews had taken place with the trader until the middle of the night, while the computer research carried out by staff of the OPER department under the leadership of Claire DUMAS continued in parallel . The talks had resumed

Page 0 12


Sunday, January 20 in the morning.

According to the participants, Jérôme KERVIEL was limited in his remarks to admitting that the last operations were fictitious and intended to mask a positive result for the bank of 1.4 billion euros achieved as of July 2007.

It was only thanks to the investigations carried out during the night and the following day that the real number, the exact size of the positions and the results generated over the months prior to July 2007 and the results were finally revealed. 18 first days of January 2008, a reality that the person concerned was careful not to confirm until the end of these exchanges at the end of the morning.

According to the representative of Société Générale, it thus appeared that the operator concerned had taken open positions outside the authorized limits during 2007 . As of March, it had built up a directional position in future which had reached a nominal value of 30 billion euros on July 31, showing an unrealized loss reaching 2.156 billion. He then benefited from the downturn in the market caused by the subprime crisis, which enabled him to achieve a positive result of 500 million euros in August.

He was thus able to liquidate his position and, from the end of September 2007, had built a new one, liquidated this time between the end of October and the end of the year, from which he generated a gain of 1.471 billion euros. on December 31.

At that date, its position in futures had been reduced to almost zero (in reality a short position of 246 million on all three DAX, Eurostoxx 50 and FTSE indices ).

It turned out that Jérôm e KERVIEL had taken an open position of 50 billion euros in January 2008, but in the opposite direction, masked by a fictitious hedge on futures with the mention “broker pending”, and whose valuation on January 18 generated a loss of 1.2 billion corresponding to the margin calls that had taken place during this period.

The volumes handled by Jérôme KERVIEL from January 1 to 18, 2008 resulted in the construction of the following net positions for the bank (D335 / 4):

–   DAX futures (due March 2008): long position of 18.434 billion (99.925 lots),

–   Eurostoxx 50 futures (due March 2008): long position of 29.781 billion (739.359 lots),

–   FTSE futures (due March 2008): long position of 1.119 billion (14.198 lots).

The analyzes showed that Jérôme KERVIEL had increased his exposure by processing 8.15 billion euros in volumes on January 17, 2008, and 3.09 billion euros the next day, January 18, until 20hl5 (D426 / 114 ).

2) The revelation of fictitious operations intended to hide directional positions out of limits, and the results achieved:

Jérôme KERVIEL had managed to hide his positions by applying techniques used in the bank for accounting modeling purposes but based on an economic reality, which, in this case, was not the case for the transactions entered by the trader. for the sole purpose of hiding its directional activity.

Claire DUMAS emphasized the techniques that Jérôme KERVIEL had been able to acquire in his previous assignments, in the framework and in his functions as assistant trader, and on the relationships that he had managed to forge with the various control services that revealed on his part a propensity for contacts and exchanges, which showed in relation to his behavior in the trading room where he was, according to Martial ROUYERE, taciturn and reserved.

¤ recourse to technical counterparties :

It should be noted at the outset that the notion of “fictitious” transaction covers two realities. The first is that relating to transactions as entered by Jérôme KERVIEL which did not appear to be based on any economic reality. The second

Page n ° 13


covers the technical operations for the entry of which recourse was had to a technical counterpart for the sole purpose of bringing about a management event relating to these operations, however very real (D285).

– the “echupo” counterpart (for example, in 2005, fictitious hedge on Allianz shares by sales against echupo):

These transactions had to be checked by the back office on the due date, but Jérôme KERVTEL had canceled them a few days before.

On the expiration date of the product (security or warrant), which no longer exists, it was necessary to enter a sale of securities or warrants against echupo in order to reduce the position to zero .

Likewise, in the event of a restructuring of a product by changing one or more characteristics, with the agreement of the customer, a sale of the old product was entered against echupo and the repurchase of the product in its new configuration, this double-trigger operation nevertheless had only one economic reality on the market in the face of a real customer.

– the “pre-hedge” counterparty (for example, in July 2007, false loans were seized under the pre-hedge counterparty in order to hide the cash flow hole resulting from the loss of 2 billion euros; checked at the end of months, these operations had been canceled at the end of August).

In the pre-marketing phase, large-scale operations were launched within large client entities (insurance companies or large companies). In this case, the transactions were entered in the ELIOT database against the PRE-HEDGE counterparty pending the finalization of the transaction.

– the “brokerpending” counterparty (for example in 2007: on a short position of 30 billion, it would have been a question of correcting undue results on knocked out warrants , the trader having on this occasion produced supporting documents in Finnish).

The counterparty or the broker were not referenced in the BDR database . As the approval was issued following an internal control procedure called “KYC” (Know Your Costumer), the operation was theoretically blocked pending the outcome of this procedure.

¤ the choice of types of operations :

  • the entry of purchases-sales of securities or purchases of warrants with avalue date in the future:

These operations had the particularity of escaping controls:

–   at the transaction confirmation stage a few days before their value date, due to the cancellation just before the issue or receipt of this confirmation;

–   at the stage of payment for transactions by providing for a postponed departure date with cancellation before this date.

  • entering transactionson futuresagainst a “broker pending  counterparty :

The objective was to prevent the operation from going to the back office, which is in fact retained as a “buffer base”, and to avoid reconciliation by the team responsible for monitoring the operations collected in this buffer base, who worked in collaboration with the back office. The operator could go ahead and cancel the transaction, or , if he hadn’t already canceled, he replaced it with another equally fictitious transaction .

These operations were drowned in the mass, this product being used daily by all arbitrageurs in significant proportions (in 2007, there were 30,000 on the German index and 260,000 on the Eurostoxx 50, and in 2008: more than one million).

Page n ° 14


  • entry offorwards and options against Click-Options (internal counterparty):

These seizures by nature escaped control by reconciliation of stocks between the front office and back office databases , and passed easily to the back office database .

They also escaped confirmation control, as the internal counterparty of Click-Options, a subsidiary of the Société Générale group, was automatically hedged.

They were canceled before the second check, at the financial settlement stage (default of payment normally causing a “cash pending” recording) and before the intra-group reconciliation intended to verify the reciprocity of the postings at the end of the month .

  • entry of provision flows:

These flows were used to adjust the ^ / rott / office result in one entry in the event that the valuation at the end of the day showed an explained error and to be corrected. They were entered in “intra-month” by the assistant traders who had to make a validity check.

They were nonetheless reviewed exhaustively at the end of the month by the “gateway” teams responsible for second-level accounting control, then again checked by an ACFI team.

3) Analysis of the responses provided by Jérôme KERVIEL to the discrepancies observed during the monthly and quarterly closings:

¤ the differences observed in March and April 2007 :

Discrepancies were noted on the March 2007 “gateway”. They related to future “pending” counterparties (representing a P&L of 88 million euros) that did not appear in the back office and forwards against Click-Options (emerged intragroup reconciliation ) for a total of € 94 million.

Jérôme KERVIEL then explained that these seizures corrected a valuation error on deactivated (knocked) turbo-warrants , a practice existing in certain trading rooms. He had on this occasion produced a notice (term sheet) relating to a series of warrants, written in Finnish, on which we found figures corresponding to his statements but, at that time, it was impossible, due to lack of time, to verify the content of this description which he hastened to transfer to ELIOT and then to remove after validation of the operations.

In April, a difference related to two “pending” futures blocked in buffer, generating a result of 142.8 million euros. Jérôme KERVIEL then invoked entry errors (booking) linked to two other warrants.

To support his thesis, he then produced two fictitious CLEARSTREAM warrants. The operation dates were intentionally different, which gave credence to the reality of a “false” loss that the “pending” futures had to correct.

Secondly, it was found that the impact on the result of these booking errors rectifications was too strong (156.8 million instead of 142.8 million). In order to reduce this impact, Jérôme KERVIEL produced two other deals, just as fictitious, which, he claimed, could not be entered in ELIOT for a technical reason. This initiative had made it possible to reduce the result by 13.9 million.

For the purposes of his demonstration, on May 11 and 16 he transferred to the middle office services three emails which were to turn out to be false: • two under the header of Constanza MANOCCHI, of Société Générale Italy, dated 11 and April 12, 2007 to justify the difference of 13.9 million relating to the repurchase of two warrants on the DAX which had not been entered in ELIOT for technical reasons

Page 0 15


  • a third dated April 30, under the heading of Lorenzo BOTTI, from BNP PARIBAS,reporting a delay in registering 5 knocked-out products whose booking was only due at the end of May.

¤ the difference observed in May 2007 :

Jérôme KERVIEL had entered OTC transactions against Click-Options but that the latter did not recognize during the intra-group reconciliations at the end of May 2007. He replied that the real counterparty was Deutsche Bank but, contrary to the commitment made, he did not made no changes in ELIOT.

¤ the difference noted on the June 2007 decree :

During the June closing, discrepancies on options vis-à-vis Click-Options had been detected by ACFI, which turned to the “bridge” team, which itself had inquired with Jérôme KERVIEL. The latter then claimed that they were in reality transactions against external counterparties (the banks JP MORGAN and Deutsche Bank) which had given rise to input errors.

To justify these counterparties, he transferred two emails in which the transaction identifiers and the exact names of the counterparties were described:

  •  one dated June 28, on behalf of the bank JP MORGAN,
  •  the other dated June 15, on behalf of Deutsche Bank, in the person of Christophe de la CELLE.

On the occasion of this same order, two forwards were identified against an external counterparty, Click CLT, showing in the “gateway” gap. To accredit the mistake of booking, with regard once again to the counterparty Deutsche Bank, Jerome KERVIEL was transferred on July 6 in Sebastian CONQUET another email from Deutsche Bank.

In order to avoid this time the pitfall of collateralisation, he managed to dissuade the back office from proceeding with the payment of the “collateral while assuring him that the operation was going to be ” remodeled in the list in the day \ which n has not been done.

¤ anomalies from August to December 2007 :

From August to December, Jérôme KERVIEL masked his results by buying and selling Porsche shares with a delayed departure date, undetectable at the back office before their value date.

_____ At the end of November, however, a method deviation appeared, resulting from the existence

massive operations of this type. The difference was between the accounting result containing a valuation at the closing price and the economic result in which a financing cost was added between the trade date and the value date. Jérôme KERVIEL justified these operations as materializing amounts due to the broker for “give m /?” Transactions .

_____ In December, Jérôme KERVIEL entered forwards against Click-Options and

had to change counterparty using the BAADER broker in order to avoid intra-group reconciliations. However, the absence of a Collateral Security Agreement with this broker resulted in the maximum risk being taken into account, which led to the transaction being reported in the system for calculating commitments determining the solvency ratio. bank up to 2.4 billion ERC (counterparty risk commitment).

The discovery of the facts led Société Générale to react urgently and to launch additional investigations.

Page n 0 16


  1. C)Initiatives taken by Société Générale

1) The unwinding of positions :

Informed of the situation during the day of January 20, Daniel BOUTON, Chairman of the Board of Directors of Société Générale, had informed the Accounts Committee that same day at the end of the day (this committee had already been convened to examine the estimate of 2007 results) by informing it of its decision to close the positions as soon as possible and to postpone any communication on this situation and the bank’s results until the outcome of the unwinding.

The information was also delivered to the Governor of the Banque de France and to the Secretary General of the Autorité des Marchés Financiers. The board of directors was informed of the situation that evening.

For the most part, the positions were unwound over the three sessions of Monday 21, Tuesday 22 and Wednesday 23 January 2008, in a stock market context qualified by the banking commission as “very unfavorable” (uncertainties about the evolution of the American economy in particular the very high losses linked to American risk loans announced by the major banking groups). These elements had made the markets very volatile as of January 18. The decline that began on the main stock exchanges on the same day (declines in Paris and Frankfurt, drop in the Eurostoxx index of 1.74%), continued on Monday, January 21 on the Asian markets (Tokyo down 3, 86%, Hong Kong -5.5%).

The operations to unwind the remainder were to continue on January 24 and 25 .

We went from an unrealized loss of 2.7 billion euros to additional losses of 3.6 billion euros, for a total of 6.3 billion euros. Thus, the balance stood at 4.9 billion euros in losses, after deduction of the positive result achieved at December 31 of 1.4 billion euros.

2) The intervention of the general inspectorate:

At the same time, the executive committee of the Société Générale group seized the General Inspectorate (SEGL / INS) on January 24, in order to conduct an investigative mission. Its report, entitled “Green Report”, was tabled on May 20, 2005.

The work of the inspection confirmed the reality of the positions:

  • 2005 and 2006: presence of some transactions (up to 15 million euros depositsfrom June 2005 to February 2006, up to 135 million from February 2006), mainly on shares;
  • 2007: – gradual build-up from the end of January of a short positionin index futures reaching 28 billion euros on June 30, unwound in August,

–   construction of a new short position in September reaching 30 billion at October 31, 2007, unwound in November,

–   at the same time: taking directional positions in equities up to € 370 million, depending on the month,

–   realization of a gain of 1.5 billion euros at December 31, 2007.

  • 2008: creation between January 2 and 3 of a long position in index futuresof 49 billion euros, discovered on January 20, then unwinding resulting in an overall loss of 4.9 billion euros.

Page 0 17


These findings confirmed the concealment techniques and the inability of internal control services to detect fraud.

II – Investigations

  1. A)The preliminary investigation

1) Searches:

On January 25, 2008, simultaneous searches were carried out at the home of Jérôme KERVIEL, 24 avenue Madeleine Michelis in Neuilly-sur-Seine, in the absence of the tenant, and in the premises of Société Générale in La Défense and more particularly in the “EST 07” trading room where Jérôme KERVIEL’s workstation was located.

On this occasion, the investigators seized the seven computers which had equipped Jérôme KERVIEL’s workstation, which had until then been stored in a specific office . Two of these computers were used for trading (sealed ORDISG5 and 6), another used to receive quote feeds (sealed 3). The other four computers included 2 free PCs (sealed ORDISG1 and 7), a PC for Excel processing (sealed ORDISG3) and a PC TEST (sealed ORDI-SG4).

He was also apprehended:

–   the results in the form of two DVDs of the internal survey carried out by the SOCIETE GENERALE team set up on January 18 (SGI 1 seal),

–   a set of documents representing the summary of the work of this team (sealed SG12 and 13),

–   the list of users used by Jérôme KERVIEL on his computer station and summary of the checks carried out by the front office (SGI4 seal),

–   an example of confirmation of “fictitious deal (SGI5 seal),

–   an extraction from the ELIOT database, shared by the front office (trading department) and the back office (operations department), of all the trades and flows covering the period from January 2, 2007 to January 18, 2008 (sealed SG16),

–   a copy of the audio recordings of telephone conversations exchanged between the 1 st January 2007 and 25 January 2008 called “Etraly”, corresponding to the exchange trading and communications with the outside (sealed SG17etl8).

The investigators also entered a recording of the telephone conversations exchanged between Jérôme KERVIEL and the representatives of Société Générale on January 19 and 20, 2008 (Seals SG22 to 24).

2) The hearings of Jérôme KERVIEL in police custody:

On January 26, 2008, Jérôme KERVIEL responded to the summons that had been sent to him and presented himself to the police. He was interviewed under police custody (D34 to 55).

Heard on the facts, he immediately recognized having entered fictitious transactions and, after having canceled them, entered new ones. He said he was “less affirmative on the taking of unauthorized positions on futures.

He specified that his mandate was to ensure the market-making of products listed “Delta One” \ without volatility (certificates, warrants, trackers etc.), but said he had not signed any document defining the limits.

However, he admitted to having taken large positions that could be described as “outside the limits of [his] mandate *, which he masked by fictitious coverage.

Page n ° 18


He ensured that his first objective was to make money in the bank. Nevertheless, he declared: ” assuming that my commitments were really posted, without cover, my hierarchy would have imposed in view of their importance that I cut my positions” (D40 / 6).

In addition, he hoped to derive some professional advantage from this activity, aware that he was less well regarded than others with regard to his university studies and his professional career.

He added: ” I cannot believe that my hierarchy was not aware of the amounts I was committing”. Regarding the results obtained, he considered “impossible to generate such profits with small positions” (D40 / 6).

He enumerated the multiple alerts which, according to him, should have aroused the attention of his superiors and informed him of his positions (D45):

– receipt of interrogative mails from the back-ofjfice, sent to its assistant- traders (MOUGARD, NEMOUCHI and HOBBS) about transactions blocked in ” buffer base “;

-the appearance in March and April 2007 of differences in accounting results of which his own hierarchy had been informed in the person of François BABOULIN who had asked him to settle them and which led him to maintain that it was a question of the maturity of warrants whose cover had been cut, and to transmit, in order to help correct the deviation, a term sheet corresponding to the warrants issued, a procedure validated by RISQ;

-the choice of value dates causing large deviations from the three-day standard applied in France;

– the absence of symmetry on internal counterparties at the level of forwards vis-à-vis Click-Options;

-the mismatch between the result of 55 million euros declared in December 2007 and the volume of transactions apparently processed;

-the receipt in November-December 2007 by the compliance department of Société Générale of requests for information from the German EUREX index derivatives market on transactions that it had personally processed;

– the explosion of its limit at the beginning of January 2008, faced with the BAADER broker who had led it to respond to questions by fake emails to the risk department (see seal SG 15);

-the fact that he had not taken any leave in 2007 (in fact: 4 days out of the year);

-the high amount of fees (commissions paid to the stock exchange);

– the appearance of control by the accounting department at the end of the year to obtain an explanation of the refinancing differences on margin calls;

– interest produced on the cash balance of 1.4 billion euros;

– frequent risk messages which warned of a lack of nominal coverage;

– the use of certain instruments (actions and forward) that are impossible with Click-Options.

As of December 31, no longer having a position to conceal its “mattress” culminating at 1.4 billion, it had decided to enter into reverse fictitious transactions and to declare only a result of 55 million euros (to which the 1.4 billion should have been added). In order to justify a counterparty, he then opted for Click-Options, then the German broker BAADER, then finally Deutsche Bank.

“I had recourse to BAADER, he explained, to find blocks of futures in the market. Indeed, insofar as a broker does not deal with Forward, Société Générale could have been surprised.”

Page n 0 19


At the beginning of January 2008, he saw the market return within three months. He went “long” for very large amounts. In his eyes, his positions were justified by the prospect of a market reversal. He stressed that his result had remained positive until the morning of January 18, 2008, considering that it was only at the close of that day that he had gone negative (D38 / 5).

fi claimed that the passivity of his hierarchy had pushed him to continue, evoking the “spiral” in which he had been drawn and from which he could not escape (D55 / 5).

  1. B)Openness of information

1) The indictment of Jérôme KERVIEL:

Following this investigation, information was opened from January 28 against Jérôme KERVIEL on the head of:

–   forgery and use of forgery (use of false documents and false positions and false emails to justify them),

–   fraudulent entry of data into an automated system (theft of third-party access codes to cancel operations),

–   attempted fraud (obtaining an additional bonus),

–   breach of trust, in the usual way, relating to third party assets (exceeding of the management mandate relating to securities, in the case of positions irregularly taken in the amount of 50 billion euros).

Jérôme KERVIEL was indicted on the grounds of:

–   forgery and use of forgery (for having, during the years 2005 to 2008, resorted to false documents and false positions intended to hide operations carried out without the knowledge of Société Générale),

–   breach of trust (for having, during the years 2005 to 2008, misappropriated to the prejudice of Société Générale funds, securities or any property that had been handed over to him and that he had accepted on condition of returning or representing them or to make a specific use of it );

–   penetration of a computer file (for having, during the years 2005 to 2008, fraudulently introduced data into an automated processing system or fraudulently modified the data it contained, by usurping the access codes of third parties).

He was placed under judicial control with the obligation not to leave metropolitan France without prior authorization, to hand over his passport to the registry, not to meet any person working at Société Générale and not to engage in the activity of market operator and all activities relating to financial markets.

Seized on appeal by the public prosecutor, the investigating chamber had to reverse this decision and place Jérôme KERVIEL under a committal warrant by judgment of February 8, 2008, reserving the contentious of the detention.

A request for release was to be granted by judgment of the following March 18 , ordering his placement under judicial supervision with the following obligations

–   hand over his passport,

–   not to leave Ile de France without authorization from the examining magistrate,

–   do not go to a place where financial instruments are traded and in general to any stock exchange,

–   come to the SEDJ once a week,

Page n ° 20

–    refrain from receiving, meeting or entering into contact with a certain number of persons named by name,

–    not to engage in the activity of market operator and any activities relating to financial markets .

The pointing obligation was lifted by order of the examining magistrate dated June 20, 2008.

The order for maintenance under judicial supervision now only mentions a ban on leaving mainland France and the filing of proof of identity documents at the registry .

2) The constitutions of civil parties:

Société Générale became a civil party on January 29, 2008.

René ERNEST’s civil claim was declared inadmissible, failing to invoke a prejudice which was directly linked to the facts forming the subject of the information. As were the other shareholders subsequently formed.

Martial ROUYERE and Eric CORDELLE, dismissed from Société Générale as a result of this case, filed for civil action and were also declared inadmissible, for similar reasons.

  1. C)Continuation of investigations

On January 29, 2008, a letter rogatory was issued to the Financial Brigade for the purpose of further investigation.

The following was entered in the premises of Société Générale:

–   the extraction of Jérôme KERVIEL’s emails exchanged through the LOTUS NOTES messaging (sealed KUPKA 1), via the internet and outside SOCIETE GENERALE (KUPKA 2), the messages between Jérôme KERVIEL and Moussa BAKIR, his contact broker at within the FIMAT on the Reuters system (sealed KUPKA 3) and two units stations likely to have been used by Jerome KERVIEL (KUPKA seals 4 and 5), the cats between Kerviel and Moussa BAKIR where to notably of one called MATT (KUPKA6 seal) (D127);

–   two hard disks from Thomas MOUGARD’s workstation, his trader’s assistant (TMlet2 seals) and three hard disks from Manuel ZABRANIECKI’s workstation, seller at Société Générale (MZ 1,2 and 3 seals) (D222) ;

–   the backup copy of the internal LOTUS NOTES mailbox of Manuel ZABRANIECKI and Thomas MOUGARD (sealed ZABRANIECKI-MOUGARD LOTUS NOTES 1, 2, 3), the copy of the internet-mail archive of Manuel ZABRANIECKI (sealed ZABRANIECKI INTERNET MAILS-UNIQUE), and telephone conversations of Thomas MOUGARD exchanged in January 2008 (sealed MOUGARD TELEPHONE UNIQUE) (D221);

–   the paper extraction of the monthly communications from November 2007 to January 2008 between Jérôme KERVIEL and Manuel ZABRANIECKI (sealed TEL 3), from January 19 and 20 (TEL5) (D219);

–   the copy of the conversations exchanged on the Etraly network between Jérôme KERVIEL and Manuel ZABRANIECKI between July 2007 and January 2008 (D225);

–   the copy of Jérôme KERVIEL’s internal Lotus Notes mailbox for the

Page n ° 21


period from January 15, 2005 to December 16, 2006 (sealed ALICANTE 1) (D268).

All of these media, as well as those that had been seized during the initial investigation , gave rise, prior to their placement under closed seals, to the making of working copies for the purposes of exploitation by the investigators and to the submission of a copy to Société Générale.

On July 8, 2008, the investigators were given by the persons in charge of the Société Générale various documents and personal matters attributed to Jérôme KERVIEL among which a document entitled “Cahier de Procedures Trading DEAF \ placed under seal JKV3 (D587).

At the same time, the investigators carried out their investigations in order to verify the existence of a personal enrichment of Jérôme KERVIEL, to specify the professional rules which were imposed on the traders and the assistant-traders of the Delta-One desk, to seek possible complicity from which Jérôme KERVIEL could have benefited.

1) On the search for personal enrichment:

The investigation carried out in the personal environment, with his partner Hanane MEJRHIRROU and his brother Olivier KERVIEL, friendly and professional of Jérôme KERVIEL, and the searches carried out at the homes concerned, the requisitions addressed to the domiciliary banks of the accounts of the accused as well as of his relatives did not make it possible to detect the slightest suspicious movement that could be linked to the actions alleged against Jérôme KERVIEL.

His lifestyle, resources and expenses seemed to match his income. No extravagance was noticed.

At most, it was found that the respondent consulted a clairvoyance platform without it being possible to determine whether these steps had a link with the decisions he made in the context of his professional activity.

2) On the professional practices of Jérôme KERVIEL:

 ¤ within the scope of Jérôme KERVIEL :

Claire DUMAS was again heard as a witness by the investigating judges . It specified that in 2007, Jérôme KERVIEL had taken directional open positions by betting on the fall of the markets on futures. However, he was not authorized to take such large positions in futures , even when hedged.

Jérôme KERVIEL had in fact gone so far as to take more than 15 billion unhedged positions on EUROSTOXX and more than 30 billion on the DAX.

She added that only the net of the position was controlled in all the risk systems .

The risk limit of the DELTA ONE team to which Jérôme KERVIEL belonged was 125 million euros, all transactions combined for all eight traders. It was up to the manager, Martial ROUYERE, to distribute these 125 million among the different members of his team.

Claire DUMAS also emphasized the fact that Jérôme KERVIEL’s normal activity was an arbitration activity. This consisted in taking equivalent positions in the opposite direction on similar products in order to take advantage of the price differential on products which in theory should have the same price. Thus, Jérôme KERVIEL treated three types of products:

Page n ° 22


–   competition warrants,

–   coverage of the issuance activity of Société Générale turbos-warrants,

–   the hedging in futures of positions taken by his colleagues at Delta- One.

¤ on the existence of common instructions for the entire desk:

  • Ouachelfalah MESKINE,trader who dealt with the same products as Jérôme KERVIEL (turbo-warrants from Société Générale and the competition) provided the following explanations:

–   if the traders were authorized to have directional positions, nothing stipulated in intraday that there was a limit not to be exceeded (D514 / 2);

–   he was the one who bought the competition’s turbos while Jérôme KERVIEL provided coverage with futures;

–   everyone knew that they did not cut immediately; it was a particularly profitable practice in a down market (D514 / 2);

–   Jerome KERVIEL said he had a big client who bought put on the index Eurostoxx, and he had to cover with future; this is how he could have been in a directional position of 6,000 futures (D514 / 2).

He confirmed the existence of an overall limit of 125 million on the day by adding: ` ` We received an email every morning but personally I did not pay attention. Everyone knew that Jérôme was playing and winning. It was known that spiel represented an important part of his income. He managed to release 400,000 euros over half a day (while he released 700,000 euros in the month). Eric had said that he had seen Jerome take a position of a few hundred futures which had brought in 300 to 400,000 euros “ (D514 / 3).

  • Taoufïk ZIZI(junior trader at the Delta-One desk, trained by Jérôme KERVIEL) declared to have seen Jérôme KERVIEL spieler on futures. “Each operation being limited to the nominal, that is to say 30 futures (one million) I saw that he crossed several lines of purchase on the DAX index. I knew that Jérôme had to cut his operations finally of day because there was the limit of 125 million. (…) He told me that he had already traded 1,000 futures on the DAX (around 200 million euros) and for me this figure was the maximum limit he could process (D558 / 2) .
  • Thierry RAKOTOMALALA (trader at theDelta Onedesk in charge of market making on the Exchange Traded Fund – ETF) considered that the mandates of traders had never been clearly explained. He knew that Jerome KERVIEL “spielait” in intraday with the knowledge of management with up to about 30 to 50 million euros but he ignored completely if he kept the positions overnight.

According to this witness, Eric CORDELLE was aware of this activity having seen it practice in front of him.

He explained that there had to be an informal limit, at most between 5 and 10 million euros for market making on ETFs, and that he set himself a “stop loss” and a “max” gain (D557).

It turned out that three of the Delta-One desk traders had accepted a transfer of results from Jérôme KERVIEL in December 2007, when the bonuses had already been stopped:

–   Thierry RAKOTOMALALA had benefited from the transfer of one million euros (or 8% of his 2007 result) materialized by a buy-sell of forwards on the Eurostoxx index,

–   Ouachelfalah MESKINE had benefited from a transfer of 759,000 euros (6% of his 2007 result),

–   Sébastien GERS had benefited on three occasions from transfers from P&L for a total of 850,000 euros.

Page n ° 23


These three traders had been the subject of a dismissal measure.

¤ the hierarchy :

  • according to Luc FRANÇOIS, there were more than 2,000 limits within GEDS, theselimits were expressed in terms of market risks.On “Delta One Listed products”, the replication limit was 125,000 euros. It had been notified to all the people making up the desk and implicitly applied to each of the traders.
    Jérôme KERVIEL knew her and knew that he could not pass her without prior authorization .

This limit was checked daily on an analysis and summary document (reporting) produced by the market risk department, sent to all managers (N + 1 and beyond).

The amount of this limit was set according to the activity objectives. It was reviewed annually according to the development of this activity. The amount is set at the GEDS level and then distributed in cascade.

With regard to GEDS’s result, which was 3.4 billion euros for 2007, the result declared by Jérôme KERVDEL for 2007 (55 million euros) was consistent with its activity at the rate of 25 million euros for the arbitrage of turbos-warrants, and 17.6 million for animation trading.

To ensure the adequacy of the result, it was sufficient to compare it with the valuation of the portfolio.

If the results posted by Jérôme KERVIEL were very good, 15 traders had nevertheless posted a result higher than his.

  • according to Martial ROUYERE, the “Delta One-listed products” team could not carrya directional risk at the end of the day (overnighf) greater than 125 million euros. This limit had been 75 million until January 2007. It was he who requested the increase that was finally granted by the management of GEDS. This limit was known on the desk and had been sent to Alain DECLERCK by email and orally to the whole team. In addition, Jérôme KERVIEL received emails notification of overruns in which the amount of 125 million was mentioned and to which he responded personally.

He confirmed that the limit only took into account the cumulative residual risks of all positions, that is to say the cumulative differences between the exposure linked to the traded product and the hedge. In real time, the trader could see in his PLC the net exposure resulting from the day’s trading. In the evening, once all the transactions were entered in ELIOT, the trader had the risk analysis and valuation tool (BACARDI) which allowed him to precisely measure his exposure. Each trader had visually on screen a table setting his own limits. risks in the application of the trading system (in particular the maximum nominal amount of an order, maximum number on an order, etc.). These filters were set by the N + 1 (Eric CORDELLE) after discussion with the N + 2.

He affirmed that if the loss of 2 billion euros during the summer of 2007 had appeared, the position would have been settled and Jérôme KERVIEL immediately revoked. Likewise in the event of discovery of the gain of 1.4 billion.

  • according to Nicolas BONIN, the GEDS procedures book stipulated that each traderhad to ensure that his positions were covered. He had to check his risk analysis and valuation every evening . In addition, he received risk control over the entire scope intervening the next day. It was impossible for Jérôme KERVIEL to take an uncovered position without having previously notified his manager. He added that there were computer filters (volumes, price, nominal) independent of the trader and which made it possible to stop an order before the market.
  • according to Alain DECLERCK, his senior trader, Jerome had been told verbally

Page n ° 24


KERVIEL that he had the authorization to take positions of the order of one million euros, preferably during the day and not over several days. Positions of a million were frequent with Jérôme KERVIEL. He had a speculative activity in equities which led him to take uncovered positions. Its sharply rising result was itself linked to increased activity.

  • according to Eric CORDELLE, traders were very independent in theirdailyactivity , nevertheless, any new strategy or any transaction that was out of the ordinary had to receive its prior authorization. Thus, in July 2007, Jérôme KERVIEL had proposed to develop a strategy of upward risk of gap covered by the arbitrage of the competition’s turbos. He had already started to develop his intraday positions The following November, Jérôme KERVIEL wanted to set up an activity for the bank’s own account.

¤ the indications contained in the EUREX survey :

On January 31, 2008, Xavier de la Maisonneuve, ethics officer at Société Générale more particularly dedicated to the equity and equity derivatives activities of the investment bank , was heard on the requests for information received in November 2007 from EUREX, regulated market for indices on futures in Germany and involving Jérôme KERVIEL.

It brought the following elements:

The first request for information, dated 7 November 2007, was on the Société Générale trading activities since 1 st April 2007 and especially on the Dax and Eurostoxx 50 futures and more particularly on the coincidence of the account “PI “(attributed to Société Générale) of a large net short position on the Dax and a large net long position on the Eurostoxx. It was noted that most of the transactions supplying this account via the “give up” procedure had been introduced by Jérôme KERVIEL, recorded by FIMAT and transferred to the Company. General. Thus, on October 19, more than 1,700 Dax futures contracts and 2,300 Eurostoxx contracts had been transferred.

The questions concerned the strategy to which these operations responded, the large number of transactions, the use of the give-up procedure and recording techniques.

In its response dated November 20, the ethics department of Société Générale, under the signature of Vincent DUCLOS, had justified the use of FIMAT-Paris with give-up to FIMAT-London by the fact that the instructions of Jérôme KERVIEL intervened. after the closing of the market and by the advantage that this one found in being thus relieved and being able to devote itself to other tasks. It had been indicated that the volume of transactions was explained by the high volatility in the markets.

This response called for a request from EUREX for additional information by letter of November 26, 2007. This letter specified that it had been noted on October 19, 2007 between 3 p.m. and 5 p.m. (i.e. during European opening hours ) more than 6,000 purchases of Dax contracts and requested explanations on certain terms used such as “£ M77V”, “Decade Down”, “Call down and phew \

It had been answered by letter of December 10 under the signature of Vincent DUCLOS, to which was attached a table containing, according to the author, the details of the positions covered by the Dax contracts negotiated on October 19. This response had been sent in copy to Eric CORDELLE, Jérôme KERVIEL, Jean HEUGA and Xavier de la MAISONNEUVE.

It emerged from the depositions of Xavier de la MAISONNEUVE and Vincent

Page n ° 25


DUCLOS (D84p 13) that the elements of answer had been provided by Jérôme KERVIEL who had been aware of the first letter that Vincent DUCLOS had immediately transferred to him and had provided two successive draft answers on November 16 . In particular, he indicated that he needed to set up large positions in futures to hedge the downside exposure of other positions.

Jérôme KERVIEL appeared to his interlocutors to be particularly concerned not to reveal his strategy based on the fact that after the European markets closed, the evolution of the American market guided the orientation of the European markets the next day as soon as they opened.

This embarrassment was reflected in the instant messaging (chat) exchanges between Jérôme KERVIEL and Moussa BAKIR, as they were identified between November 19 and December 13, 2007.

Michel ZOLLWEG, head of the Trading Surveillance Office (TSO), the market surveillance office of the Frankfurt Stock Exchange and the EUREX Deutschland market, and Laurent ORTIZ, head of the representative office of the Deutsche Bôrse in France.

This indicated that from August 2007, the presence of large buyers had been detected on the market. In October, the market was informed of a strong action on PEurostoxx and Dax. In fact, it was noted that on October 19, out of a total of one million Eurostoxx contracts and 150,000 contracts on the Dax, 10 to 15% of them had gone through FIMAT, whose operator was identified. in the person of Moussa BAKIR, who was the bearer of Société Générale give-up transactions . Only Jérôme KERVIEL had constituted this position for Société Générale, augmented by FIMAT.

It is in view of these elements that contact was made with the compliance department of Société Générale which had provided an initial response which was not satisfactory but the second response was not much clearer than the first. . It had nevertheless been envisaged to extend the analysis to the period dating back to April and, given the importance of the positions taken in January 2008, EUREX was preparing to send a third letter to the bank.

¤ highlighting the privileged relationship between DELTA ONE and FIMAT, notably through the payment of significant commissions :

The company FIMAT, newly named NEWEDGE, a company of the Societe Generale group , ensured the clearing and the keeping of accounts of the major part of the positions of the derivative products listed of the Societe Generale. This is how the transactions handled by Jérôme KERVIEL generated the payment of significant commissions.

The FIMAT invoices apprehended at the NEWEDGE premises for the months of August to December 2007 totaled 1,890,638 euros all taxes included (D133). These commissions corresponded to the processing of 339,354 Dax futures, and 1,911,863 Eurostoxx 50 contracts .

In November 2007, an internal control procedure was launched at FIMAT due to the significant increase in income generated by the FIMAT Paris index options desk . It emerged that over the months of September to November, the average NBI (net banking income) of the “index derivative” desk stood at 2.2 million euros, of which 55% related to derivatives, while the NBI average was 738,000 euros in 2006 and 885,000 euros in the first eight months of 2007.

Significant cash equities orders had appeared with Jérôme KERVIEL as principal. However, the information had not been transmitted to Société Générale.

According to the inspectors of the Banking Commission (D592 / 27), these important positions , attributed to Jérôme KERVIEL, could have been identified by the middle

Page n ° 26


securities treasury office through monitoring of security deposits, as soon as it received a daily statement of “deposit” needs , one line of which precisely reflected Jérôme KERVIEL’s activity, as well as margin calls.

3) The search for complicity:

¤ outside: Moussa BAKIR. financial intermediary (broker) at FIMAT :

On February 7, 2008, Société Générale sent the examining magistrates the messaging elements between Jérôme KERVIEL and Moussa BAKIR, broker of the company FIMAT and interlocutor of Jérôme KERVIEL for the passage of orders. In the eyes of the civil party, certain elements of the messaging showed:

–   Moussa BAKIR’s knowledge of the disputed transactions, in particular their volume and abnormal nature,

–   the help and assistance of Moussa BAKIR to bypass the controls,

–   the payment by Jérôme KERVIEL to Moussa BAKIR of increased brokerage fees in return for his assistance and his silence.

Some of these exchanges were contemporaneous with the EUREX surveys.

The investigators carried out various searches at the home of Moussa BAKIR and the premises of NEWEDGE as well as interviewing the person concerned (D92 to 135).

On this occasion, the copy of the invoices sent by FIMAT to Société Générale and the bonus payments for the benefit of Moussa BAKIR in 2007 (sealed FIMAT / NEWEDGE 2), personal LOTUS NOTES, HOTMAIL messengers were entered on this occasion. , instant messaging archives (FIMAT- NEWEDGE4 seal ) (D99).

At the end, Moussa BAKIR was heard by the investigating judges under the status of assisted witness on February 9, 2008 (D139).

Moussa BAKIR, customer manager at FIMAT since January 2006, confided to having received, for the third quarter of 2007, a bonus of 438,499.39 euros which came mainly from his activity with Jérôme KERVIEL. The latter had indeed become very active from August 2007. They had set up a cash equities activity from September.

Jérôme KERVIEL had claimed to him to act for a big client called “MATT”, recalling on this subject the remarks made by the trader: “/ ‘objective for Matt it is to arrive at the billion and that this would have been the first time that Mat realized a billion with a trader and that at that time, he would be KERVIEL recognized by MAT. “

He recalled that an internal FIMAT investigation had taken place in November 2007 and had concluded that the transactions were regular.

On his knowledge of the size of Jérôme KERVIEL’s positions, he specified that the latter had not dealt with him the long positions taken in January to the tune of 50 billion (short DAX of around 6,000 and long EUROSTOXX of 10,000 and FTSE), while adding: “In January, he told me that he was taking a buffalo pose. As the market was not going in his direction for the pose he had taken for MAT, he told him in a cat that MAT was “ messing around  (D159 p.9).

Moussa BAKIR specified: “At Société Générale there were controls in all directions, we cannot imagine that sizes like that and volumes go by without us seeing them. (…) I could not imagine that ‘he could have acted without respecting the rules of Société Générale. I did not ask myself the question. For me, it was obvious. (…) The policy of SOCIETE GENERALE was that’ they were the best but everything was controlled “ (D159).

Moussa BAKIR was not indicted.

Page n ° 27


within Société Générale :

The rest of the investigations focused on gathering information from the various professional circles of Jérôme KERVIEL.

  • Manuel ZABRANIECKI,sale traderat Société Générale:

Manuel ZABRANIECKI had sold from July 2007 until January 2008 intraday strategies to Jérôme KERVIEL who was acting on behalf of the bank (D210 / 3).

Jérôme KERVIEL placed an order every two days for volumes initially less than 3 million euros per share and then up to 5 million euros, so that in 2007 this represented 20% of his turnover. business (D215 / 2) (D237 / 5).

On five or six occasions, Jérôme KERVIEL had placed him orders of up to 40 or 50 million euros on a value spread over the day, which was not in his eyes abnormal (D215 / 3) and seemed related to an activity of animation on the market of the turbos or sometimes for investments of initiative, but within the framework of the mandate of Jérôme KERVIEL.

On Y intraday, Manuel ZABRANIECKI had processed many stocks every day in the Eurostoxx 600 universe (Deutsche Bank, Crédit Agricole, BNP, Allianz, Conergy and perhaps SOLARWORLD – solar energy); the biggest had been 46 million euros on Deutsche Bank. For Jérôme KERVIEL, it was a question of hedging himself on his own transactions on derivative products (D244 / 2 and 3).

  • Thomas MOUGARD, trader assistant at the service of Jérôme KERVIEL:

Thomas MOUGARD, assistant trader, was heard twice (first on 6 and 15 and 22 February 2008-D173 and 181 and D278-and on 19 and 20 March-DD 308,310,315, 316 and 319). He was then heard twice by the investigating judges as an assisted witness (D329 and 544).

By supplementary indictment of July 2, 2008, the public prosecutor requested the indictment of Thomas MOUGARD on the count of complicity by aid or assistance in the offense of fraudulent entry of data into an automated processing system by entering a part himself. fictitious transactions.

H was actually indicted this head on 1 st August 2008.

He explained the functioning of the computer system B AC ARDI that allowed to produce daily the P & L of the trader on the basis of all data entered in ELIOT (1 èr * function of the wizard). The trader was informed of these states and the existence of a positive or negative balance. All BACARDI applications then flowed into the CRAFT application, the official results reporting tool . The status had to be validated daily by the Delta-One manager.

The middle-office then carried out the risk analysis based on BACARDI data: “it is the risk units which sound the alarm if the limit of 125 million euros is exceeded” (D329 / 4). This was to bring out the balance of the trader’s exposure.

In addition to the output of these two daily reports, the trader assistant had functions of entering transactions at the trader’s request (this only concerned the 10% of transactions that did not go through the machine).

Thomas MOUGARD considered that a result of 55 million euros corresponded to 60% of the result of the eight traders of Delta-One listed products and ” could not result from the traditional activities of market making and arbitrage but from

Page n ° 28


directional positions taken intraday on necessarily large quantities. By that I mean, he specified, positions of hundreds of millions of euros that can reach a billion “(D329).

Thomas MOUGARD, for his part, contested any deliberate involvement in the entry of fictitious operations or the flow of provisions in the interest of Jérôme KERVIEL’s operations.

He was to benefit from a dismissal.

  1. D)The report of the Banking Commission and the decision taken atthe counter of the Company Shareholders

The Commission Bancaire’s inspection carried out its investigations on the basis of the information provided by Société Générale and submitted its report on March 28, 2008.

In its subsequent decision, the Commission imposed on Société Générale, in application of the provisions of Article L613-21 of the Monetary and Financial Code, a reprimand accompanied by a financial penalty of 4 million euros for various breaches of Articles 5a. , 32,7-1,9 paragraph 1,14,32-1 and 34 of regulation 97-2 of February 21, 1997 relating to the internal control of credit institutions and investment firms.

This decision was related to:

– serious failures in the hierarchical controls to which the market operator was subject ;

–   insufficient awareness of the departments responsible for internal control of the issues of fraud and embezzlement despite the discrepancies that appeared on several occasions in 2007;

–   breaches of strict independence between the units responsible for initiating operations and those responsible for validating their payment and monitoring due diligence related to risk monitoring;

–   insufficient resources allocated to permanent control in quantitative and qualitative terms , even though certain flaws had already been identified by periodic control, with regard to the need to prevent operational risk;

–   the delay in the implementation of recommendations.

Significant flaws in the information system had also appeared, in particular as regards the entry of transactions by operators.

III – Present theses

  1. A)On the scope of Jérôme KERVIEL’s mandate

During the information, Jérôme KERVIEL described the components of his mandate by distinguishing the activity of market making, its main activity originally which had become secondary over time, from what he called “directional trading. that led him to take open positions on futures and equities (spiel), and hedged positions on the turbo warrants of competition made directional by the effect of knock (knockout). He challenged the term ‘arbitrage used to define this part of his activity insofar as, according to him, the arbitragist does not took no risk by simultaneously covering himself with the position taken, whereas, in his case, what was systematically sought in fine was a directional position by the play of the deactivating barrier (D352 / 6).

The market-making was to arouse the interest of customers in this type of product. Jérôme KERVIEL considered that this activity had to be lucrative for the bank. In the event of the sale of a Societe Generale turbo-warrant, the hedging takes place automatically through the machine. If the turbo-warrant is deactivated, the

Page n ° 29


trader had to resell (or buy back) the hedging that had become directional (barrier, option exercised, term of the option). It happened to remain in a directional position for several days for amounts less than 30 or 40 million euros (D352 / 7).

In 2007, its proprietary trading activity involved around ten transactions for a nominal value of around one billion. He bought turbo-calls from the competition and hedged them by selling futures or forwards on the same index as that of the warrant, generally on the Dax (90%) or the Eurostoxx (10%) (D352 / 8) .

He described his strategy based on the effect of the deactivating barrier and on the price gap that occurred a / ter market, between the time when the underlying index ceased to quote and the time of the opening the next morning. The warrant was acquired at the end of the day with a discount, the operation being covered by a future in the evening. The next day, if the decline was confirmed, the turbo-warrant would disappear through the effect of the deactivating barrier and the hedge would then switch to a short directional position on the future. If the barrier was not reached until the next day or later during the day, the risk was that the price would rise again, in which case the redemption of the hedge was made at a price above the barrier, resulting in an equivalent loss (D352 / 9).

He argued that his activities had never been documented, even though they were admitted by his superiors and known to him.

There were also the taking of ab initio directional positions (D352 / 6), a practice known to the hierarchy and which everyone had recourse to in the CDU 12 and 3 trading room ).

At the hearing, Jérôme KERVIEL maintained his previous statements, defining himself as a market maker. He emphasized that his superiors had asked him to take more and more positions because it was lucrative (hearing notes page 42).

He also clarified during the debates that it was not his mission to take speculative positions of one to several days “ma / s, he added, ye did so because I was doing business. ‘money, in full view of everyone “ (audience notes page 45). He considered that the mandate was vague, specifying that the turbo-warrants of the competition did not fall within his perimeter. He invoked the absence of a signed commitment, while acknowledging that he had “gone too far in his mandate” (hearing notes, page 51).

He added that he had never been asked to warn the hierarchy beforehand , while admitting to having signed the book of trading procedures (sealed JK3) and that he was unaware of having to seek authorization to take directional positions on an unregulated market (audience notes page 45).

  1. B)On the reality of his directional positions

1) The year 2005:

Jérôme KERVIEL explained that by joining the front office at the beginning of 2005, he had seen his fellow traders “spieler” 50 or 100 futures, which represented a maximum of 2 or 3 million euros. At the end of June, beginning of July 2005, while he was specialized in the German market and more particularly in DAX shares, he decided to take a short position (downward) of 15 million euros on the ALLIANZ share not covered and masked by a fictitious purchase of securities.

A few days later, following the London bombings, this position had proved beneficial. He was thus able to settle a gain of 500,000 euros. D. had informed his senior, Alain DECLERCK, who immediately referred it to Nicolas BONIN, chef

Page n ° 30


from the desk.

At the hearing, he said about this event: ” I am making money on Allianz. I covered my colleague who had lost money. And I had entered fictitious transactions. I wanted to stay in the nails by hiding this spiel (audience notes page 46).

It was one or two months later that Alain DECLERCK and Nicolas BONIN had discovered that Jérôme KERVIEL had worn this position for several days and that it had been masked by fictitious operations, which he confirmed at the helm. (hearing notes page 46). He had then received verbal reprimands without being threatened with disciplinary action. In reality, the result of 500,000 euros had not been included in the calculation of the bonus because it did not result from his normal field of activity (D77p6).

Its limit on the day had however been raised from 1 to 5 million (D197 / 3 and 197/8).

According to Nicolas BONIN, it did not fit into Jérôme KERVIEL’s mission to take direction. He admitted, however, that if Alain ECLERCK had asked him, he would not have refused him an intraday position of around one million euros. He added: “Jérôme KERVIEL had left his mission but we could give him the chance to recover under the control of his tutor” (D 197/9).

According to Alain DECLERCK, Jérôme KERVIEL could deliberately take a directional position during the day within the limit of one million euros. If he took it in the evening, he had to declare it, which never happened.

Martial ROUYERE and Eric CORDELLE affirmed that they had not been informed of the incident which occurred in 2005 on the Allianz title (D189 and 326/2). However, according to Jérôme KERVIEL, there had been question of the exclusion of the Allianz operation in the calculation of the bonus in front of Alain DECLERK and Martial ROUYERE (D326 / 2).

2) The year 2006:

During 2006, Jérôme KERVIEL was once again positioned in the renewable energy sector in Germany to the tune of several tens of millions of euros (15-20 million over several days – D197 / 5), with fictitious positions in the opposite direction . So much so that at the end of 2006, its P&L had reached 12 million euros, 3/4 of which corresponded to hidden directional positions.

During the discussions, he estimated that management’s share constituted half of its operations in 2006 (audience notes page 51). He admitted not having informed his manager that this result was the product of hidden directional positions (D77 / 8).

According to Alain DECLERK, these positions were masked by fictitious deals and drowned in the mass of transactions. The P&L of 12 million was a profit built up over the year on a regular basis and which was in line with the increase in volumes (D 197/6). Jérôme KERVIEL’s increase in P&L seemed to him to be correlated with the increase in volumes and profit for all of Delta One’s activity.

Page n ° 31


Jérôme KERVIEL, for his part, estimated that his P&L, having more than doubled from 5 to 12 million, did not correspond to the increase in the volumes normally handled (D326 / 3).

That year, he was still trading in the equity market. At the end of 2006, it was entrusted with a new scope comprising mainly futures which enabled it to take more important positions (D264 / 2).

3) The year 2007 :

At the beginning of January 2007, Jérôme KERVIEL had started to speculate on the downside, basing himself on the risks of the economy overheating in Asian countries, and took a short position of 1 or 2 billion euros. This position, which closed at the end of February with a gain of 28 million euros, had been masked by fictitious buy / sell transactions generating an equivalent fictitious loss; nevertheless, the result was to appear in cash.

When asked for what reasons he had decided to hide this P&L, he simply replied: “It was a very sudden result which arrived at the end of February. I did not want to bring up the fact that) ‘had taken positions also important “ (D77 P 9).

At the end of February-beginning of March 2007, when the rumor swelled on the subprimes and that the official speeches wanted to be reassuring, he had built a short position on the Dax. However, the market had resisted and continued to rise, causing unrealized losses of around 2.5 billion euros on a nominal value of 30 billion.

He conceded that he was “worried because he was losing money but more and more serene as to the merits of his analysis” (D77p9).

At the end of July, beginning of August, the market having suddenly turned around, he had sold his positions and recorded a net gain of 500 million euros, by buying back the contracts he had sold from March to July at a lower average price.

Thus having a “mattress” of 500 million, he had embarked on an intraday trading activity for large amounts, greater than this sum.

At the end of September-beginning of October, he built a new short position (down) up to 30 billion, closed in November with a gain of one billion euros by the purchase of futures contracts at a lower price.

These two positions of 30 billion euros had been passed through Moussa BAKIR (hearing notes page 47).

Jérôme KERVIEL explained that this total mattress of 1.5 billion euros corresponded to the result achieved, appearing in cash and visible to his managers and Guillaume DEPAUW, mandated to monitor the cash flow of the Delta-One desk at the time of the subprime crisis and bank liquidity crises.

Its normal activity could not generate more than 100 million in cash. This did not prevent Eric CORDELLE from contenting himself with congratulating him: ” It’s good you’re not short” (D77 plO), without questioning him about the origin of such cash.

4) The year 2008:

Jérôme KERVIEL maintained that in January 2008 he had found himself in a spiral of success. He was encouraged by his colleagues who witnessed his success. With a gain of 1.4 billion, nothing could happen to him, he thought.

He saw that the prices were falling sharply. In his eyes, this tendency did not appear

Page n ° 32


not founded. He then took a long position on the European indices (Dax, Eurostoxx and Footsie) but “by successive touches” and that until January 18th. He assured that he had no intention in doing so to lose the result he had hitherto garnered (D77pl3).

However, on January 18 at noon, he had lost his winnings and his result had fallen back to zero in net. It was not until the afternoon that he was “in the rowge” (D77p14).

He had set the “limit” of 50 billion in January 2008 in application of the 10-day Value at Risk which, in January, was 1.2 billion for a position of 50 billion euros in Dax futures. or the Eurostoxx. He had thus taken in several days a position which he estimated covered by the mattress of 1.4 billion (D537 / 4).

He did the math every day by determining the nominal he could engage according to the mattress (D541 / 4). He had anticipated the decline in 2007 (against the market) and that having succeeded him, he anticipated the rise in 2008.

Before the examining magistrates, Jérôme KERVIEL declared “I hoped to unwind the position by a gain as had been the case in 2007 (…) Unfortunately, the conditions of the unwinding were disastrous and this in a historical way. (.. .) We were in the % of VaR at its extreme point “ (D537 / 4).

According to Jean-Pierre MUSTIER, the VaR resulting from the positions taken by Jérôme KERVIEL would have been dozens of times higher than the VaR of Société Générale for all of its positions. This VaR was set by the Board at the end of 1 st quarter 2008 to 30 million euros. That of Jérôme KERVIEL was of the order of a billion (D560 / 2). The stress test was over 7 billion (compared to 700 million euros for Société Générale as a whole). Or 15% of the position (D577 / 10). Therefore, according to the witness, the risks of the positions taken by Jérôme KERVIEL were multiples in tens of admissible risks for Société Générale as a whole.

“I had confidence in my analysis and all the alerts, very explicit to my hierarchy, which remained unanswered did not slow me down” replied Jérôme KERVIEL (D560 / 6).

He had continued to pass his orders after the Cooke Ratio meeting with Richard PAOLONTONACCI around 10 a.m. This discussion only focused on Baader forwards as at December 31, 2007. He therefore continued his trading day .

He concluded in these terms : “On Friday evening when I left, I heard Mr. BABOULIN say to Mr. ROUYERE that there would be no inspection because the problem was resolved, following an email from the hierarchy” (D537 / 4).

At the hearing, to the question of whether the directional positions of 50 billion euros fell within his mandate, Jérôme KERVIEL replied “It is probably not in my mandate (hearing notes page 45).

He also insisted on the fact that his results had not stopped growing by adding: ” At constant scope I am asked to undo the same result. Habit helping, I take more positions. And I do 10. And finally year, I am told to start over. And the following year I am 55 ” (audience notes page 45).

  1. C)On exceeding the limits

1) On the existence of limits

Jérôme KERVIEL acknowledged having kept his directional positions unmasked beyond Yintraday “but within the limit of 125 million”, adding: ” Is it correct that the overall limit of 125 million for the desk should not be exceeded? ‘( P 189

Page n ° 33



According to him, under the direction of Eric CORDELLE, no intraday limit had been set. The limit of 125 million allotted to the desk was “porous, vague, not validated in writing and exceeded very regularly (of 10, 50 or 100 million). This did not move anyone and at no time was there any threat of sanctions by superiors “ (D354 / 2).

According to Eric CORDELLE, who was aware that Jérôme KERVTEL took small directional intraday positions of the order of a few million euros ( which sometimes appeared in the reporting), there was no intraday limit on the desk. He had no more limit on take positions ab initio in intraday (D548 / 2). This had nothing to do with the directional positions resulting from its turbos arbitrage activity (valued at 500 Dax futures or 100 million euros) (D189 / 2).

Martial ROUYERE explained that the establishment of intraday limits implied the ability to measure the total exposure of a trader in real time, which the systems of the time did not allow. Nevertheless, “the fact that there are no limits did not authorize Jérôme KERVIEL to take directional positions ab initio outside his mandate \ He had not given Jérôme KERVIEL the authorization to take regular positions ab initio (D548 / 3). The practice of spiel was limited and tolerated,

It happened to Jérôme KERVIEL to take on the automaton of his colleague, Bouly WU, positions of 600 to 700 futures. It handled certain positions via brokers for sizes of 250 to 750 million euros intraday or overnight via a (micro) box known to everyone (D354 / 2).

Jérôme KERVIEL admitted having taken some twenty directional positions during the second half of 2007 for a maximum of 6 or 7,000 intraday futures He hadn’t told anyone about it. Otherwise, he usually took 500 futures (D548 / 4) and had taken ahead of Eric CORDELLE for 300 to 400 futures each time.

According to Eric CORDELLE this did not exceed a few dozen futures, or a few million euros.

Jean-Pierre MUSTIER reminded that the limits applied equally to positions intraday and extraday. For Delta One, it was 125 million. If there had been tolerance, it was an error (D560 / 4). “Traders don’t play, they work,” he said .

During his testimony, Christophe MIANNE referred to the terms of the procedures book that Jérôme KERVIEL had signed (D577 / 4). He asserted that no exceeding of the limit was tolerated. He confirmed that the RISKne department measured it only in extraday. There were an average of 10 limit violations per day out of the 2,000 limits. The exceedances generally reached 10% of the set limit, whereas in this case it was 500 times the limit.

Jérôme KERVIEL nevertheless indicated that “regularly, we received emails from the risk department mentioning overruns of the limit of 125 million for the intraday”.

He confirmed this point at the bar by indicating: ” We received an email every morning (…) The whole team, the whole hierarchy including me were aware of the

Page n ° 34


mails ” (hearing notes on page 43).

He had had a conversation with Martial ROUYERE about the coverage of the turbos during which the latter seemed informed of the consequences of deactivation and of the fact that one could double the position without cutting it.

Martial ROUYERE denied having been able to make such remarks.

Jérôme KERVIEL maintained that he had never been hampered by the limits inherent in his trading position. The device, which resulted in the appearance of a window on the screen, included limits to which only the risk manager had access (D537 / 2).

However, on occasion he had seen orders rejected due to too large a quantity , but the number of orders was not limited during the day. He admitted the existence of a limit in nominal cumulative over the day but claimed that he had not been rejected for this reason (D537 / 2).

This limit allowed the manager to both limit and control the amounts traded by the different traders (audible alarm on the manager’s post). The only limits which existed for Jérôme KERVIEL were those which were set in the automaton by the Risk manager and of which he did not know the amount (D560 / 5).

There were two other types of limits at the level of order placement servers and via the “RISK CONSOLE” tool.

He maintained, in contradiction with the assertions of Richard PAOLANTONACCI, that there were volume limits on PROXIGEN (D631).

On this subject, he explained: “// there was a whole series of limits including a nominal limit accumulated over the day which allowed the manager to both limit and control the amounts traded by the various traders. When this limit was exceeded, an audible alarm sounded on the manager’s workstation who had access to this tool and a window was also displayed on his screen mentioning the exceeding of a limit “ (D642 / 2).

This point was considered during the discussions. Jérôme KERVIEL maintained, based on Richard PAOLANTONACCI’s assertions, that there were nominal limits and that for his part he had never connected to the “Risk Console” tool ( audience notes page 44).

Finally, he denounced the fact that the nominal limits had been deactivated on his PLC.

2) Information of the hierarchy on the exceeding of the limits:

He recognized that “in a certain way” Martial ROUYERE had not been informed of the overruns concerning his directional operations. “I hid from CORDELLE the overruns that I made in my positions” he admitted (D77 p 3). He admitted that the limit was set at 125 million for all eight traders on the desk and that he had not spoken to his superiors about his open positions (seller of 30 billion in July 2007, seller of 30 billion at the end of October 2007 and buyer of 50 billion in January 2008) and never having informed Société Générale of these amounts.

He added: “Often, in the morning I received as well as my bosses, the notification of large exposures on some of my portfolios. I then entered fictitious operation without informing my bosses to hide these open positions” (D77p 3).

However, there were no limits for the hedged transactions. However, there were indicators that enabled the risk department to control the structure.

Page n ° 35


of books, ie the composition of traders’ positions in their books.

He maintained that Eric CORDELLE had seen him take, from his automaton, positions of the order of 500-600 futures (= 500/600 million euros) which allowed Eric CORDELLE to recover the result as well. generated. These positions were normally cleared during the day, otherwise Jérôme KERVIEL transferred them to his own machine .

Eric CORDELLE had to confirm it, specifying that it was about the automaton of Bouly WU, a junior of the team. He had seen Jérôme KERVIEL take intraday positions on this machine as part of the WU training. The P & L resulting had to be several hundred thousand euros (D189 plO).

Jérôme KERVIEL claimed to have never masked his intraday positions He noted, however, that Eric CORDELLE had an exposure risk analysis tool (STORM) that can be used intraday allowing to see the exposure of a trader or a group of traders at any time of the day ( D537 / 3). H admitted on the other hand that he had concealed overnight positions in order to reduce the residual risk at the end of the day.

At the helm, he said that all his operations were visible on the Eliot base, including the history. He added: “You can see all the transactions in 3 clicks, in 30 seconds” (audience notes page 52). He also recalled that the limit of 125 million was exceeded 70% of the time (hearing notes page 51).

  1. D)On the alerts that the hierarchy would have ignored

1) The incompatibility of the declared result with the entrusted mandate :

Jérôme KERVIEL did not hesitate to question Martial ROUYERE for having transferred the result from one year to another by distorting the modeling of certain products, by creating fictitious transactions generating risk provisions at the end of the year or by modifying the price determination parameters (D77pl4).

Martial ROUYERE, however, denied having asked the assistant traders or traders to conceal the result (D548).

Christophe MIANNE confirmed that he had given no such instruction (D577 / 8).

Jérôme KERVIEL declared: “when I entered these operations, I only thought of the fact that it was too big. I said to myself, it is too huge, I cannot declare that” (D77pl4). He estimated to have generated, on his own, 70% of the P&L of the entire desk and considered that the result of 55 million euros and the cash of 1.4 billion euros that he had posted as of December 31 2007 could not be the result of normal activity. He had declared only 55 million euros of P&L for a target initially set at 10 million.

By way of comparison, he argued that the P&L of Ouachelfalah MESKINE, which had an identical activity, had to be of the order of 6.7 million euros.

He argued that his superiors could not ignore that 80% of this result corresponded to directional, this emerged from the daily reporting (CRAFT) which revealed the structure of the result of each trader.

He was perfectly aware that the controls did not relate to volumes but to the net balance (net position at the end of the day) which should not exceed 125 million euros. So he knew that his risk for 50 billion euros in positions

Page n ° 36


covered had to emerge zero.

As of December 31, 2007, he had canceled the P&L of 1.4 billion, but not the cash, by entering purchases and sales of fictitious forwards generating a loss of 1.4 billion.

During the end-of-year evaluation interview (review), Martial ROUYERE suggested that he dedicate it exclusively to trading for the bank’s own account, while asking him to intensify arbitrage strategies. competition and positions. This strategy made an arbitrage transaction a speculative transaction .

Regarding the accounting elements, he explained that in March and April 2007, he had linked his positions to his market making activity (D161 / 2).

Confronted with Eric CORDELLE, he maintained that he had told him that 80% of his result corresponded to directional and included the arbitrage activity of the turbos of the competition and the intraday directional (D189 p6), which his opponent confirmed.

Jérôme KERVIEL considered that it was not likely that he was able to generate 80% of his result on proprietary trading on competing products when he was only supposed to have taken 5 or 6 positions on the Dax, or 3,000 futures at most, which could only generate 3 million euros in total. He considered that, in order to generate 35 million euros in profit, it was necessary to have taken cumulative intraday positions of 3 and a half billion (D189p8).

Eric CORDELLE estimated that Jérôme KERVIEL’s result was consistent with his activity and should represent 10 million for the client trading activity and 45 million euros for the proprietary trading activity.

According to Eric CORDELLE, it was necessary to add to the proprietary trading on the competition’s turbos, intraday trading and positions linked to the knockout. For him, the directional positions taken by KERVIEL were only intraday, within the limit of the desk’s 125 million euros (D189 p 7).

It did not seem absurd to him that Jérôme KERVIEL could earn 40 million in proprietary trading. “I asked Jérôme and the others 50 times about their results, the risks they took and the major transactions. Each time, Jérôme KERVIEL’s answers convinced me” Çp \ 89p%) . “At the beginning of January, I had to send an email to all the traders on the team drawing attention to the fact that they too often exceeded the threshold of 125 million and asking everyone to specify their needs for 2008. Jérôme replied that there was no need to ask for an increase in the limit of 125 million euros ” (D189 page 7). “ a discussion with Jérôme on the setting up of the new arbitrage business in 2008 and on the risk limits necessary for this activity. He replied that 125 million euros for normal activity was sufficient. For the new activity, he told me that we could not go beyond 500 directional intraday futures. It has always been a question of amounts in the order of 100 million euros but never billions or tens of billions of euros “ (D189 p8).

Jérôme KERVIEL admitted having been “evasive in his answers to Eric CORDELLE, simply telling him that it was about directional trading and the knock-out effect .

Martial ROUYERE considered that it was necessary to deduct from the 55 million the 12 million that Jérôme KERVIEL unduly attributed to himself when it was about the commercial margin on the market-making.

According to the manager, the 17 million profit on market-making could be explained by a very strong growth in volumes, outstandings placed and position

Page n ° 37


dominant position of Société Générale on the markets for which Jérôme KERVIEL was responsible. Regarding the 25 million result on the arbitration of competition turbos, this amount seemed important to him. Jérôme KERVIEL played on barrier products which were particularly profitable in the event of a market opening in “gap” and high volatility. Jérôme KERVIEL’s result represented a quarter of that of the twenty-three traders working under the responsibility of Martial ROUYERE (216 million) (D326 / 5).

At the end of 2007, Jérôme KERVIEL asked him to be relieved of market making in order to devote himself to a proprietary activity. His request was granted to devote himself exclusively to the arbitration of competition turbos (D326 / 6).

Jérôme KERVIEL recalled that the June P&L was a loss of 2.5 billion while the losses were on average 3 million per GEDS agent for a total of 3 billion (D577 / 8). But this position was closed with a gain of 500 million.

It evaluated its overall intraday income at 100 million euros (adding to the 1.3 billion resulting from the unwinding of the two positions of 30 billion euros). He had developed it in September 2007. He had put part of it aside.

fi declared at the end of 2007 a positive proprietary trading result of 25 million euros, including:

–    3 million “valos” {P&L) resulting from the deactivation of the turbos of the competition by deactivating barrier,

–    22 million resulting from directional intraday or extraday positions.

2) Cash balances:

Jérôme KERVIEL considered that the statement of his treasury was sufficiently eloquent to deduce from it that he was engaged in a large-scale management activity beyond the limits of his mandate (D252 / 2).

He compared the cash flow of his post, the “2A”, with that of the “WU” operating center attributed to Ouachelfalah MESKINE who, like him, dealt with Société Générale turbo-warrants in market making. The graph produced (D187 / 15) made it possible to see very important differences on the 2A while the curve relating to the center WU was over the same perfectly linear period.

He also underlined that the daily reporting was in the possession of Eric CORDELLE and Guillaume DEPAUW, the treasury manager dedicated to the Delta- One desk , and that in any case, his fictitious transactions could not have any impact on the balances of Treasury.

He estimated that his activity could not generate a balance greater than 100 million euros (D77pl0).

As its cash balances usually show consumption of around 20 million euros for its market making activity , the balance of 1.4 billion euros posted at December 31, 2007 necessarily corresponded to profit (D252).

With regard to real operations on futures, the cash flow was affected by the cash payment of a remainder of the deposit and daily margin calls according to the evolution of the price of the future. In the event of unwinding, it took a reverse position which had the effect of resetting the position to zero, following a final cash flow (D252 / 2).

He remembered an interview with Eric CORDELLE about his cash balance during which the latter had told him: “It’s good, you’re not short” (D77pl0) without asking him any questions about the origin of this cash. D had deduced that his superior knew “that it was P&L carried out and that it [was going] to be useful to the bank given the deteriorating credit conditions (D77pl 1).

Page n ° 38


Eric CORDELLE maintained on the contrary that reading the cash flow had never been an indicator of results. * 7 / was enough to undo a cash loan to increase the cash flow without affecting the result “ he added (D696 / 3), specifying that it had already happened on several occasions that traders had cash positions in the billion order .

Jérôme KERVIEL retorted that he had no interest in borrowing 1.4 billion and keeping it in his book for the sole purpose of being a cash creditor, especially since his financing needs did not exceed 20 million. euros (D696 / 4).

Jérôme KERVIEL came to affirm, during his final confrontation with Eric CORDELLE, that he had had discussions with the latter on the existence and importance of his positions and his hidden results throughout the year, which was contested by Eric CORDELLE (D696 / 3 and 5).

On this occasion, Eric CORDELLE recalled a conversation dated January 17, 2008 with Jérôme KERVIEL during which the latter had mentioned the fact that he had a problem with ACFI in relation to the application of the Cooke ratio (D696 / 5).

Jérôme KERVIEL reported on a request for an adjustment of 5.2 million euros relating to the modification of the strikes of the turboswarrants, sent by Eric CORDELLE in July 2007, whereas the amount of such an adjustment was incompatible with the activity in which he was engaged limited to “closed-end” turbo-warrants whose exercise price was immutable (D696 / 5).

Eric CORDELLE qualified these adjustments as minor with regard to the team’s result (D696 / 5). It was a question of carrying out a “restriking” in the middle of the month in order not to disturb the accounting closing . He admitted to having sent a request for authorization by email to Luc FRANÇOIS at the request of Jérôme KERVIEL who said he had agreed with Céline SERRE on such a procedure (D696 / 6).

3) On the obviousness of EUREX alerts:

On the EUREX alert, Jérôme KERVIEL pointed out that the content of the first letter received on November 7, 2007 contained something abnormal given the enormity of the number of contracts mentioned (1,700 Dax futures and 2,300 Eurostoxx contracts ), while the standard revolved between 500 and 600 contracts on the Dax and a tiny amount on Eurostoxx. Eric CORDELLE was not unaware of it whereas his only concern had been, taken knowledge of this request, that the answer was published (D140 / 3).

According to Jérôme KERVIEL, EUREX could not know whether the positions mentioned were hedged or not, hedging being able to be taken outside this market on shares, forwards or even options.

The writing was even more striking in the second letter which mentioned 6,000 Dax futures bought in two hours (which represented a value of 6,000 x 25 (value of the index point) x 7,940 = 1.191 billion euros).

Jérôme KERVIEL had interpreted this lack of reaction from Eric CORDELLE as an agreement on his part, especially as he was interested in his result.

His only concern was that we discover his positions, that he be laid off, “aupire, he declared, in view of such a result [+1.4 billion], I would have been hired elsewhere” (pi40 / 4).

He admitted to having attached to the second answer a false table mentioning inaccurate quantities which he himself had invented (D 140/4 and 74/39).

Page n ° 39


He considered that the EUREX survey was all the more atypical as it focused on the strategy applied by the trader. Vincent DUCLOS had made a first draft response in view of his technical insights and technical comments as during the response to the second request (D348). It was obvious to everyone that the debate was about the importance of volumes. In reality, the main concern on the side of Delta-One was not to disclose the strategy.

It was inconceivable in his eyes that he could process 12,000 Dax futures on the day of October 19 (the Dax processing a maximum of 60 to 70,000 futures in volume per day), without leaving Vintraday, which Eric CORDELLE “could only ‘have understood “ (D348 p 3).

Eric CORDELLE was not formal about the information he would have passed on to Martial ROUYERE on this subject (D548 / 5). He maintained that he had not read EUREX’s letter before the police presented it to him. He had simply asked for a copy of the response. This procedure had been presented to him by compliance as something trivial (D548 / 6). If Jérôme KERVIEL had spoken to him about the second letter, it was only in front of the investigators that he had heard about the 6,000 future ones.

At the hearing, Jérôme KERVIEL explained that if he had expressed concern in his “chat” with Moussa BAKIR during this period, it was because he feared that he would be accused of price manipulation. , even though he felt that he had remained within his limits (hearing notes, page 48).

4) On the importance of the volumes processed via FIMAT

With regard to relations with FIMAT and more particularly Moussa BAKIR to whom he had recourse when he had decided to unwind his first position in July 2007, he saw the advantage of being relieved in his work.

He explained that he had managed to take advantage of the broker’s ability to process larger orders all at once than he could do from his position. He specified in this regard: “Indeed, the nominal, for a single order, was limited on my post”. In addition, with FIMAT, the result remained in the bank (D140 / 5).

He had claimed to the broker that these were transactions carried out on behalf of an imaginary client called “MATT”. “I did not want, he explained, that he could communicate to the competition the fact that Société Générale was dealing in large volumes on Dax and Eurostoxx futures” (D 140/7).

During the second half of the year, he had taken many intraday and multi-day positions, increasingly calling on FIMAT to take and cut them.

In September-October, he had taken new positions of up to 30 billion euros for part of his position and part of that of FIMAT. Moussa BAKIR had informed him of the validation of these operations by his own hierarchy.

Eric CORDELLE reported on the questions he had formulated with Jérôme KERVIEL on the fact that the commissions allocated to him were high compared to those allocated to the other traders of the team, without this particularly targeting FIMAT. The response provided was that center 2A was historically used by all traders for all of the desk’s products and that as a result it received arrears from all traders (D695 / 5).

Page n ° 40


  1. E)On fictitious transactions

1) On the techniques used

Jérôme KERVIEL made the distinction between:

–    transactions intended to hide frozen results: these were combined purchase and sale transactions of underlying assets at different prices ( Porsche, DBK, Allianz, Solarworld shares in 2007);

–    transactions intended to conceal unrealized income and market risk faced either with Click-Options or with technical counterparties (in particular “èchupo”, “pending ‘”):

=> for forwards on the Dax: it used the counterparties Click-Options, Click CLT, and “broker pending”, as well as in isolation JP MORGAN and / or Deutsche Bank;

=> for OTC options : Click-Options and JP MORGAN and / or Deutsche Bank;

=> equities traded in OTC : Click-Options, Click CLT, “echupo” and “pending” = 0 for index futures: “pending”.

He contested the fictitious transactions that Société Générale had retained with the “NULL” counterparty .

Jérôme KERVIEL declared that he had asked his assistant trader, Thomas MOUGARD, to enter fictitious transactions in return / 7th “rf /” get transactions against Click-Options (forwards or purchase-sale of shares) clearly intended to hide open positions and valuations (“valo”), ie P&L.

He explained: “At the end, by dint of doing it every day, Thomas MOUGARD entered the morning pending or adjusted the transactions of the day before, to cancel the risk and the result ‘ (D348p5).

If Thomas MOUGARD was not aware of the nominal amount committed in these positions, he could not ignore the amount of P&L generated and masked, since he had made the remark to him: “You have a large position” (D 140 / 2).

Transactions entered as pending never went back down to the back office (they were collected in a buffer), unlike the purchase and sale of Click-Options shares, OTC and Click-Options forwards and options which automatically went back down to the back office.

The forwards and options OTC deal with external counterparties should be integrated into the back office by a specific team.

Alain DECLERCK explained that the use of the “pending” counterparty only intervened for real deals , pending the identification of the counterparty in the IT systems, for example a hedge fund not yet referenced (D 197/4).

Jérôme KERVIEL recalled that in May-June 2007, Bruno DEJOUX had contacted him, asking him to justify the importance of method deviations in his operating center. These were differences between two valuation methods for the same financial instrument :

–   market value: “marked to markef (retained by the accounts);

–   value known as “theoretical pricing” (retained by traders).

The differences concerned amounts in the order of 10 to 15 million euros, positive or negative.

As a result of these differences in method, the accounting department had obtained from the statutory auditors the authorization to change everything to “theoretical pricing” (D 186/3).

According to the auditor, between October and November 2007, there had been no “cash suspense” linked to the fictitious transactions of Jérôme KERVIEL because he canceled them before their outcome. There was a quarterly follow-up of the situation of “suspense cash” and “material” for which more in-depth work had taken place with a view to the annual decree.

Page n ° 41


Jérôme KERVTEL maintained that, on the contrary, some remained in the front office and back office system after the value date, for example on purchases- sales of shares or futures (D613 / 3).

At the end of June 2007, he had entered forwards and options against Click-Options. He had deleted them and replaced them with futures or forwards.

He had canceled the sham operations most often himself within two or three weeks, or even one or two months later (D348).

If he had also entered fictitious loans (rate forwards) against “prehedge”, it had not followed cash movements These loans were not intended to hide the cash flow hole resulting from the loss of 2 billion in July 2007.

He admitted having entered at the end of June July 2007 two fictitious transactions against external counterparties, in particular an American bank or Deutsche Bank, but having come up against the problem of collateral, having had to cancel them.

2) The monthly decrees of March and April 2007

He explained that he had hedged his directional position at the end of March 2007, taken on futures, by entering fictitious transactions, namely:

–   futures as a pending counterparty ;

–   forwards with Click-Options as a counterpart.

He had tried to justify them by linking them to his market making activity and claimed that the deactivation of warrants was only recorded with a certain delay which he had covered by temporarily entering fictitious repurchase transactions. He then invented a list of 7 deactivated warrants.

The accounting department had decided to cancel the result of these fictitious operations and to credit the PnL on the result of the warrants. However, he had to buy back the warrants, which he did not do (D161 / 3).

At the end of April 2007, he had lost 142 million euros in hidden positions. He had to seize fictitious covers (ftâmespending generating a gain of 142 millons). He had used the pretext with the accounts department that it was a question of balancing his result distorted by booking errors and the deactivation of two Call down and out (D161 / 3).

The emails sent by the accounting services had been sent to its N + 1 and N + 2 who could not ignore the improbability of the information provided relating to:

–   the size of 15,000 futures,

–   the importance of the “valo” corrections (142 million over one month),

–   the aberrant sizes of the products to be bought back (3×20 million warrants in the 1 st table D4 / 16),

–   the existence of two warrants of 35 and 30 million (50% greater than the entire issue).

This subject had never been discussed with them.

However, at the beginning of April 2007, François BABOULIN (his N + 3) had asked him to solve the valuation problem (D161 / 4) following the intervention of Cécile BARTENIEFF from the mid-office.

Eric CORDELLE remembered that once, in 2007, there had been an accounting problem concerning Jérôme KERVTEL. Jérôme KERVTEL’s answers were not insane. “In this profession, we work on trust” he added (D 189/10).

Martial ROUYERE remembered having been informed on April 16, 2007 while he was traveling in the United States, having been made addressee, like François BABOULIN, of the message from Cécile BARTENIEFF (middle office) and from Marine AUCLAIR (PnL / REC) who went to see Jérôme KERVIEL for explanations about the seizure of

Page n ° 42

fictitious future pending to offset the nsque exposure and the result linked to the deactivation of turbos straddling the end of the month (D326 / 3).

The problem had arisen again in May and had been treated in the same way. He had approached him from afar in April. He admitted that the information contained in the emails (D4 / 16) was aberrant (D326 / 4). In May, he did not dwell on the details of the calculations (D4 / 15page 2).

He confirmed his participation with François BABOULIN, but irregularly in “bridging” meetings.

3) The end of 2007 and the first days of 2008

It was not until the end of 2007 that Jérôme KERVIEL had once again had recourse, to hedge his results, to purchases and sales of Porsche securities against Click-Options and to purchases and sales of forwards against the broker BAADER in the goal of generating a fictitious loss of 1.4 billion euros.

In January 2008, he entered futures pending for fictitious hedges against his new positions. The cash flows thus generated were subsequently canceled retroactively (D186).

He had to rectify (D252 / 2) by indicating that the fictitious hedging transactions had no impact on the cash balances which corresponded to real activity. As for the fictitious operations hiding the result, they could not have the effect of hiding the cash flow, which was clearly visible.

Eric CORDELLE claimed to have never been informed of the concealed positions (D696 / 2).

The positions of 30 billion at the end of June 2007 were concealed. Jérôme KERVIEL had not spoken about it with Eric CORDELLE and Martial ROUYERE (D577 / 7).

If Jérôme KERVIEL affirmed that in March and until June 2007, the bank knew the amount of its positions and its results through its accounting statements, the fictitious transactions being identified both in nominal and in income, he tried to justify his desire to hide the losses of 2 billion at the end of June, by his concern to avoid that “everyone jumps”, and “to keep his position as long as possible while respecting the pseudo-limit of 125 million”. He admitted that if he had not masked, he would probably have been made to cut his position (D613 / 7).

He specified that the back office, the middle office as well as Martial ROUYERE, Eric CORDELLE and François BABOULIN had been aware of these practices since March 2007 (D 613/9). In January 2008, the information had gone higher, which had determined the reaction of the senior hierarchy of the bank.

He also acknowledged having offered his colleagues transfer of results at the end of 2007.

He admitted that, in order to hide his result of 1.4 billion euros, he had retroactively entered , on January 10, 2008, forwards with the BAADER counterparty showing an equivalent loss.

  1. F)On fake emails

According to Jérôme KERVIEL, the first emails of April 11 and 12, 2007 (D562 / 3 and 4), had been sent to the P&L service on the following May 11 in order to allow it to justify the price of certain warrants (D597 / 2). He admitted never having sold for 30 million

Page n ° 43


of warrants and having had to produce these two messages to accredit the alleged transaction.

The email of April 30, 2007, under the heading of Lorenzo BOTTI of BNP PARIBAS in Milan (D562 / 5 and 6) had been sent on May 16, 2007 to Sébastien CONQUET by Jérôme KERVIEL to justify the value date of certain other transactions .

The emails under the header of Christophe de la CELLE of Deutsche Bank in London, dated June 15, 2007 (D562 / 7 to 10), in reality, still according to Jérôme KERVIEL, constituted a single document relating to a fictitious transaction with Deutsche Bank on a position of more than 2 billion euros which 13 days later had not given rise to any confirmation. He had sent these messages successively to Sébastien CONQUET on July 6, 2007 (D562 / 7) and to Christophe FROSSASCO on July 19, 2007 (D562 / 9).

The e-mail of June 28, 2007 under the letterhead of Amanda HALLAM from the bank JP MORGAN (D562 / 11) had been sent to the same Sébastien CONQUET on July 12, 2007. According to the accused, this message was intended to hide a position (D597 / 3).

Other emails had been intended, according to Jérôme KERVIEL, to serve as pre-confirmation of fictitious transactions with external counterparties that he himself had entered in ELIOT (D597 / 3). These are emails from BAADER dated January 17, 2008 and Deutsche Bank dated January 18, sent to Richard PAOLANTONACCI as part of the solvency ratio check. They referred to alleged forwards transactions which were in reality intended to mask the $ 1.4 billion profit .

  1. G)On unwinding

Jérôme KERVIEL found it surprising that the unwinding began on Monday, January 21, 2008, when the American market was closed due to Martin Luther King’s day, which, according to him, meant that American investors did not intervene in the markets. He estimated that it would have been better to shift 24 hours, the US market having opened to equilibrium on Tuesday while the European market had unscrewed by 7% on Monday (D615 / 4).

This would have had an impact in terms of volumes and price level since the market rose sharply on Tuesday, knowing that, according to him, American investors in the Dax and the Eurostoxx represented 30 to 40% of the total transactions.

The volume of positions taken by Jérôme KERVIEL was around 1 million Eurostoxx contracts and 100,000 Dax, which corresponded to a normal daily volume in 2007.

According to Maxime KAHN, in charge of unwinding operations, on January 21, the volume traded on the Eurostoxx maturing in March 2008 was 3.5 million and rose on January 23 to 3.6 million so that it is not demonstrated that the absence of the Americans had any influence on the volumes. He insisted that he had been instructed to sell Dax, Eurostoxx and Footsie futures for less than 10% of the volume of the market as a whole (D615 / 5). More than 99% of the risk was unwound in 3 days, i.e. from Monday to Wednesday (D615 / 7).

Jérôme KERVIEL estimated that the crossing of the book limits (2 to 3 at most on the EUROSTOXX and 4 or 5 on the Dax) led strongly to the decline by giving an indication to the market that an operator in the market closed a large position (D615 / 8).

Page n ° 44


IV- The submissions filed at the hearing by the defense

By submissions filed and referred to at the hearing of June 23, 2010, the defense requests the release of the accused, stressing that Jérôme KERVIEL has always, under the watchful eye of his superiors, wished to act in the interest of the bank that employed him. .

At the very least, the tacit assent of Société Générale is invoked, which, for more than three years, has never attempted anything to prevent Jérôme KERVIEL from engaging in an alleged misuse of his mandate, even though , from April 2005, his hierarchy had been informed of anomalies in the course of his trader’s activity.

On the crime of breach of trust, it is alleged in particular:

–    that Jérôme KERVIEL’s employer could not ignore the reality of Jérôme KERVIEL’s activity (cf. Crim. 24 February 1999);

–    that the hierarchy received daily for validation the trading results of Jérôme KERVIEL, the risk exposures of each portfolio, a file listing the cash flow of each of the traders and the effects resulting from the directional positions taken by each of them in terms of costs commissions on market fees, financing costs and margin calls which intervened daily through “monthly pilot accounts” (CPM);

–    that if Jérôme KERVIEL’s hierarchy had been normally attentive and had checked all the reporting and databases for which it was responsible, it would have immediately noted the directional positions taken by Jérôme KERVIEL.

It is also supported:

–   that “the mandate entrusted to Jérôme KERVIEL was progressive and without fixed limit  (opinion Commission Bancaire D592 / 5,38,170);

– that   no sanction was imposed on Jérôme KERVIEL following the taking of a short position downward by 15 million euros on the Allianz share in April 2005 when the intraday limit was set at 1 million euros; that, on the contrary, his limit had increased to 5 million euros and his objective from 3 to 5 million euros in 2006, which should be interpreted as an encouragement from his superiors to repeat the same performance and which could not be achieved that by adopting the same practices apart from the initial mandate of market-maker , the limit of which was “porous”;

– that   no limit (nominal, cumulative nominal, at risk) has ever been expressly assigned to Jérôme KERVIEL in his employment contract or in any other document;

–   that its hierarchy had all the IT tools possible if it wished to set limits for it, but they had all been deactivated: Risk Console controlling Proxygen and the application ;

–   that, contrary to what Richard PAOLANTONACCI could affirm, Jérôme KERVIEL did not have any right to configure the “RISK CONSOLE” application which made it possible to define such limits in “PROXYGENE”; that only his direct hierarchy (Eric CORDELLE, Martial ROUYERE and Alain DECLERCK) could set limits for him, which she did not do (see document in part 21);

–   that his hierarchy saw fit to deactivate the many functionalities offered by this risk control tool (see also sealed hard drives Jérôme KERVIEL – part n ° 4 – examination of the column “Max.cum.Hedge nominaF specifying the limit in nominal cumulative column deactivated) while the desk managers used this tool to set limits on the cumulative nominal value of orders placed in a day to the traders they had under their responsibility when they wished (see also the hearing of Benoît TATLLEU by the court, which used this nominal accumulation feature for its traders);

– that the hierarchy was informed every morning, on a recurring basis, of the exceeding of the limit allocated to Eric CORDELLE of 125 million euros due to

Page n ° 45


Judgment n ° 1

directional positions taken the night before by Jérôme KERVIEL; this one however let it work (cf hearing of Eric CORDELLE D172 / 5, 6 and 8 – banking commission report D592 / 22 and hearing Jean-Laurent MOISSON at the hearing of the 16th jum);

– that the positions taken by Jérôme KERVIEL were visible to his hierarchy who could only note that his results had changed;

–    that everyone on the desk, including Jérôme KERVIEL’s hierarchy , knew that he was operating outside the initial mandate that had been entrusted to him and that, his hierarchy having accepted it, his mandate had changed (see statements by Antoine DELORME at the hearing on June 9 and Taoukik ZIZI on June 15);

–    that a large number of departments have seen the importance of the directional positions taken by Jérôme KERVIEL through the ELIOT database accessible to all departments;

–    that the treasury and accounting departments had sophisticated tools enabling them to immediately detect discrepancies;

–    that the visibility of fictitious operations resulted from “bridge” mergers (see hearing of Marine AUCLAIR at the hearing of June 17, 2010), recurring problems were raised at meetings organized with the front office;

– that the directional positions taken by Jérôme KERVIEL generated significant “bridging” discrepancies at the end of the month, of which his hierarchy was informed (discrepancy at the end of March 2007 – email from Marine AUCLAIR to Philippe BABOULIN and Martial ROUYERE and email from Sébastien CONQUET on May 16 2007 to the same people);

– that the importance of the differences in method underlined (from 5 to 15 million euros) meant the existence of positions largely exceeding one billion (see report of the Banking Commission D592 / 17 and 79 and hearing of Bruno DEJOUX (D343 p 10 and he);

– that Jérôme KERVIEL’s answers could not deceive anyone and especially not the hierarchy which was systematically in copy or informed of the problems posed by the very important uncovered positions which it took on the market
(D592 / 74).

Jérôme KERVIEL’s defense also argues:

–     that Jérôme KERVIEL’s hierarchy was fully informed of the disparate evolution of his cash flow which also reflected that he no longer operated as a market-maker or trader on the turbos-warrants of the competition, cash by no means impacted by so-called “fictitious” transactions (see statements by O. MESKTNE D 514/4 and C MIANNE D637 / 4) and that Eric CORDELLE validated the CPMs mentioning significant losses or gains in terms of cash flow, while other traders came to finance themselves with this cash from GOP 2A;

–     that as of July 2007, Jérôme KERVIEL’s daily telephone contacts with the broker of the company FIMAT confirmed, if necessary, that he was no longer acting within the framework of his initial mandate as market-maker, especially since on the one hand the extremely high commission costs for the benefit of FIMAT (6 million euros) had provoked the concern of the London management and the launch of an audit, and on the other hand, despite due to the high amount of FIMAT invoices mentioning the volumes processed, Eric CORDELLE had validated the monthly piloting accounts (CPM) (documents n c l 1 and 12);


–   that the margin calls which, in absolute value, reached the sum of 28 billion euros over the entire year 2007 had continued to impact downward (July 2007) or upward (2nd quarter 2007) ) Jérôme KERVIEL’s cash position and his 2A portfolio which housed the directional positions thus taken on futures (debit cash of more than 2 billion euros in July 2007);

–   that Jérôme KERVIEL declared an exceptional result of 55 million euros in December 2007, representing half of the desk’s result, while the

Page n ° 46


scope of products has continued to decrease and the objectives to grow; that nevertheless the hierarchy of Jérôme KERVIEL validated daily a PnL of which it transpired that it took positions in risk without any relation with its initial mandate and with regard to the imposed limits of 125 million euros; that this P&L, brought to the attention of the whole of the hierarchy (cf declarations of C MIANNE, THAILLEU and LUBOCHINSKY), should have caused a series of controls;

–   that the positions were visible outside Société Générale (see EUREX letters), that the bank’s ethics department and the hierarchy (Eric CORDELLE) were informed in November 2007 of the development by Jérôme KERVTEL of an activity in margin of its mandate relating to colossal amounts of several billion euros;

–   that, moreover, it appeared that he had been identified as the author of the scandal on January 24 by people outside Société Générale (see hearing of Mr. DOLISI).

The defense of Jérôme KERVIEL puts forward the idea that the so-called fictitious operations could not deceive anyone insofar as:

–   the hierarchy of Jérôme KERVIEL and many other services of Société Générale had a complete view of the transactions introduced into the ELIOT system (see depositions Benoît THAILLEU and Alain DECLERCK) as well as their possible modifications or deletions (exhibit 13) (hearings by Valérie ROLLAND and GONCALVEZ);

–   Jérôme KERVTEL never tried to hide the operations that he inserted in the Eliot base (left on leave in August 2007, beginning of September 2007), moreover the control services were fully informed of the fictitious nature of some of the operations entered by Jérôme KERVIEL in the Eliot base (ex Sébastien CONQUET and Marine AUCLAIR);

–    the operations were perfectly detectable as the techniques used by Jérôme KERVIEL were simple and known within Société Générale and raised many questions from the control services (see the hearings of François BABOULIN and Benoît THAILLEU and the practices alleged against Thierry RAKOTOMALALA and Ouachelfalah MESKINE having justified their dismissals);

– Societe Generale often recorded transactions that had no economic reality, qualified as “fictitious” then “technical”;

–   the fictitious transactions were not very credible (aberrant) with regard to forwards against Click Options, OTC / Porsche shares against Click Options, futures as “pending” counterparties , a large number of which remained in buffer for more than 20 days – instead of 3 days – and this for several billion euros, the absence of deposits and calls for execution of fictitious futures, in particular on EUREX when they related to 600 billion euros;

–   transactions inserted in Eliot’s buffer base were subject to daily individual control, contrary to Société Générale’s thesis (Exhibit 15) ( daily report );

–  fictitious operations caused inexplicable intra-group and gateway discrepancies .

On the offenses of forgery and use of forgery, it is argued:

–   that the emails sent by Jérôme KERVIEL cannot engage his penal responsibility since these writings do not constitute “a support having for object or for effect to establish the proof of an act or a fact likely to have a legal consequence “ (crim December 12, 1977 and March 7, 1972);

–   that given the context in which the documents were produced, the issuer did not have the objective of “fraudulently altering the truth” (crim 23 January 1997), Jérôme KERVIEL responding to the requirements of the control bodies which, although having full knowledge of the real operations carried out on the market, asked Jérôme KERVIEL to give them an appearance in line with accounting expectations .

Page n ° 47


Part two: court reasons

– On criminal proceedings

  1. A)On the crime of breach of trust

Whereas Jérôme KERVIEL is being prosecuted for “having in Paris and at La Défense, during the years 2005, 2006, 2007 and until January 19, 2008, in any case on the national territory and since time not prescribed: (…) embezzled funds of securities or any good that had been given to him and that he had accepted on condition of making a specific use of it , in defiance of the prerogatives entrusted to him and beyond the authorized limit , set at 125 million euros for the Delta-One “desk”, using resources provided by the bank for the purposes of high-risk operations without any cover, whereas they were to be used exclusively in the context of operations ofanimation (market making) and risk hedging of derivative products, own account arbitrage on turbos warrants issued by competing institutions and taking ab initio directional positions supervised in intraday “;

Whereas, to be constituted, the offense of breach of trust supposes, at the material level, that the delivery of a thing to the perpetrator of the offense as precarious and the misappropriation of this thing are noted ;

Whereas the information and discussions established that Jerome KERVIEL was assigned quality junior trader from 1 st January 2005 in the desk “Delta One” GELS, under the responsibility of Alain DECLERCK;

Whereas Jérôme KERVIEL was assigned a trading station from which he was able to place his orders either through an automatic machine or directly in contact with interlocutors outside the desk through the intermediary of means of communication equipping his workstation and with the assistance of his assistant trader;

that in the exercise of his functions of market operator within the team “Delta One Listed Products”, Jérôme KERVIEL had, from the start, a mandate of market animation and hedging in risk turbo-warrants issued by Société Générale for its customers; that its activity has extended over time, and particularly during 2007, to an arbitration mandate for own account on turbo-warrants issued by competing financial institutions; whereas this dual activity has led it to buy or sell for hedging purposes index futures contracts and, to a lesser extent, equities;

that these activities normally entail minimal risk taking for the bank; that if the specificity of the operation of the turbo-warrant and the mechanism for crossing the deactivating barrier could place the operator in the open position , he had to either cut the remaining position or cover himself again as quickly as possible;

that Jérôme KERVIEL declared in particular that within the framework of his market making activity he happened, after deactivation of the turbo-warrant, “to remain in a directional position for two or three days when the size was too large to cut” or because he wanted to; that he specified: “I did it for amounts not exceeding 30 or 40 million euros ” (D352 / 7);

that with regard to the turbo-warrants of the competition, it counted ten transactions during the year 2007 for a total nominal amount of one billion euros (D352 / 8) and specified that the strategy that he was developing with Ouachel MESKINE was determined by the search for a directional position in fine by the play of

Page n ° 48


deactivating barrier (D352 / 6);

that if the mandate entrusted to Jérôme KERVIEL excluded any ab initio directional position taking apart from the marginal tolerance on the positions taken and unwound during the day, he acknowledged having developed the ab initio directional position taking , “like all practical world in the trading room “ (D352 / 6);

Whereas it has been established that Jérôme KERVIEL deliberately took directional positions remaining beyond the day; whereas its first actions, relating to shares, were revealed in 2005 and continued during 2006; that Jérôme KERVIEL persisted in this direction during the years 2007 and 2008 by building three times directional positions on futures on European stock indices (mainly the Dax, Eurostoxx 50 and Footsie indices) for total amounts of 30 billion euros euros twice in 2007 and 50 billion euros in the first 18 days of January 2008;

that these facts brought to light by the internal control services and the bank’s inspection, then confirmed by the inspection mission of the Banking Commission, were finally recognized by Jérôme KERVIEL during his police custody, judicial information as well as at the bar of the court;

that during the debates, he conceded that he was not part of his mission to take speculative positions that could last several days “but, he added, I did it because I was making money , in full view of everyone ” (hearing notes, page 45); that he considered that the mandate was vague, that there was no signed mandate in the file but admitted that he had “gone too far in his mandate (hearing notes page 51);

Whereas the absence of a written mandate cannot lead to the presumption of the absence of delimitation in Jérôme KERVIEL’s field of intervention;

that the Banking Commission noted, to regret it, that the mandate entrusted to Jérôme KERVIEL had not been formalized but noted that “the expectations of his hierarchy and the financial objectives set for the trader were nevertheless explicitly stated in the data sheets. end-of-year evaluation 2006 and 2007 “ (D592 / 5);

that thus, in his evaluation of December 2005, while he was still a junior trader, his main mission was defined in these terms: “Management and development of the range of products listed” Delta 1 “European and in particular of the range turbos. Co management of the ETF position in support of Thierry RAKOTOMALALA “; that the assessment interview report for the year 2006, mentioned among the financial and qualitative objectives “migration and reliability of turboshaft management processes, (…) business development Germany, Finland, UK (…) ) Arbitrage turbos competition “‘, that in 2007, it was reported “specification and installation of the overall manager of the turbos” ( SG10 seal );

that Jérôme KERVIEL did not dispute having signed the “Cahier des Procedures Trading -DEAT, a copy of which was discovered among his personal effects in the premises of Société Générale (sealed JK 3); that under this document he was reminded the trader of the main rules that must guide his actions in the trading room and in particular that “the interests of SOCIETE GENERALE at stake must be defended, in particular our operations must be covered. The best course of action is to be in situation of being able to justify one’s position a posteriori (to be in good faith) and to show an intention to be professional which implies not to seek to earn money by shifting the market. It is essential to notify the compliance officer before a major operation. In the case of specific products (barrier options, reverse convertible), it is necessary to validate with your line manager the terms of

Page n ° 49


implementation of covers “ (seals JK3 page 6).

that through these prescriptions, the trader’s attention was drawn to the obligation to cover his operations, to be in good faith, professional and transparent with respect to the ethics services and the hierarchy;

that it was also stated in this same document: ” Sending orders by electronic system is dangerous. We must ensure that our ordering systems are secure and equipped with filters to avoid the sending of inconsistent orders (filter on nominal sent, premium sent, on order sending sequence when using a PLC).

In the case of a large order, the size of which may impact the price of a financial product , you should first seek the opinion of compliance “ (seal JK3 page 6);

that the notebook drew the trader’s attention to the importance of taking market risk into account in these terms: ” the main risk that the trader manages is the market risk. Every trader must be aware of the market risk limits which are granted to him by his risk manager and be able to exhibit a document setting out the risk limits of the activity to which he belongs’ (sealed JK3 page 7), and further: “in the event of loss or gain for a operational risk greater than 50,000 euros the trader must complete the standard form within 2 days. The document must be validated by the direct line manager before being sent to the COO DE AI, Bruno DEJOUX, and to the general secretary of OperIBD ” (seal JK3 page 8);

that Jérôme KERVIEL has, moreover, recognized the existence of personal limits which had been fixed initially in 2005 to the tune of 1 million euros then of 5 million euros; that it also admitted the existence in extraday of the collective limit common to the eight traders of the team “Delta One Listed Products” passed in January 2007 from 75 million euros to 125 million euros; that it recognized “that the global limit of 125 million for the desk should not be exceeded ” (D189 page 8); whereas it appeared that the evolution of these limits followed that of the desk’s activity volumes, which increased in 2007;

Whereas the defense of Jérôme KERVIEL maintains that the nominal limit equipping his trading station would have been deactivated; that nevertheless the elements that it contributes to the debates do not provide proof that the absence of nominal limits is the consequence of a deliberate deactivation of these systems at the initiative of the risk manager on which Jérôme KERVIEL depended, it is – ie Alain DECLERCK, Eric CORDELLE and Martial ROUYERE;

Whereas Jérôme KERVIEL could no longer usefully claim to have considered that the absence of configuration of the “Risk Console” and “Proxigen” applications, or even “DeltaOne.Net”, could be worth even tacit authorization on the part of his hierarchy to speculate excessively, insofar as he was aware that his positions were deliberately outside the scope of authorized operations and the mandate received from his employer and that he was constantly striving to hide these positions; that he declared: “Often in the morning I received as well as my bosses, the notification of large exposures on some of my portfolios. I then entered a fictitious operation without informing my bosses to hide these open positions “ (D77 page 3);

Whereas the defense of Jérôme KERVIEL argues that the attitude of his hierarchy during the discovery of the directional position on the Allianz title to the tune of 15 million euros would have encouraged him to free himself from his limits;

that it is appropriate on this point to recall that both Alain DECLERCK and Nicolas BONIN , on this occasion, reminded Jérôme KERVIEL, then a young trader, of his obligation to

Page n ° 50


refrain from taking a directional position without the prior authorization of his manager, in accordance with the rules included in the book of trading procedures , that the result linked to this operation (500,000 euros) has not been taken into account in the calculation of the bonus and that after a period of monitoring, a new limit was set at 5 million euros;

that, under these conditions, the reaction of the hierarchy in 2005 during the Allianz episode could not be interpreted by Jérôme KERVIEL as an encouragement to continue in this way or to renew the exceeding of limits by operations which he already had at that time, masked by fictitious operations unknown to his hierarchy and by the use of techniques (so-called “echupo” counterpart) of which his manager Alain DECLERCK declared at the hearing to have ignored everything;

Whereas the failure of Société Générale in setting nominal limits, considered by the Commission Bancaire as a breach of the obligations arising from article 14 of regulation n ° 97.02 (D578 / 3), cannot exonerate a trader from his duty of transparency towards his employer; that the bank’s lack of vigilance in monitoring only existing limits, functioning as warning indicators, in no way exempted Jérôme KERVIEL from the duty to inform his superiors of the reality of his overruns or to come back within the limits set for the desk;

Whereas the reiteration of overruns over a long period (between April 2005 and January 2008) is not sufficient to demonstrate that Jérôme KERVIEL has received from his employer the power to freely dispose of the means made available to him, but illustrates, on the contrary, the latter’s ability to conceal his action from the eyes of his professional entourage by carefully considered techniques;

that Jérôme KERVIEL is inappropriate to try to hide behind the frequency of overtaking within the team; that force is indeed to note with regard to it that, despite the enormity of the amounts reached, none of its commitments has given rise to notification of any overrun; that this anomaly is explained above all by the fact that Jérôme KERVIEL has endeavored throughout his activity, as he has repeatedly acknowledged, to mask open positions by fictitious hedging operations , hide the latent or frozen results by fictitious gains or losses, by providing truncated information on its result and to respond tointerrogations of the control services by assertions which disguised reality;

that by making his commitments on regulated markets, deliberately and without cover, Jérôme KERVIEL, with full knowledge of the facts, was outside his mandate as a trader; that in themselves these commitments were constitutive for the bank of a market risk greatly exceeding the collective limits imposed on the “Delta-one Listed Products” desk , and in particular the replication limit;

Whereas the defense tries to draw an argument from the inertia of the hierarchy in front of its alerts to justify the continuation of its actions; that it emerged from all the elements submitted for discussion that the result declared by Jérôme KERVIEL on December 31, 2007 amounted to 55 million euros (in reality 42 million euros, including 17.6 of market- making) , very far from its actual total gain of 1.4 billion euros, was at a level in line with the very favorable development of the desk’s activity ;

that for all that, if the declared amount corresponded to half of the result of the whole “Delta One Listed Products” team, Jérôme KERVIEL was not the best operator of the Delta One desk ; that thus neither the attention of Eric CORDELLE, nor those of Martial ROUYERE and François BABOULIN could be attracted by such a result of which Jérôme KERVIEL assured them that it came from his activity within the limits of his mandate;

Page n ° 51


Whereas if, as the defense recalls in its writings, Benoît THAILLEU, predecessor of Alain DECLERCK, indicated at the hearing: “The cash factor is a key element of your strategy. It is the duty of the hierarchy to verify the level of cash ” (audience notes page 92), it appeared throughout the discussions that the cash balance did not allow us to deduce the importance of the volumes processed and even less of the realized result corresponding to the amount of gains or losses generated by positions taken on the market; that cash reflects the outstanding liquidity resulting from the trader’s activity, compensate for ;

that, consequently , it could not be deduced from the validation of the monthly piloting accounts by Eric CORDELLE, in particular on the center “2A” over the months of May 2007 to January 2008 showing losses in cash costs of up to 3 million euros (June 2007) or on the contrary a maximum gain of 2.4 million euros (September 2007), proof of the knowledge by Jérôme KERVIEL’s manager of the positions taken by the latter;

that, moreover, it appeared that the amounts of cash balances did not significantly attract the attention of Guillaume DEPAUW in charge of cash operations on the Delta One desk , with the exception of two peaks recorded in the SAPE application during the year 2007 “of the order of 6 or 8 billion twice in a row which were regularized three days later each time” (D177 / 3);

that finally, Jérôme KERVIEL’s direct line managers, although recipients of these SAFE reports , did not have the re-invoicing levels for initial margin calls, in particular from FIMAT; that it emerges from the explanations provided by Frédéric COLETTE, Director of Operations for Europe at NEWEDGE Groupe in London, that margin calls could only have a relative impact on cash flow and that, on EUREX, ” Société Générale receives its global net open position daily from the market, including the global margin call by product and the amount of risk to be paid “(D340 p5);

that at the hearing, Jean-Laurent MOISSON, inspector of the Banking Commission, indicated in particular that “the system made it possible to see its cash. For the N + l, that was part of the checks to be carried out” ; that for all that, in a more general way, questioned on the absence of reaction of the hierarchy to the “74 alerts” of which this one had been addressed, the witness answered: “The controls are not carried out at N + l . The indicators came on. In this case they were satisfied with the explanations, which we criticized. The control was not sharp “ (hearing notes page 216);

that Jean-Laurent MOISSON endeavored to specify: “At the global level, there was no anomaly. If this 1.4 billion is melted, is drowned, we do not see it. Cash is an important indicator. As things stand, the figures show that these movements can go unnoticed “ (hearing notes, page 215);

Whereas it has been shown, moreover, that the explanations provided by Jérôme KERVIEL on the occasion of the “bridge” deviations of March and April 2007 were intended to convince his interlocutors of the need to resort to relative fictitious modeling techniques. to operations having the appearance of economic reality; that by diverting such processes, Jérôme KERVIEL managed to bypass and cross the controls put in place, his only concern being to validate his fraudulent positions which he knew to be devoid of any economic reality;

Whereas, to demonstrate that the accused could not act without the knowledge of his hierarchy, the defense draws argument from the content of a first message sent by Marine AUCLAIR on April 16, 2007 to Philippe BABOULIN and Martial ROUYERE bearing in subject: “IMPORTANT deviations on future etfwd du 2A” and another message with the subject:

Page n ° 52


“knocked warrants 2A -ARM 040T sent on May 16, 2007 by Sébastien CONQUET to Martial ROUYERE and Philippe BABOULDSf, transmitted in copy to Jérôme KERVIEL and transferred the same day by the latter to Eric CORDELLE;

that on reading these documents, it appears that, in the first message, the emphasis is on the explanations provided by Jérôme KERVIEL during the accounting controls and on the latter’s expectation of elements information which will be established much later to be untrue; that in the second message, under the heading “EDM”, attention is drawn more to the deviation of method than to the volumes concerned which, moreover, appeared in excess of 17,000 contracts at the back office; that in this logic, the differences are not in themselves suggestive of anomalies; that their mention seems intended rather to provide the elements to enable the treatment to be completedaccounting and valuation of a transaction;

that differences in method have, in fact, multiplied during 2007, mechanically induced by the importance of the positions taken by Jérôme KERVIEL, in particular at the end of November 2007 on a carry of shares reaching 5.5 billion euros ;

that while it is regrettable, as the Commission Bancaire’s inspection underlined, that there was no “in-depth analysis of these discrepancies even though the extent of the discrepancy over a period of month presupposes massive positions “ (D592 / 80), such a reproach is addressed to the middle-office services but also to the immediate hierarchy of the operator; that it could not however be induced from such elements of information, had they reached the knowledge of the hierarchy, the obvious sign of an activity outside the mandate of Jérôme KERVIEL generating a risk of several tens of billions of euros than the operator, at the same time, strove to camouflage, in particular by canceling the purchase / sale operations of Porsche securities, which were initially intended to hide its result of 1.4 billion euros;

Whereas the information established that the brokerage fees have significantly increased and have focused on FIMAT; whereas the total amount invoiced in 2007 thus reached 6 million euros; that the large amounts arising from the purchases and sales of futures reflected a volume of transactions without specifying their meaning, making it impossible for the observer to infer the existence of a directional position and to determine its magnitude; whereas, moreover, the amounts mentioned on the FIMAT invoices correspond to an overall net per product;

Whereas the answers to successive EUREX questions relating to the operational framework of the strategy used by Société Générale via FIMAT, were written by Jérôme KERVIEL himself, with Vincent DUCLOS; that Jérôme KERVIEL has, in the second answer, given technical explanations intended to opacify its practices whereas the Société Générale, dixit Vincent DUCLOS, was unaware that this request related to 6,000 futures in directional position; that it is in ignorance of the fraud mechanisms implemented by Jérôme KERVIEL that Vincent DUCLOS has refrained from any prior verification with the computer tool; that if the procedure investigation adopted by the ethics department, as it emerges from the statements and material elements collected, favored transparency with regard to the trader involved, to the detriment of verifying the authenticity of the elements of information collated, none of these elements appeared to be able to alert a priori the attention of the immediate hierarchy of Jérôme KERVIEL;

Whereas all of these elements, invoked in vain by the defense, do not allow to deduce that Société Générale was aware of the fraudulent activities of Jérôme KERVIEL or even that it could have suspected them;

Page n ° 53


Whereas the content of the remarks exchanged by instant messaging with Moussa BAKIR on November 19, 2007 demonstrate the state of mind of Jérôme KERVIEL faced with requests for information from Eurex when he expresses himself in these terms: “chui dans la shit (…) Well I’m making too much money (…) Eurex is going to break my balls again “ (D98 / 8), or even November 28, 2007 ” yeah but I don’t want to kils me mapsoe at 250,000 sx5e ” (D98 / 14); that his concern was growing, in particular on the following December 13, when Jérôme KERVIEL replied “in jail” (ÇD 98/16) to the suggestion to take vacation ;

that it is clear that at no time, during the year 2007 and the first 18 days of 2008, did Jérôme KERVIEL speak with one or the other of his hierarchical managers to inform him of the unimaginable scale taken by its positions and the importance of the result which resulted from it;

that it is precisely the implementation of one of the internal controls of the bank, in an operation scheme hitherto never used by Jérôme KERVIEL (purchase-sale of forward against an external counterparty without a collateral agreement ) and for amounts still unmatched, which made it possible firstly to put an end to fraud and secondly, through increased investigations, to circumscribe its scope;

that it is just as obvious that it would not have been within the competence of any authority within Société Générale to give a mandate to take positions the amounts of which exceeded the bank’s own funds and endangered up to to its sustainability;

Whereas if the positions taken during the year 2007 made it possible to garner a gain of 1.4 billion euros, which the operator refrained from declaring, it was different from the positions taken in 2008 whose hasty unwinding under difficult market conditions resulted in losses amounting to more than 6 billion euros;

that thus, by passing on the markets, from his trading station, exorbitant orders with regard to both their cumulative nominal values ​​and the resulting risks for the bank, Jérôme KERVIEL knowingly, unbeknownst to the bank, hijacked the technical means made available to it by using them for purposes other than those for which they had been entrusted to it;

that therefore the offense of breach of trust is constituted against the accused who will be declared guilty on this count;

  1. B)On the crime of fraudulent entry of data

Whereas the material element of the offense defined by article 323-3 of the penal code is based on the introduction, modification or deletion of data in an automated processing system; that the introduction supposes the incorporation of new data-processing characters on a support of the system and the deletion, a physical attack on the integrity of the data;

that the moral element of the offense results essentially from the conscience and the will of the author to undermine the reliability of the system by introducing into it, knowingly , false data;

Whereas in this case Jérôme KERVIEL is accused of having entered and then canceled “fictitious transactions intended to conceal both market risks and the latent results of unauthorized directional positions” ; that he is also accused of having entered on the one hand “pairs of fictitious purchase-sale transactions for

Page n ° 54


identical quantities on the same product but at a different price in order to generate a fictitious result offsetting the result actually generated and thus bringing the net position to zero ” and on the other hand ” of the provisions during the month making it possible to cancel and therefore to conceal over this period, a previously released result ” ;

Whereas Société Générale, civil party, also mentions under fictitious transactions the modifications and additions of certain data contained in the system relating to these financial transactions actually carried out by Jérôme KERVIEL within the framework of his mandate in order to hide some of the transactions fictitious; that it suggests to the court to include under this same qualification all the positions taken out of mandate constituting also the breach of trust;

Whereas, however, these facts not having been included in the referral to the court under the qualification of fraudulent introduction of data, none of them could, at the current stage of the proceedings, give rise to prosecution;

Whereas Jérôme KERVIEL acknowledged having personally entered or had his assistant trader enter fictitious transactions in the ELIOT database dedicated to the front office; that this base was accessible as well to its hierarchy as to the services in charge of its control in particular the DLM middle-office services; he said: “I hid my positions by entering opérationsfictives (. . I masquais exposure SOCIETE GENERALE.). do not know my positions * ” (D77p5);

that Jérôme KERVIEL clarified: “Very often and on a regular basis, from memory from March-April 2007, I asked my assistant, Thomas Mougard, to enter fictitious transactions, namely pending and transactions with click options as ffbrwards counterparty or purchases and sales of shares). While pending transactions are common practice in order to materialize pending transactions, fictitious transactions with Click Options were not normal transactions; Thomas Mougard could not have escaped notice that these last trades were intended to hide open trades. He only acted on my instructions. He knew it was to hide open trades. open positions and hide valuations or valuations, ie P&L “ (D140);

Whereas the strategy developed by Jérôme KERVIEL was to enter fictitious data at a sufficient distance, in time, from the monthly decrees in order to be able, if necessary, to cancel them before they give rise to confirmation, regulation or control;

Whereas the fictitious transactions entered consisted of 53 forwards and 16 options against internal counterparties (Click Options) having the advantage of not giving rise to any confirmation and escaping the control of the back office, such as fictitious sales of actions against technical counterparties such as “echupo” ; that these operations were intended, by the same admission of the accused, to mask the open positions, taken out of mandate, and the latent result which ensued;

that in the same way, to conceal the market risk and the latent result, Jérôme KERVIEL entered shares traded in OTC against Click Options (numbering 126), against Click CLT (2), against “echupo” (54) and in “pending ‘ (66);

Whereas Jérôme KERVIEL admitted having, moreover, masked his “short” position of 30 billion euros in 2007 and his position of 50 billion euros in 2008 by adding in ELIOT purchases or sales of enpending futures ; that 262 were counted (D426 / 28);

that these operations were mechanically discharged into the buffer base, making it possible to escape any daily checks by the middle-office unit responsible for the integration of transactions as well as back office accounting and in particular the

Page n ° 55


payment of margin calls; that the control of the buffer bases was faulty because of the importance of the managed masses, these bases having vocation to collect all the operations in a waiting situation but having an economic reality;

that there were also 115 pairs of transactions in the opposite direction, of buy-sells on securities (in particular Solarworld and Porsche shares) against Click Options and with a deferred start date in order to hide the result frozen real but out of mandate; consideration also search the four rate forwards face to “préhedge” (D426 / 30);

that Jérôme KERVIEL was also led to enter at the end of June and July 2007 transactions against external counterparties such as Deutsche Bank and JP MORGAN, on questioning of the accounting department but to cancel them the next day because of the collateral they generated, then in January 2008 against BAADER to hide the real result of 1.4 billion euros;

q ue Jérôme KERVIEL finally seized the flow of provisions in the hope of concealing the results obtained in 2007; that nine operations were thus recorded at a time when Jérôme KERVIEL was making the greatest gains; that these flows, positive or negative, the amounts of which fluctuated between 63 million euros on July 23, 2007 and 1,485,700,000 euros on January 10, 2008, were canceled the day after they were entered or in the following days (D426 / 31 ) whereas such flows were not subject to any control since 2006 (D592 / 18);

Whereas all of these fictitious operations, which were not based on any economic reality , had the effect of distorting the level of market risk reached by the positions taken by Jérôme KERVIEL and its result as produced by the data of the ELIOT system feeding the bank’s information and accounting systems;

Whereas the information and the debates have made it possible to establish that these facts are part of a real system of fraud set up by Jérôme KERVIEL in a perfectly coherent way ; that the operations were indeed configured by him in such a way that they cover the fraudulent positions actually taken elsewhere; that in his explanations provided to the accounting services, following the observation of differences in results, Jérôme KERVIEL did not hesitate to modify the parameters of certain products in the ELIOT base in order to make them consistent with his own explanations;

that, for their author, it was a question of masking the reality of his activity and in particular of his directional positions taken in unsuspected proportions given their scale, without commensurate with the volumes normally handled by a trader of the team “Delta-One Listed products”, even the best of them, and to defeat the internal controls of the bank;

that it happened to Jérôme KERVIEL to change counterparty to hide the actual result as in December 2007 and January 2008 or to claim entry errors relating to the counterparty;

Whereas the defendant nevertheless tried to justify his fictitious operations by the need to save “appearances” in the interest of the desk and vis-à-vis the control services which operated each month and the latter vis-à-vis the group hierarchy; that he added that the practice of transfers of result, which was current, required recourse to fictitious transactions;

that Jérôme KERVIEL, sheltering behind accepted practices but in different contexts , deduced from the silence of his hierarchy that it endorsed its fictitious operations while this same hierarchy ignored, by its own admission, the importance of its real result;

Page n ° 56


Whereas, contrary to what the defense of Jérôme KERVIEL suggests, the ELIOT base was in no way designed or intended to allow the detection of a fraudulent system ; that this IT tool, made available to the front office, was intended to receive all transactions processed by traders; that it was supplied by the trader himself or, at his initiative and under his responsibility, by his assistant;

Whereas, for their part, Eric CORDELLE and Martial ROUYERE admitted that they had access to the ELIOT base but that their attention had not been drawn by the activities of Jérôme KERVIEL and particularly by the fictitious operations that he seized or had it seized;

Whereas Jérôme KERVIEL is very unwelcome to claim, based in particular on the statements at the bar of Benoît THAILLEU (hearing notes p 91 to 100) and Alain DECLERCK (hearing notes pages 219 to 229) and by providing the discussions with a screenshot of ELIOT (Exhibit 13), that its hierarchy and other services of Société Générale had a complete view of the transactions entered into the ELIOT front office system, accessible to all , and that this system made it possible to carry out targeted searches due to the traceability of prices, products and counterparties at the stage of entering new data as well as their modification or cancellation, as indicated by Valérie ROLLAND,compliance officer within Société Générale (audience note p 115);

that if, on this subject, Claire DUMAS conceded at the hearing: “On the ability of managers to identify fraudulent transactions, we still had to look for them”, she was careful to add: ” On a daily basis, it is difficult to look at deal by deal. In Mr. KERVIEL’s book there were indeed 500,000 transactions “(audience notes page 53); that this figure was confirmed in court by Carlos GONCALVES, deputy head of information services at Société Générale, specifying that, within the scope of Jérôme KERVIEL, there were, in 2007, “100,000 securities transactions and 100,000 future transactions, (hearing notes page 163); he nevertheless declared: “All the operations are in the ELIOT database. If we know what we are looking for, we can make queries. Otherwise it is impossible in 3 clicks, if we do not know what that we are looking for “(…)” the hierarchy does not use ELIOT. There are aggregated processes which make it possible to follow the activity ” (page 165) and ” We can enter an operation. It does not disappear. It is drawn. All lines do not disappear. We can find everything , if we know what we are looking for “ (page 167), insisting on the need to set up on January 18, 2008, the research of which required devoting, according to the witness, “800 man-days, then 1,000-man days” (page 166);

that it is precisely because of the incapacity in which both Taoufik ZIZI, a young trader in training, and Eric CORDELLE, remained present alongside the latter, were placed in managing Jérôme KERVIEL’s portfolio as well as that of the latter. Ci was recalled in early September 2007, shortly after his departure on leave at the end of August;

Whereas Sébastien CONQUET admittedly declared to the investigators that on the occasion of the bridge deviation of March 2007, Jérôme KERVIEL would have explained to him that these operations had no economic reality and that the P&L thus observed was the “reflection of three fictitious transactions “ (D297 page 3 and 4);

that however Marine AUCLAIR for its part indicated to the investigators “Indeed, these operations did not have an economic reality but an economic interest” (D341 page 4); that this response should be compared to the comments made by the same person in the same hearing, where she said: ’77 for me, these were transactions which were not real transactions recognized by the broker or Click Options, which had no legal existence. They were just used to compensate for a failure of ELIOT of the Front system which did not

Page n ° 57


was determined at the end of a period of recognition of the underlying. It is the failure of the system that Jérôme KER VIEL argued to justify the booking of fictitious operations (…) For me, they had no legal existence but they had an economic existence insofar as they came to balance the valuation and the risk analysis on these operations “ ; that it follows from these declarations that these operations, according to the false assertions of Jérôme KERVIEL, wrongly admitted by the control services , were intended to adjust to the plan accounting an economic reality that the front office system would not have been able to faithfully translate, the expression ” These futures / fwds are” fictitious “transactions booked upon reaching the barrier on knocked warrants to balance the ptfen valo and in AR as long as the observation of the spot does not allow the redemption value of the warrant ” contained in the email of April 16, 2007 sent by Marine AUCLAIR to Philippe BABOULIN and Martial ROUYERE (D665 / 2); that this message followed the meeting held in the presence of the same people; that Marine AUCLAIR clarified during the information that, during this meeting, Jérôme KERVIEL had indicated that “PNL, ACFI and the Front knew that they were fictitious operations” KERVIEL had put forward ” the problem inherent in Eliot” (D342 / 1);

that at the hearing, Marine AUCLAIR underlined: “These were operations justifying the valuation for which Jérôme KERVIEL gave us documents. These operations had no counterpart in front, as such, independently. We can play on the words (…) Click Options did not recognize these operations. JK told us that it was an adjustment (audience notes pages 237 and 238); that she put the emphasis on the credibility of Jérôme KERVIEL’s explanations which were “consistent and held up. They were plausible “, on the energy expended by the person concerned to achieve his ends, this one moving in the offices of the middle office, which was rare on behalf of a member of the front office, and on the fact that at the time Jérôme KERVIEL had told him that he was worried about his deviations, confiding to him: “that he was going to jump if it was not resolved. If we succeeded, he said that he would offer me Champagne” ‘that Marine AUCLAIR concluded: “Under Covered with interest, I told myself he didn’t give a damn. He doesn’t care about us. Sometimes he referred the problem to the trainees or assistant traders ” (page 234);

Whereas it is maintained that the techniques used were not likely to deceive the hierarchy and the various departments of the bank, especially since the practice of transfers of income from one year to another was, according to Benoît THALLIEU, a “regular use” that had led Philip BABOULIN when discovering fictitious sales-purchases of shares on 18 January 2008, thinking that it was to hide the result;

Whereas Jean-Laurent MOISSON, one of the two inspectors of the Banking Commission in charge of the mission relating to this affair, qualified at the bar of the court these fraud techniques as “quite clever”, to then specify that they “were not particularly sophisticated or unstoppable” and that one could  have discovered the earlier actions ” (audience notes page 213); that it was therefore indeed fraud techniques;

Whereas, contrary to what the defense of Jérôme KERVIEL claims, the fact that Thierry RAKOTOMALALA and Ouachel MESKINE, mentioned in the note established by the inspection of Société Générale for the investigators (sealed SGI2), participated in two transfers results initiated by Jérôme KERVIEL in December 2007 does not allow us to consider that these practices were “current and known within SOCIETE GENERALE”, especially since they were sanctioned by the dismissal of the interested parties , accompanied by transaction protocols;

that it is clear that throughout these years Jérôme KERVIEL has persisted in concealing both the activity of these operations and the information relating to his real activity by deliberately undermining the authenticity of the data entered in the

Page n ° 58


ELIOT base and conveyed in the IT management system, despite the duties prescribed in the “Trading Procedure Book”: “The valuation of all portfolios must be carried out daily after the trading day; if certain closing prices are not not available, we will take those from the day before. The valuation of the day must represent the most realistic image of the P&L of the activity at the time it is launched. ” (seal JK3 page 12);

that the prescriptions presented in the presentation document of the “GEDS Middle-office – Deal Management” department (document n ° 15 submitted by the defense of Jérôme KERVIEL) defining the process of the various controls should make it possible to “ensure that the relative information transactions entered into the GEDS / DAI information system by the front office and the middle office are accurate and comply with the rules defined by OPER, ACFI, RUISQ and the regulators ” cannot escape Jérôme KERVIEL from his transparency obligations and sincerity in entering data;

that according to the information provided by Société Générale, civil party, the number of transactions on futures as a “pending” counterpart amounts to 262, ie approximately 0.5% of the total number of buffer operations; whereas the total amount of operations discharged into the buffer base in 2007 represents several thousand billion euros, and that , moreover, the control relates only to the unit price;

that the email from Erneste-Madelein extracted from Thomas MOUGARD’s mailbox (exhibit 18 provided by the defense) relating the key events of August 20, 2007 highlights discrepancies relating to the EOLE and GMI bases on Delta, the amounts of which are not None specified, no breakdown allows attributing these discrepancies to Jérôme KERVIEL’s 2A portfolio, which supports the idea of ​​a systematic aggregation of data that does not make it possible to identify their author, except by carrying out more targeted research on the basis of predetermined criteria which does not appear to have been the case in this case;

Whereas in any event, the fraudulent nature of the introduction of data is independent of the innovative and complex nature of the techniques used, of the obviousness of the activity of the underlying operations or of the maintenance of these data in a buffer for more than 20 days for some of them;

Whereas it follows from all of these elements that the offenses of fraudulent entry of data into an automated processing system appear perfectly constituted against Jérôme KERVIEL who knowingly entered transactions without economic reality, which he has by the continuation partly canceled, with the sole aim of masking its out-of-mandate and out-of-bounds commitments;

  1. C)On the offenses of forgery and use of forgery

Whereas Jérôme KERVIEL is accused of “having fraudulently altered the truth, alteration likely to cause prejudice to SOCIETE GENERALE and accomplished by any means whatsoever, in writing or any other medium of expression of the thought which has for object or which can have as effect to establish the proof of a right or of a fact having legal consequences, in this case by the creation of electronic mails which bind the bank in accounting, financial and legal terms (. ..) And to have made use to the prejudice of SOCIETE GENERALE of the so-called false “ ;

Whereas Jérôme KERVIEL acknowledged having been the author of all the transferred emails listed in the order for reference by making them from previous emails actually received from the same correspondents and to Tinsu from the latter, this to the sole purpose of accrediting the explanations he provided to

Page n ° 59


accounting services when fictitious transactions emerged during monthly audits or during audits carried out in January 2008;

that by doing so, Jerome KERVIEL did not hesitate to involve third parties for the purposes of constituting a means of proof intended to convince of the reality of operations which he knew full well fictitious;

Whereas thus the emails transferred on May 11, 2007 to Sébastien CONQUET, established under the heading of Constanza MANNOCHI, bearing the dates of April 11 at 6 pm 1 and April 12, 2007 at 1 pm 1, were made by Jérôme KERVIEL; that these two emails lent to Constanza MANNOCHI, are part of a single action tending to explain the merits of the accounting adjustment required by the bridge deviation of the April 2007 decree and, more particularly, to justify the price certain warrants and as a consequence of the difference of € 13.9 million recorded on the end-of-month closing;

that, in the same way, Jérôme KERVIEL acknowledged being the author of the email transferred on May 16, 2007 to Sébastien CONQUET under the heading of Lorenzo BOTTI of BNP Paribas in Milan, dated April 30, 2007, indicating ‘a delay in the registration of five knocked-out products whose booking was to take place at the end of May, postponement of seizure due to a technical malfunction attributable to BNP Paribas; that this document was, like the precedent intended to support the false explanations of Jérôme KERVIEL near the accounting services about two false deals passed OTC against Clearstream, having given rise to an alleged entry error;

that the terms of the explanatory e-mail written by Jérôme KERVIEL and sent to the same Sébastien CONQUET, attest to the bad faith of its author in that he indicated: “The value date will be the end of May. I have been fight with them on the subject (…) The deal was deleted yesterday because the people from the stock exchange called me to tell me that it will be done on May 28. I will rebook them today because I am waiting the correct trade Date. I ask them for a confirmation from them if you need it “ (D562 / 5);

Whereas the email transferred on July 6, 2007 to Sébastien CONQUET under the letterhead of Christophe de la CELLE of Deutsche Bank in London, dated June 15, 2007, entitled “Trade details DAX Forward Roll Over” was intended to justify to accounting services a change in counterparty dçforwards initially entered against Click CLT, blocked in the back office pending the identification of the customer, then facing Click Options, generating a “gateway” difference on the June 2007 decree, then finally Deutsche Bank;

that as of July 9, Jérôme KERVIEL announced, to prevent the problems which were bound to arise for collateralisation, that the decision had been taken to “remodel this deal as listed during the day”, which did not not been done, and for good reason since the operation was, from the outset, fictitious; that in reality the operation was purely and simply canceled ten days later;

Whereas the email dated June 28, 2007 and transferred July 12, 2007 to Sébastien CONQUET under the heading of Amanda HALLAM from the bank JP MORGAN, was intended to correct with the accounting services an alleged booking error originally a variance in intra-group reconciliation relating to OTC versus Click Options that the latter had not recognized at the time of the end of June 2007; that to this email was attached a response sent by Jérôme KERVIEL to Sébastien CONQUET written in these terms : “I confirm that the OTCs in deviation are against DBK and JP MORGAN. Here is already the detail on the 3 trades I reforward the confDBK in the wake “;

that the email transferred on July 19, 2007 under the heading of Christophe de la CELLE to Christophe FROSSASCO, dated June 15, 2007 and entitled “Trade details DAX future Roll

Page n ° 60


0ver “confirmed the cross on DAX futures and explained the other part of the booking error ;

that the attached explanatory email was worded as follows: “it’s a listed cross badly booked in eliot. The counterpart was in OTC, the modification was made on our side to be finally confirmed as listed as initially processed. My middle made a modification on the deal to wrongly rebook it in OTC lately, it is corrected tonight “;

that these two operations were not entered either by Jérôme KERVIEL, since the operations were fictitious from the outset; that these emails nevertheless enabled him to validate, during the necessary time, the changes of counterparties;

Whereas the emails transferred on January 18, 2008 to Richard PAOLANTONACCI at 12.50 p.m. , one, under the heading BAADER, dated January 17, 2008, and the other under the heading of Christophe de la CELLE, dated 18 January at 12:46 p.m., both aimed to materialize the confirmation of the substitution of the counterparty Deutsche Bank for the counterparty BAADER on the fictitious cross forwards on the Dax and the Eurostoxx intended to mask the result of 1, € 4 billion at December 31, 2007; that it was for Jérôme KERVIEL to accredit the idea of ​​the authenticity of these transactions with Richard PAOLANTONACCI who had questioned him on their reality and had wished to have access to

Whereas the defense of Jérôme KERVIEL did not come to maintain that the documents had to be confirmed then controlled before being passed in accounting entry in order to offer the proof of a right or a legal fact; that in fact, considered as a whole, this succession of message transfers responded to only one concern: to hide reality while giving its assertions accents of authenticity and to the operations which he knew to be fictitious, an appearance misleading reality; that these maneuvers engaged the accounting departments and led them to validate the proposed adjustments and to admit the false reality of the operations concerned; that the messages were in this intended to establish the existence of facts having legal consequences within the meaning of article 441-1 of the penal code;

Whereas the defense is not admissible either to claim that the emails were intended not to deceive the control services but to meet the formal requirements so that the latter can transmit these operations, which they knew to be fictitious, to the accounting services ;

that it is clear that the text of these emails was chosen by Jérôme KERVIEL in order to meet precisely the expectations of the control services which questioned him and to escape their sagacity, while involving in these responses third parties totally foreign to his embezzlement, the signature of which he usurped without the slightest scruple;

that Jérôme KERVIEL distinguished himself in his ability to react to questions from the control services; that this exceptional capacity undoubtedly culminated in the first week of January 2008, when it managed, simultaneously, to mask the result of 1.4 billion euros and to build a new directional position of an unprecedented amount ;

that it is indeed established that the forwards vis-a-vis BAADER, initially seized on December 31 , 2007 vis-a-vis Click Options, were canceled by Jérôme KERVIEL on January 9 following; that the forwards against Deutsche Bank entered on January 18 at 11.58 a.m., after the cancellation of the provision flow of 1.4 billion euros which replaced the previous forwards on January 9, were transformed on the same day at 8:06 p.m. and replaced by “pending” futures that, at the same time, Jérôme KERVIEL had set about building a new directional long position which, committing more than the totality of the bank’s own funds, reached 50 billion euros, itself masked by one

Page n ° 61


new wave of fictitious operations;

Whereas it follows that the fraudulent intention of Jérôme KERVIEL appears clearly established; that consequently the offenses of forgery and use of forgery being constituted against Jérôme KERVIEL this one will be declared guilty of this third count;

  1. D)On the penalty

Whereas Jérôme KERVIEL, 33 years old, single, childless, was imprisoned for 41 days; that he was placed under judicial control, a measure that he has always respected; that he exercises a professional activity ensuring him income of around 2000 euros; that his criminal record bears no mention of any conviction;

that he devoted his higher studies to finance, that his only professional experience was that of finance and trading rooms and, in particular, of Société Générale, which recruited him to the middle-office in January 2000;

that, according to Mr. BOUCHARD, expert psychologist committed by the examining magistrate, Jérôme KERVIEL “presents a personality balanced both on the emotional, intellectual levels as relational and social investments”, that it appeared free from mental disorder;

that in an attempt to explain his behavior, Jérôme KERVIEL maintained that he found himself in a virtual world, “caught in a spiral”, “intoxicated by success” ;

Whereas it has however been shown that Jérôme KERVIEL’s guilt results from multiple actions and of various natures responding to an occult strategy which is personally and exclusively attributable to him;

that the acquisition of a technical competence recognized by his superiors and a perfect knowledge of the workings of the front-office, middle-office and back-office, as well as the quality of the links forged with the various departments of the bank during his years spent in the middle office enabled him to detect and exploit the flaws in the information transmission and account control systems set up within the bank;

that these shortcomings and inadequacies, not contested and assumed at the hearing by Société Générale, were finally sanctioned by the Commission Bancaire; that the latter also pointed out a certain number of negligence at the level of the front office of which the persons in charge were moreover sanctioned by measures of dismissal;

Whereas Jérôme KERVIEL, being one of those who evolved at ease in the IT and financial bush that opened up to him, quickly forged a solid reputation for efficiency in the various sectors of activity to which he touched, having relates as much to finance as to IT;

that, cultivating the ambivalence of his behavior, he knew at the same time how to develop innovative strategies appreciated by his superiors and to resort in an occult way to practices which he considered – against all likelihood – that the effectiveness authorized it to free itself from the operating rules of the trading room and to go beyond the framework of its mandate by engaging in purely speculative activity on behalf of the bank, but without the latter’s knowledge and in gigantic proportions;

that it has succeeded, through the use of perfectly mastered jargon and the anticipation of checks, to lull the mistrust of the services concerned to the point of running the risk of involving them in its fraudulent processes;

Page n ° 62


he managed in this way to protect themselves under the guise of deceptive appearances, fruit of inventiveness, of any further checking of inclination or just any curiosity on the part of his professional colleagues, who could have provided much of obstacles to its ambitions;

Whereas he always knew, when his fraud risked being exposed, to adapt to the new configuration, if necessary by circumventing the obstacle which stood in his way, by having recourse to stratagems as was the case. cases during “bridging” reconciliations , during the EUREX survey, or during checks linked to the application of the bank solvency ratio ;

that the diversity of the techniques of falsification or concealment used by Jérôme KERVIEL is matched only by the dazzling reactivity, the permanent coolness and the deceptive impassivity which he has been able to demonstrate on a daily basis, over these many months;

Whereas the absence of immediate financial benefit derived from this affair by the accused cannot erase the very real and imminent prospect for the year 2007 of a gain in the form of a bonus that he himself had. even valued at 600,000 euros and that his manager, still ignorant of the facts, had reduced to 300,000 euros;

Whereas Jérôme KERVIEL nevertheless persisted during the discussions, in perfect coherence with the attitude adopted during the investigation, to throw on the bank the main part of the responsibility, until the modalities according to which the unwinding of his positions is intervened ;

that he thus engaged in a total reversal of roles by positioning himself as the victim of a system of which he claims to be the creature; that he argued of the lack of credibility of his own lies, leading to guilt others in order to clear himself;

that he tried to discredit the testimonies received under oath at the bar of the court on his initiative, claiming that the declarations emanate from persons subjected to the influence if not to the authority of the bank;

that, well beyond the betrayal of professional confidence, the cynicism of Jérôme KERVIEL’s actions was expressed when he claimed that Société Générale had shown opportunism in seizing his case to put into perspective the losses arising the subprime crisis ;

that he carried out a communication campaign, this time taking public opinion as a witness, conveying the image of an individual in search of anonymity, antithetical to the impact that he endeavored to give to the case in the media during the various phases of the investigation and in the run-up to his trial, or even during it;

that this attitude can not hide the fact that, by his deliberate action, he endangered the solvency of the bank which employed the 140,000 people of which he was part, and whose future was seriously mortgaged; that by their magnitude, their specificity and the context of crisis in which they took place, its actions undoubtedly undermined international economic public order, the financial impact of which was finally able to be circumscribed by the reactivity of the bank;

Whereas in consideration of all these elements, the recourse to a penalty of five years imprisonment including two years suspended appears fully justified; that it is also necessary to impose on the accused, as an additional penalty, in application of articles 131-27 and 314-10-2 ° of the penal code, in order to prevent the repetition of such facts, a definitive prohibition of exercise the activities of a market operator and any activity relating to the financial markets; that it is finally necessary to pronounce the confiscation of

Page n ° 63



II – On civil action :

  1. A)On the withdrawals of Xavier KEMLIN and Gérard COSCAS:

Whereas, by letter received at the registry on March 3, 2010, Gérard COSCAS became a civil party on behalf of Xavier KEMLIN, presented as a shareholder of Société Générale, who had given him power to represent him before any court; that, by act of bailiff issued on May 17, 2010, Xavier KEMLIN, electing domicile at the headquarters of the law firm LEX and COS, summoned Société Générale as civilly liable for Jérôme KERVIEL by asking, in addition the condemnation of Jérôme KERVIEL to pay a sum of one euro as damages, the joint judgment of Société Générale to pay an amount equal to the difference between the stock market price on December 31, 2006 (128.60 euros) and that on December 31, 2008 (36 euros), i.e. the sum of 92.60 euros per Société Générale share held and a sum of 1,500 euros on the basis of the provisions of article 475-1 of the code of criminal procedure;

Whereas by letter deposited at the hearing of June 23, Xavier KEMLIN expressly declared to withdraw from its constitution of civil part; whereas this withdrawal should be noted ;

Whereas by letter filed with the registry on June 8, 2010, Gérard COSCAS declared that he was acting as a civil party in his capacity as a shareholder of Société Générale; that by letter of 11 June following, he declared to desist from his constitution of civil party;

whereas this withdrawal should be noted;

  1. B)On the conclusions of nullity and inadmissibility of SOCIETE GENERALE againstXavier KEMLIN

Whereas in terms of its writings filed at the hearing on June 23, 2010, Société Générale concludes:

–   the nullity and at the very least the inadmissibility of the summons to civil liability that Xavier KEMLIN had issued on May 17, 2010 to Société Générale, due to lack of capacity to act of the representative of the LEX & COS selarl who intervenes for his account and at whose headquarters he elects domicile;

–   the inadmissibility of the constitution of civil party of Xavier KEMLIN, failing to justify in his capacity as shareholder of the Société Générale of a personal damage directly related to the commission of the infringements;

that it appears that these conclusions have become without object following the withdrawal of Xavier KEMLIN;

  1. C)On the admissibility ofthe association HALTE a la CENSURE, A LA CORRUPTION, A UDESPOTISM, A L’ARBITRAIRE (HCCDA) represented by its president Joël BOUARD

Whereas by letter filed with the registry on June 10, 2010, Joël BOUARD, acting as president of the association HALTE A LA CENSURE, A LA CORRUPTION, AU DESPOTISME, A L’ARBITRAIRE (HCCDA), declared himself to be a party civil;

Page n ° 64


Judgment n ° 1

Whereas in application of Articles 2 and 3 of the Code of Criminal Procedure, the civil action for compensation for damage caused by an offense only belongs to those who have personally and directly suffered from the damage caused by the offense; that it follows that association HCCDA, not justifying any personal damage resulting directly from the facts of which the court is seized, will be declared inadmissible in its constitution;

  1. D)On requests from SOCIETE GENERALE shareholders

Whereas, by conclusions duly filed and referred to at the hearing of June 23, 2010 Deborah DAIGNE wife VICTOR, Nadine GRUNBERG, Gérard KILIAN, Nelly PELLET-LEGUEVAQUES, Pascal PERUCHON, Marie-Claude PODGUSZER, Jac VAN BRAKEL and Lilian WTNTHER request, on the basis of Articles 2 and 3 of the Code of Criminal Procedure, to be received in their constitutions as civil parties, considering themselves direct victims of the actions of the defendant, and, basically, request the joint conviction of Jérôme KERVDEL and the Company Générale, civilly responsible for the actions of its employee, to compensate them for their financial loss up to the loss of value of the securities they hold in the capital of Société Générale (at the rate of 92.60 euros per share held) and their moral prejudice assessed as follows:


number of actions financial damage moral damage
Deborah DAIGNE wife VICTOR 102 9.384 euros 1,020 euros
Nadine GRUNBERG 1875 172,500 euros 18,750 euros
Gerard KILIAN 546 50,232 euros 5.460 euros
Nelly PELLET-LEGUEVAQUES 112 10,304 euros 1.120 euros
Pascal PERUCHON 60 5.520 euros 600 euros
Marie-Claude PODGUSZER 231 21,252 euros 2.310 euros
Jac VAN BRAKEL 14000 1,288,000 euros 140,000 euros
Lilian wtnther 1750 161,000 euros 17,500 euros

in addition to a global sum of 2,000 euros to each civil party in application of article 475-1 of the code of criminal procedure.

Whereas in application of Articles 2 and 3 of the Code of Criminal Procedure, civil action for compensation for damage caused by an offense only belongs to those who have personally and directly suffered from the damage caused by the offense;

that the shareholders as civil parties invoke in support of their request for compensation, the existence of a financial loss resulting from the depreciation of Societe Generale securities of which they were owners, caused by the actions of Jérôme KERVIEL; that such damage, assuming it has been established, is not the direct consequence of the facts before the court against the defendant, employee of SOCIETE GENERALE, under the qualifications of breach of trust, forgery and use of forgery , and fraudulent entry of data into an automated data system; that these same civil parties who do not justify having suffered a personal injury distinct from that resulting from the depreciation of Société Générale securities, will be declared inadmissible in their requests made against Jérôme KERVIEL and Société Générale in their capacity

Page n ° 65


civilly responsible;

  1. E)On requests from employees and retirees of Société Générale

Whereas in their written submissions duly filed and referred to at the hearing of June 23, 2010, Albert MINEO and Laurence DAUPLAT, currently employees of Société Générale and Adrien RIGHI, Marie-Josette VUILLEMIN née CACCIAPUOTI and Marcel ROCA, all three former employees currently retired of Société Générale, conclude that their constitutions are admissible, arguing that the material and moral damages suffered are personal and direct ; that basically, they seek the conviction of Jérôme KERVDEL to pay:

–   to Albert MINEO: 10,000 euros in compensation for his non-pecuniary damage and 13,294 euros in compensation for his material damage;

–   to Laurence DAUPLAT: 10,000 euros in compensation for his non-pecuniary damage and 468 euros in compensation for his material damage;

–   to Adrien RIGHI a sum of 9,718 euros in compensation for his material damage;

–   to Josette VUILLEMIN the sum of 38,588 euros in compensation for her material damage

–   to Marcel ROCA a sum of 10,057 euros in compensation for his material damage; in addition to a sum of 3,000 euros to each of the concluding parties on the basis of article 475-1 of the code of criminal procedure;

that they invoke the material damage resulting from the depreciation of their employee savings in the company through fund shares whose value is largely dependent up to 70% of that of the stock price of the Societe Generale share while admitting that Jérôme KERVTEL is not solely responsible for the losses noted since the methods of unwinding the positions taken are largely in question, the liquidation having taken place in full stock market crash;

Whereas Société Générale has for its part concluded that the constitutions of civil parties of Adrien RIGHI, Marcel ROCA and Marie VUILLEMIN née CACCIAPUOTI are inadmissible, acting in their sole capacity as shareholders of Société Générale; that the latter relies on justice on the admissibility and the merits of the constitutions of civil party of Albert MINEO and Laurence DAUPLAT which invoke the double quality of shareholder and employee of Societe Generale;

Whereas in application of Articles 2 and 3 of the Code of Criminal Procedure, the civil action for compensation for damage caused by an offense only belongs to those who have personally and directly suffered from the damage caused by the offense;

1) On claims based on the existence of financial loss:

Whereas the five civil parties, employees of Société Générale, some of whom (Adrien RIGHI, Marie CACCIAPUOTI and Marcel ROCA) are retired, invoke in support of their claim for compensation, the existence of financial damage resulting from the depreciation, caused by the actions of Jérôme KERVIEL, of the Societe Generale securities of which they were owners through their rights within the company savings plan to which they subscribed within the framework of the employee profit-sharing policy implemented within the bank ;

that, if it has been shown that following the discovery of the facts committed by Jérôme KERVIEL, Societe Generale securities have indeed suffered a depreciation likely to prejudice the interests of the civil parties, such damage cannot be analyzed as the direct consequence of the facts before the court against the accused,

Page n ° 66


also employee of the same company, under the qualifications of breach of trust, forgery and use of forgery, and fraudulent entry of data into an automated data system; that it will be appropriate consequently to declare inadmissible requests formed of this head by Albert MINEO, Laurence DAUPLAT, Adrien RIGHI, Marie CACCIAPUOTI and Marcel ROCA;

2) On claims based on the existence of non-pecuniary damage:

Whereas only Albert MINEO and Laurence DAUPLAT, still currently employees of Société Générale, also allege non-pecuniary damage;

that it appears that in view of the deleterious working conditions that these employees experienced following the revelation of the facts, the impact, on all staff, of the damage to the image of the bank, in particular within retail banking activities in contact with customers, and especially the brutality and gravity of the situation and the threats that the facts attributed to Jérôme KERVIEL discovered and publicly announced , immediately weighed on the professional prospects of employees, generating concerns about the sustainability of the company and their employment, these employees justify the reality of this personal and direct moral prejudice suffered by them and giving rise to the right to compensation; that it will be fixed for each of the two employees still in activity, Albert MINEO and Laurence DAUPLAT, at the sum of 2,500 euros charged to Jérôme KERVIEL;

Whereas it will also be necessary to condemn Jérôme KERVIEL to pay to Albert MINEO and Laurence DAUPLAT a sum of 1,500 euros under article 475-1 of the code of criminal procedure;

  1. F)On the requests of SOCIETE GENERALE

Whereas at the hearing of June 24, 2010, the Société Générale filed conclusions tending to the condemnation of Jérôme KERVIEL to pay him in compensation for the damages suffered a sum to be improved of 4,915,610,154 euros;

that in respect of the financial damage, it maintains that the damage results from the loss caused by the imperative unwinding of the positions fraudulently constituted between January 5 and January 18, 2008 by Jérôme KERVIEL in the amount of 52,257,062,380 euros in the form of futures and forwards;

that the civil party specifies:

–    as of January 18, 2008, based on the closing price, the unrealized loss was already 2,779,631,464 euros;

–    that the capital loss on the sale made over the period from January 18 to 23, 2008 amounts to 6,445,696,815 euros, in addition to a residual position on January 23 of 58,810,888 euros;

–    that as a consequence, on January 23, 2008, the net loss is established, after deduction of the gain realized on December 31, 2007 to the amount of 1,471,275,773 euros, to the sum of 4,915,610,154 euros, amount taken back by the statutory auditors of Société Générale and the banking commission and published in appendices to the financial statements of Société Générale for the year 2008.

Whereas Société Générale also asserts:

– that Jérôme KERVIEL was only able to take aberrant positions on the Dax, the Eurostoxx and the FTSE by committing all the offenses with which he is accused, only the desire to fraudulently deceive the bank in order to try to escape

Page n ° 67


the discovery of the totality of the offenses continued until January 18 in the evening and that it was only on January 20 in the morning that the defendant ended up confessing the existence of the colossal positions which he had taken;

–   that the immediate liquidation of fraudulent positions and the resulting loss were the mechanical consequence of their constitution by these fraudulent means

–   that, as a result of these actions which no longer complied with the prudential ratios provided for in article 511-41 of the CMF and regulation 90-02 of 23 January 1990, relating to own funds, regulation 91-05 of 15 February 1991 relating to solvency ratios, and regulation 95-02 of July 21, 1995 relating to the prudential supervision of market risks (in particular articles 2, 5.6 and 7 of the said text), the bank had no other choice , with regard to banking regulations, than to liquidate Jérôme KERVIEL’s positions without delay ;

–   that Société Générale was inevitably led to unwind these positions without delay in order to comply with the General Regulations of the Autorité des Marchés Financiers (RGAMF) and particularly with article 223-2 of this text, relating to communication to markets “as soon as possible” inside information held by issuers of listed financial instruments, given the obvious influence that this information was likely to have on Société Générale’s price if it had come to be known to the public ;

–   that the financial and stock market context in which the unwinding took place does not allow us to affirm that this would be the cause of the very negative and volatile dynamics of the financial markets between January 21 and 23, 2008;

– that the launch of operations on Monday January 21, in the absence of
American investors due to a public holiday in the United States, was not likely to
create a difference in the volumes traded;

– that a study, carried out on the possibility of postponing unwinding operations over a period extending from January 21 to October 8, 2008, showed an average loss of 9 billion euros, with a maximum reached in October 2008 totaling 18 billion euros;

– that the commercial and reputational damage invoked by Société Générale results according to the civil party from the intense media activity surrounding the discovery of the facts, and reiterated as the trial approaches through a media campaign initiated by the defendant .

Whereas Jérôme KERVIEL has never contested the materiality of these commitments; that in his defense, in addition to having pleaded for the release in particular of the count of breach of trust, he essentially argued that he was no longer in possession of these positions as of January 18, 2008, date on which the unrealized loss was 2.7 billion euros, criticizing the strategy deployed to achieve this unwinding;

Whereas it nevertheless emerges from the debates and documents of the proceedings that Société Générale was the victim of the willful act of Jérôme KERVIEL, constituting the offenses of breach of trust, forgery and use of forgery and fraudulent introduction data in an automated data processing system, of which he is guilty; that negligence attributable to the civil party cannot be taken into account in determining the extent of its rights to compensation resulting from the commission of willful offenses; that in fact, Jérôme KERVIEL was the sole designer, initiator and developer of the fraud system that caused the damage caused to the civil party ; that it follows that the Société Générale is entitled to obtain compensation for the entire financial loss resulting from it;

Whereas these damages are due to the taking of directional positions outside the mandate for a total nominal amount of around 50 billion euros, i.e. the equivalent of double the bank’s own funds, and masked by fictitious transactions ; that they extend to all the losses recorded as a result of the unwinding of said positions, carried out in an unfavorable economic situation during the

Page n ° 68


Judgment n ° 1

week which followed the revelation of the facts, on instruction of the leaders of the bank after having received the approval of the authorities of regulation of market; that it was in vain that Jérôme KERVIEL was able to draw an argument from the intention he would have had to unwind only at the expiration of the futures, since the regulations prohibited the institution from maintaining such positions and that the risk of disclosure in the market necessitated immediate communication to the market; that in addition the theoretical analysis over the following months and up to October 2008 concluded that losses could have reached on average 8 billion euros between January 21 and October 8, 2008, or even 15 billion inSeptember and over $ 18 billion in October;

that therefore the damage resulting from the taking of fraudulent positions and that the unwinding has revealed and consolidated beyond January 18, 2008 is certain in its quantum up to 4,915,610,154 euros, corresponding to the losses noted in the amount of 6,445. 693,815 euros, after deduction of the gain realized on December 31, 2007, ie 1,471,275,773 euros and the remainder of residual positions remaining on January 23, 2008 in the amount of 58,810,888 euros;

that it is therefore appropriate to condemn Jérôme KERVIEL to pay all the sums claimed by Société Générale.


Page n ° 69



The court ruling publicly, in correctional matters, in first instance and by contradictory judgment against Jérôme KERVIEL, accused; with regard to SOCIETE GENERALE, Albert Lucien Marius MINEO, Laurence DAUPLAT, Adrien RIGHI, Marcel ROCA, Marie CACCIAPUOTI wife VUILLEMIN, Déborah DAIGNE wife VICTOR, Nadine GRUNBERG, Gérard KILIAN, Nelly PELLET-LEGUEVAQUES, Pascal PERUCHON, Marie-Claude PODGUSZER, Jac VAN BRAKEL, Lilian WINTHER, Xavier KEMLIN, Gérard COSCAS and HCCDA, civil parties;


DECLARES Jérôme KERVIEL GUILTY for the facts qualified as:


acts committed during the years 2005, 2006, 2007 and until January 19, 2008 and

since time not prescribed, in Paris and at La Défense, in any case on the national territory.


facts committed during the year 2007 and until January 19, 2008 since time not prescribed, in Paris and at the Defense, in any case on the national territory.


facts committed during the year 2007 and until January 19, 2008 since time not prescribed, in Paris and at the Defense, in any case on the national territory.


acts committed during the years 2005, 2006, 2007 and until January 19, 2008 and

since time not prescribed, in Paris and at La Défense in any case on the national territory.

Considering the aforementioned articles:

CONDEMNS Jérôme KERVIEL to 5 years’ imprisonment.

Considering articles 132-29 to 132-34 of the Penal Code:

SAYS that the execution of this sentence will be suspended for a period of 2 years, under the conditions provided for by these articles.

And immediately, the president, following this sentence accompanied by the simple suspension, gave the warning, provided for in article 132-29 of the Penal Code, to the convicted person that if he commits a new offense, he may be subject to a conviction which will be likely to result in the execution of the first sentence without confusion with the second and that it will incur the penalties of recidivism in the terms of articles 132-9 and 132-10 of the Code

Page n ° 70


The defendant present at the hearing is informed of the possibility for the civil party, not eligible for the CIVI, to seize the S ARVI if he does not proceed to the payment of the damages to which he was ordered within the period of 2 current month from the day on which the decision becomes final.

As an additional penalty:

Considering article 131-27 and 314-10-2 “of the Penal Code:

FORBIDDEN Jérôme KERVIEL, on a permanent basis, from directly or indirectly exercising one or more professional activities, in this case from exercising the activities of a market operator and any activity relating to the financial markets.

As an additional penalty: ORDERS the confiscation of seals.

This decision is subject to a fixed procedural fee in the amount of 90 euros for which the convicted person is liable.

The president advises Jérôme KERVIEL that if he pays the amount of the fixed procedural fee within a period of one month from the date on which this decision was pronounced, this amount will be reduced by 20% without this reduction. may exceed 1,500 euros in accordance with Articles 707-2 and 707-3 of the Code of Criminal Procedure. The president further informs him that the payment of the fine and the fixed procedural fee does not preclude the exercise of the remedies.

In the event of an appeal against the penal provisions, it is up to the person concerned to request the restitution of the sums paid.


NOTES THE WITHDRAWAL from the constitution of civil party of Mr. Gérard COSCAS.

NOTES THE WITHDRAWAL from the constitution of civil party of Mr. Xavier KEMLIN.

** #

DECLARES the constitution of civil party of the HCCDA association represented by M Joël BOUARD inadmissible.


DECLARES the constitutions of civil parties of Mrs. Déborah DAIGNE wife VICTOR, of Mrs. Nadine GRUNBERG, of Mr. Gérard KILIAN, inadmissible,

Page n ° 71

of Mrs. Nelly PELLET-LEGUEVAQUES, of Mr. Pascal PERUCHON, of Mrs. Marie-Claude PODGUSZER, of Mr. Jac VAN BRAKEL, and of Mr. Lilian WINTHER.


DECLARES inadmissible the constitutions of civil parties of Mr. Adrien RIGHI, of Mr. Marcel ROCA and of Mrs. Marie CACCIAPUOTI wife VUILLEMIN.

DECLARES the constitution of civil party of Mr. Albert Lucien Marius MINEO admissible.

CONDEMNS Mr. Jérôme KERVIEL, to pay to Mr. Albert Lucien Marius MINEO, civil party, the sum of TWO THOUSAND FIVE HUNDRED EUROS (2,500 euros), in compensation for non-pecuniary damage,

and in addition the sum of THOUSAND FIVE HUNDRED EUROS (1,500 euros) under article 475-1 of the Code of Criminal Procedure.

DECLARES Ms. Laurence DAUPLAT’s constitution as civil party admissible.

CONDEMNS Mr. Jérôme KERVIEL, to pay to Ms. Laurence DAUPLAT, civil party , the sum of TWO THOUSAND FIVE HUNDRED EUROS (2,500 euros), in compensation for non-pecuniary damage,

and in addition the sum of THOUSAND FIVE HUNDRED EUROS (1,500 euros) under article 475-1 of the Code of Criminal Procedure.

DECLARES the constitution of civil party of SOCIETE GENERALE admissible.


Page n ° 72


Judgment n ° 1

Hearings of 8, 9, 10, 11, 14, 15, 16, 17, 21, 22, 23, 24 and 25 June 2010, the 1 -th chamber 3 th section, the panel was composed of:

Chairman: M. Dominique PAUTHE, vice-chairman

Assessors: Ms. Cécile LOUIS-LOYANT, vice-president

Mrs Virginie TILMONT, judge

Public Prosecutor: Mr. Jean-Michel ALDEBERT, Deputy Prosecutor of the Republic Mr. Philippe BOURION, Deputy Prosecutor of the Republic

Registrar: Miss Sandrine LAVAUD, Registrar

Done, judged and deliberated by:

Chairman: Mr. Dominique PAUTHE vice-chairman

Assessors: Ms. Cécile LOUIS-LO YANT vice-president

Mrs Virginie TILMONT, judge

and delivered at the hearing on 5 October 2010 from the 1 Ith room 3 rd section, Mr. Dominique PAUTHE, President, in the presence of Mrs. Cécile LOUIS Y ANT-LO, Vice President, Ms. Marina IGELMAN, judge, and by Mr. Philippe BOURION, Deputy Prosecutor, and assisted by Miss Sandrine LAVAUD, Registrar.


Leave a Comment

Your email address will not be published.

Reload Image