Is it possible that our French banking friends are using this guy to cover their own behinds?
FRENCH judges have placed rogue trader Jerome Kerviel under formal investigation but stopped short of charging him with fraud and have freed him from police custody.
Shares in Societe Generale, where Mr Kerviel is alleged to have lost $8 billion, took a battering as allegations emerged that a board member was guilty of insider trading related to the scandal.
Mr Kerviel was freed on bail after being placed under formal investigation for "breach of trust", "falsifying and using falsified documents," and "breaching IT procedures," said his lawyer Elisabeth Meyer.
Judges rejected a bid to charge Mr Kerviel, accused by the French banking giant of losing €4.9bn ($8.23bn) with the more serious crimes of "gross breach of trust" and "attempted fraud". "It's a great victory," Ms Meyer said, "but it's only justice being done."
Mr Kerviel, 31, who had been in police custody for more than 48 hours, walked free today after being told not to communicate with Societe Generale employees or to work in any financial services capacity until the case was resolved.
But no sooner had the 'rogue trader' handed over his passport - which turned out to have expired anyway - than prosecutors lodged an appeal against his release.
The launching of a formal investigation in France does not automatically mean that a trial will follow.
If found guilty of breach of trust, Mr Kerviel would face a maximum sentence of three years in prison and a fine of €370,000, less than half of what he might have faced if fraud charges had been laid against him.
President Nicolas Sarkozy had earlier warned there must be consequences for those responsible for the scandal, with chairman Daniel Bouton, whose offer of resignation was rejected last week, firmly in the line of fire.
"When there is an event of this nature, it cannot remain without consequences in terms of responsibility," Mr Sarkozy said.
Societe Generale shares had already plunged 7 per cent to €68.67 in morning trading, its lowest level since mid-2004.
Mr Bouton went to London in a bid to shore up investor support for a proposed €5.5bn capital increase to cover the trading losses and €2bn of losses in the US subprime market.
But about 100 Societe Generale shareholders filed suit for insider trading and manipulating share prices after the market regulator AMF revealed that a supervisory board member had sold shares worth €85.7 million on January 9.
Societe Generale's stock has now lost about 50 per cent of its value since May last year and 22 per cent since the close on January 9.
The suit by members of the Association of Small Shareholders (APPAC) targets American Robert A Day and two foundations linked to him, said lawyer Frederik-Karel Canoy.
Prosecutor Jean-Claude Marin said Mr Kerviel had admitted during two days of questioning that "he carried out a certain number of acts to conceal reckless positions on the markets", but did not try to profit personally from the financial deals.
"He wanted to be seen as an exceptional trader, an astute market player," said Mr Marin, adding that he was attracted by the prospect of a €300,000 bonus.
"He went beyond what he was authorised to do on the market, it is true, but he wasn't trying to plunder the bank."
The trader turned himself in to police on Saturday, since when Mr Kerviel's lawyers have accused the bank of trying to "create a smokescreen" to cover up wider losses from the US subprime mortgage crisis.
They argue Societe Generale brought the losses on itself by hastily dumping what were in essence stock market bets.
Mr Kerviel had held positions worth about €50bn when irregularities were first detected - well in excess of the bank's market value of €35.9bn and its shareholder funds.
Within days, Societe Generale moved to unwind his deals, incurring losses of €4.9bn.
According to Mr Marin, Societe Generale challenged Mr Kerviel several times about risky operations, and each time he produced fictitious documents to justify himself.
The trader had bought futures in three European indices - the Eurostoxx, the DAX in Frankfurt and the FTSE in London - effectively betting on the future direction of the stock market.
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