Friday, January 25, 2008

Jerome Kerviel Places a Bet or Two (that's one imprudent employee, alright)

Remember how we used to gasp at the magnitude of the 1995 Barings' fiasco, when trader Nick Leeson managed to lose $1.4B doing a bit of unauthorized dabbling in Asian futures markets.

A new record has just been set by a trader who blew just a little too hot on the dice, and managed to lose the bank a cool $7.18B placing bad bets.

What do you expect from an employ whose last name has as an anagram Evil - or Vile - Rek.(An one more "v" in there and we could call him Evil Ker-vivel.)

According to the AP account I read (picked up by the Malaysia Star), Jerome Kerviel's

...motivations were "totally irrational,'' netting him no personal financial gains. It remains unclear whether he was acting out of malevolence, ambition or some other reason.

"No personal financial gain" - I guess that bébé did not need a new pair of chaussures.

His motivation? "Malevolence" and "some other reason" still appear operative, but "ambition" - that depends on whether he wanted to continue with a career in banking or seek fame and fortune elsewhere.


All I ever had to deal with was a guy in my group who kept trying to expense dry cleaning bills for short trips, and who insisted on picking up the drinking tabs for everyone he was on the road with.

The letter from Société Générale letting the world know what happened is a classic:

It is my duty to inform you that Société Générale has been a victim of a serious internal fraud committed by an imprudent employee in the Corporate and Investment Banking Division.

Talk about Gallic understatement: "an imprudent employee."

I've just traveled such small-time circuits. Imprudent employees I had to put up with left hostile, imprudent voice mails on the phones of my boss' peer; imprudently e-mailed off-color jokes to a list that included the office prude; and imprudently faxed the names and numbers of everyone in our division to a head-hunter (and imprudently left the telltale fax on a machine in the hall where someone from HR found it). Now that's imprudent.

$7.18B I would call insane, or criminal, or criminally insane. (A leader of the SocGen union commented that Kerviel "might have lost his mind a bit.''

Un peu. There's that Gallic understatement again. I'm kind of liking it, now that I'm getting used to it.

The SocGen letter continues:

The individual in question has been dismissed and legal action will be taken against him.

Good luck with the reparations. You'd have to garnish an awful lot of paychecks to make up the $7.18B, especially when Jerome may end up in the Bastille making license plates.

The Group's Board of Directors approved my decision to terminate the mandates of the managers, including the executive managers, involved in the breakdown of the supervision systems.

"Terminate the mandates of the managers..."

Wonder what that means?

I worked for one company that regularly jettisoned a senior manager, and the letter always came out that "X has left the company to pursue entrepreneurial activities." Thus we knew that their mandate had been seriously terminated.

(The AP article states that Kerviel's managers were dismissed when he was.)

One would have thought that a bank the size and reputation of Société Générale would have checks and balances in place that would have prevented this from happening, mais non.

As for Nick Leeson, we learn from - what else - his eponymous web site that he did some serious and highly dramatic time:

...six and half years in a gang-ridden Singaporean jail, in conditions that defy belief, while at the same time, his wife left him and he was diagnosed with colon cancer.

Against all odds, Nick Leeson survived and now fully recovered from cancer...

And talk about happily ever after, he's written a couple of books: Rogue Trader (which was made into a movie) and Back from the Brink. Back from the Brink. He's remarried, is a motivational speaker (!), and manages the Galway Ireland Football Club.

So there is hope for Jerome Kerviel. If Nick Leeson could resurrect his career - and, in fact, erect it on the foundation of his fraud - chances are that Jerome Kerviel, when he comes to his senses (and gets out of jail), will have some story to tell. At minimum, he should be able to find work in risk management, no?

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