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Another SocGen Trader Taken Into Custody

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PARIS — Investigators searched Societe Generale offices, confiscating records and taking another trader into custody Wednesday as they tried to determine whether the scandal that cost the venerable French bank billions of dollars was caused by more than one person.

Societe Generale spokeswoman Laura Schalk confirmed that investigators detained an employee whose name she declined to provide. She called the search part of "normal proceedings of the police investigation."

One trader, Jerome Kerviel, has already been jailed after the bank blamed him for unauthorized trades that cost SocGen more than $7 billion. Kerviel is hoping to get out of jail this week, and his lawyers insist there is no reason to keep him behind bars after a Societe Generale report on the losses backed up his claim that he acted alone.

Judicial officials, speaking on condition of anonymity because the investigation is ongoing, said Wednesday they are still trying to determine whether Kerviel had accomplices.

A French court is scheduled to rule Friday on whether Kerviel should be freed from Paris' La Sante prison, where he has been held since Feb. 8. Investigators have said they want to prevent Kerviel from speaking with accomplices, if they exist.

The detention of the new broker "is an attempt to influence the judges," Guillaume Selnet, one of Kerviel's lawyers, told The Associated Press.

Selnet noted that soon before the initial hearing a month ago on whether to detain Kerviel, a broker who had handled Kerviel's trades was taken into custody.

Investigating magistrates questioned the broker, Moussa Bakir, an employee of Newedge, a joint venture between Societe Generale and Calyon bank through which Kerviel passed some of his trades. Bakir was released without charge after two days of questioning.

Gilbert Fouche, an independent Paris lawyer, said the court will probably rule to keep Kerviel behind bars as long as questions remain about possible accomplices.

Kerviel says he acted alone but that his bosses must have been aware of his massive risk-taking, and turned a blind eye as long as he was making money for the bank. Investigators are searching for others who could have known about, or participated in, what the bank says was Kerviel's unauthorized activity.

A preliminary internal probe by Societe Generale found no evidence that anyone helped Kerviel hide his positions. The report said bank officials failed to follow up on 74 warnings about questionable trades, uncovering Kerviel's unauthorized positions only on the 75th.

Kerviel faces preliminary charges of forgery, breach of trust and unauthorized computer activity. If tried and convicted on those charges, he faces up to three years in prison and hefty fines.

Societe Generale reported a trading loss of 4.9 billion euros, or $7.58 billion, on Jan. 24 from liquidating 50 billion euros, or $73.18 billion, in unauthorized futures positions taken by Kerviel. The bank says Kerviel forged documents and e-mails to suggest he had hedged his positions.

On Tuesday, Societe Generale successfully raised 5.5 billion euros ($8.4 billion) in new capital through a share offering designed to restore its status as a top-tier bank after the scandal. Many analysts have said the success of the capital increase was essential for the bank's continuing independence.

An American investor sued the French bank in the United States on Wednesday, accusing it of downplaying its exposure to subprime loans and failing to give proper warning about its "culture of risk in which risky trading was tacitly permitted."

Attorney Phillip Barkett Jr. filed the suit in U.S. District Court in Manhattan on behalf of investors who bought the bank's ADRs, or American Depository Receipts, between Aug. 1, 2005, and Jan. 23, 2008, on U.S. markets and Americans who bought the bank's shares on any foreign exchanges.

The lawsuit names the bank, its Chief Executive Daniel Bouton and Robert Day, an American who was on the bank's board and is being investigated over allegations of insider trading.

"This lawsuit is entirely without merit," Day's spokesman, Josh Pekarsky, said. Pekarsky said Day wasn't told about the bank's trading losses or planned write-downs until after his last share sale and that he didn't use any inside information.

Societe Generale did not respond to several calls seeking comment.

Shares in the bank rose 6.2 percent Wednesday to 71.11 euros ($110.06) following an unsourced report in La Tribune business daily that rival BNP Paribas, which has said it is mulling a bid, could give details before the annual SocGen shareholder meeting May 27. BNP Paribas called the report part of the "rumor mill."


Associated Press writers Jeffrey Schaeffer, Pierre-Antoine Souchard and Devorah Lauter in Paris and Vinnee Tong in New York contributed to this report.