Jerome Kerviel, 'Anti-Hero' French Rogue Trader, Heads To Trial

06/07/2010 09:31 am ET | Updated May 25, 2011

PARIS — Jerome Kerviel says he's living the simple life these days. The former French trader accused of gambling away billions of his bank's money has a job in the suburbs making euro2,300 ($2,700) a month. He doesn't take vacations. His adrenaline-fueled life on the trading floor seems far away.

Two and a half years after the scandal broke, Kerviel goes on trial in Paris on Tuesday, accused by Societe Generale SA of risking tens of billions of euros of its money in trades that led to nearly euro5 billion (more than $7 billion) in losses once the bank unwound his positions in January 2008.

At the time it was considered history's biggest trading fraud, but it was soon dwarfed by a global financial crisis, the fall of Lehman Brothers and the Bernard L. Madoff multibillion-dollar Ponzi scheme.

Kerviel, the accused rogue trader, already has hammered out his defense in a book and interviews with French media, casting himself as an everyman who got carried away, a scapegoat for the bank, the victim of an out-of-control banking system.

It's a tactic that seems crafted to tap into popular discontent at a time of ongoing financial scandals and economic turmoil. His case destabilized the banking sector, already on the verge of the 2008 meltdown, and heightened pressure for better financial regulation, still high on today's agenda for governments worldwide.

Helping Kerviel's strategy is the 33-year-old's standing as an anti-hero in France. The son of a metalworker and a hairdresser, Kerviel grew up in the provinces and lacked the snooty education usually required for coveted trading jobs, yet he nonetheless managed to humiliate a banking powerhouse and expose the weakness of its controls.

A few bank executives resigned in the scandal's aftermath, including longtime Chairman Daniel Bouton. Kerviel's superiors were questioned in the probe, but none of them face charges.

Kerviel's dark-haired Gallic good looks also helped his mystique: T-shirts were sold proclaiming their wearers "Jerome Kerviel's girlfriend."

The former futures trader's defense contends his supervisors were aware of his risks but did not stop them as long as he was making money for Societe Generale. The bank denies that claim.

In Kerviel's book out last month, "L'Engrenage: Memoires d'un trader" ("The Spiral: Memoirs of a Trader"), he compared his former job to prostitution – with his superiors eagerly counting his days' earnings – and likened that milieu to a "great banking orgy."

Kerviel is charged with forgery, breach of trust and unauthorized computer use. He risks five years in prison as well as a fine of euro375,000 ($448,000) if convicted.

Societe Generale lawyer Jean Veil told the Sunday paper Le Journal du Dimanche that the bank would also ask for euro4.9 billion in damages, the amount lost in the scandal's aftermath, though he acknowledged that realistically Kerviel couldn't pay it. The massive sum earned Kerviel a nickname, "the 5-billion-euro man."

Among the defense arguments expected in court, Kerviel has argued that the bank was trying to deflect attention from subprime-related losses by making him a scapegoat.

Societe Generale secretly began unwinding some 50 billion euros ($78 billion) of Kerviel's positions on Jan. 21, 2008, when U.S. markets were closed because of Martin Luther King Day, putting massive pressure on futures markets and exacerbating its losses. That week was marked by turmoil in financial markets worldwide.

The bank revealed its actions three days later, when it also announced subprime-related writedowns and provisions of euro2.05 billion. Societe Generale's legal team has said it is absurd to claim the bank was seeking to hide its subprime exposure.

Societe Generale has been gradually recovering from the trading scandal, but it's been an up-and-down ride. It successfully raised capital not long after the Kerviel affair broke, but then was hit by the global financial crisis in late 2008.

It weathered the meltdown better than some, and paid back its state loans early. This year the bank has faced another challenge – euro3 billion in exposure to Greek government debt – but reported euro1.06 billion in profit for the first quarter and is forecasting a profitable year.

The trial is expected to last through late June. Questions abound, including how Kerviel managed to cover up his risky trading for so long. An internal report by the bank has said managers failed to follow up on 74 different alarms about Kerviel's activities and queries from derivatives exchange Eurex.

And why did Kerviel take such huge risks? He is not believed to have profited personally – he never made more than euro100,000 annually, including his bonus – and insists he only wanted to earn money for Societe Generale.

In an interview last month with Le Journal du Dimanche, Kerviel said his mother instilled him with a dogged sense of dedication to your job, and he often helped out in her hair salon. Kerviel has reportedly received media training for his "I'm just an average guy" strategy.

Asked, "How are you living these days?" Kerviel responded: "Modestly, like a lot of people," adding that he has a small apartment, doesn't go on vacation and earns euro2,300 a month at a computer services company outside Paris.

(This version CORRECTS Corrects "lost" to "lot" in final graf. Moving on general news and financial services.)