Jan 26, 2008 9:45 am US/Eastern
France's $7 Bil Rogue Trader In Custody
PARIS (CBS) ―
A trader blamed by the French bank Societe General for a massive fraud was taken into custody on Saturday, judicial officials said.
Financial police in Paris were to question Jerome Kerviel as part of a probe into Societe Generale's announcement Thursday that the 31-year-old trader was behind a fraud costing the bank $7.14 billion, judicial officials said. They spoke on condition of anonymity because the investigation is ongoing.
Skeptics from Kerviel's neighbors to France's prime minister have questioned whether a single futures trader could have managed such large sums. Adding to the mystery, the bank said Kerviel may not have made any personal gain from his unauthorized trades.
The bank said it discovered the fraud last weekend and unwound the trader's losing bets starting Monday, when world markets tumbled. Some analysts have questioned whether Societe Generale exacerbated the fall and indirectly led to the U.S. Federal Reserve's subsequent decision to cut rates.
Kerviel's deception recalls the massive fraud carried out by Nick Leeson, who in 1995 bankrupted British bank Barings. Barings collapsed after Leeson, the bank's Singapore general manager of futures trading, lost 860 million pounds - then worth $1.38 billion - on Asian futures markets, wiping out the bank's cash reserves. The company had been in business for more than 230 years.
Leeson told CBS' The Early Show the flaws that allowed him to commit his fraud still exist.
"They haven't closed down the loopholes. I think when you look at what the banks are trying to do, they focus on trying to make the money. They are not too interested in trying to save it," Leeson said.
(© 2008 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
