French bank says trader hacked computers

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Societe Generale said Kerviel misappropriated other people's computer access codes, falsified documents and employed other methods to cover his tracks — helped by his previous years of experience when he worked in other offices at the bank that monitor traders. Acquaintances described Kerviel as reserved and considerate, a young man who once taught children judo and held the door for elderly neighbors.

Kerviel's downfall started in the days before Friday, Jan. 18, when Societe Generale tightened lending restrictions on one of its customers, an unnamed large bank. He had apparently used that bank's name for one or more of his fictitious trades, and it led to what Societe Generale described as having "additional controls" put in place.

Kerviel's superiors in Societe Generale's equity trading division reviewed an e-mail that day from the large bank supposedly confirming trades he had booked. But they were suspicious about where the e-mail came from and launched an emergency investigation.

A day later, Kerviel was called to Societe Generale to explain. In the meantime, bank investigators confirmed that the large bank did not know about the trades.

After first not providing a clear explanation, Kerviel eventually confirmed that he had entered fictitious trades, the bank said. It then took a bank team throughout the night and into Sunday, Jan. 20, to identify all the exposure. Societe Generale's chief executive, Daniel Bouton, notified the governor of the Bank of France that day, and a decision was made to unwind the trades as quickly and as quietly as possible.

A complicating factor was that the bank was finishing work that Sunday on details of a separate announcement about the size of the multi-billion-dollar charge it would take for bad bets on mortgage-related investments in the U.S. News of that misstep was delayed until Thursday, when along with the fraud losses, the bank said it would take a 2.05 billion euro ($2.99 billion) write-down.

Societe Generale traders began unwinding Kerviel's losing bets at the beginning of European trading on Monday, just as Asian markets were in a free-fall and European shares were poised to plummet after a big drop in U.S. markets on the previous Friday. It took until Wednesday to finally close the books on Kerviel's adventures, the bank said.

Kerviel's lawyer cast suspicion on the way Societe Generale unwound the position, saying it did so in "totally unusual conditions."

"This decision was driven by other motives," he claimed, without elaborating.

Some experts have suggested Societe Generale may have exacerbated the fall and indirectly led to the U.S. Federal Reserve's subsequent decision to cut rates.

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