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French trader in scandal ordered behind bars

A Paris court ordered French trader Jerome Kerviel to be jailed while investigations continue into billions of dollars in losses he allegedly caused at Societe Generale bank.
/ Source: The Associated Press

A Paris court ordered French trader Jerome Kerviel on Friday to be jailed while investigations continue into billions of dollars in losses he allegedly caused at Societe Generale bank.

Also Friday, the legal probe into the case broadened, with police holding a brokerage employee who had been in contact with Kerviel, a 31-year-old futures trader.

The judges' decision to jail Kerviel came after prosecutors said they were concerned he might contact accomplices, if he had any, jeopardizing what promises to be a long and complex probe. Kerviel plans to appeal, said lawyer Raphael Colas, who works with Kerviel's attorney Elisabeth Meyer.

Judges had allowed Kerviel to go free last month, after his lawyer argued he did not pose a flight risk.

News that police had arrested a second person, an employee at a brokerage arm of Societe Generale, again raised the question of whether Kerviel acted alone.

Societe Generale, one of France's biggest banks, has said Kerviel did not appear to have accomplices when he made massive unauthorized bets on European futures markets that the bank said cost it more than $7 billion to unwind.

A judicial official said the bank has turned over new evidence, including a message sent to Kerviel through the bank's computer system by the broker now in custody.

The message, sent Nov. 30, read: "You have done nothing illegal in terms of the law," the official said, confirming a report that first appeared in Le Monde newspaper.

The employee, who worked at Newedge, a 50-50 joint venture between Societe Generale and Calyon bank, was taken into custody Thursday and was still being held Friday evening, said the judicial official, who refused to be identified because of the sensitivity of the case. Police investigators also searched the Newedge office on Paris' Champs-Elyses in the case, the official said.

Joelle Rosello, a Societe Generale spokeswoman, confirmed the employee was in custody. "We are cooperating closely with police," she said.

Le Monde said Kerviel passed some trades through the brokerage, and that police suspect that the brokerage employee was aware of Kerviel's activities. It said the brokerage was searched Thursday.

Societe Generale announced Jan. 24 that it lost $7.09 billion in cleaning up Kerviel's unauthorized transactions. It said Kerviel overstepped his authority and bet $73 billion — more than the market value of the entire bank — on futures in European equity markets. It also said he did not appear to have profited personally from the trades.

Since new of the case broke, Societe Generale has faced questions about its future. There has been speculation it could be bought out or broken up. In addition, there have been questions about how Kerviel's activities went unnoticed.

Investigating judges have filed preliminary charges against Kerviel for forgery, breach of trust and unauthorized computer activity. Such preliminary charges allow judges time to further investigate and decide whether to send the case to trial.