Ex-trader Jerome Kerviel was convicted on all counts Tuesday in history's biggest rogue trading scandal, sentenced to three years in prison and ordered to pay his former employer damages of euro4.9 billion ($6.7 billion) a sum so staggering it drew gasps in the courtroom.
The court rejected defense arguments that the 33-year-old trader was a scapegoat for a financial system gone haywire with greed and the pursuit of profit at any cost a decision sure to take some pressure off the beleaguered banking system overall.
By ordering a tough sentence for a lone trader, the ruling marked a startling departure from the general atmosphere of hostility and suspicion about big banks in an era of financial turmoil. It was a huge victory for Kerviel's former employer Societe Generale SA, France's second-biggest bank, which long had a reputation for cutting-edge financial engineering and has put in place tougher risk controls since the scandal broke in 2008.
Kerviel maintained that the bank and his bosses tolerated his massive risk-taking as long as it made money.
"I have the feeling Jerome Kerviel is paying for an entire system," said Olivier Metzner, Kerviel's lawyer, noting that his client hadn't benefited financially from the fraud.
Kerviel stood expressionless as the court convicted him and pronounced a five-year sentence with two years suspended. Kerviel was found guilty on charges of forgery, breach of trust and unauthorized computer use for covering up bets worth nearly euro50 billion between late 2007 and early 2008. He was also banned for life from working in the financial industry.
In the most stunning blow, the court ordered Kerviel to pay the bank back the euro4.9 billion that it lost unwinding his complex positions in January 2008 a punishment nobody realistically expects him to repay.
It's the equivalent of 20 Airbus A380 superjumbo jets, or the entire gross domestic product of the West African nation of Benin.
French media calculated that based on his current salary of euro2,300 ($3,150) a month as a computer consultant it would take Kerviel 177,536 years to pay off the damages.
The sentence "is more symbolic than real" said Bradley Simon, a white collar criminal defense attorney, "because he will never be able to pay even a tiny fraction" of the amount.
Simon, a New York-based former federal prosecutor turned white-collar criminal defense attorney, said the decision was "breathtaking."
"One low-level individual must bear the total responsibility for the near-demise of a pillar of the French financial system," Simon said. "This judgment ignores what we now know to be the real case, that Societe Generale and financial institutions throughout the world were encouraging risky trades."
Kerviel's lawyer said he would appeal and will remain free pending that appeal. The damages are also suspended during the appeals process.
Paris lawyer Emmanuelle Kneuse, who works on white-collar crime cases, said the damages were the largest she could recall in France.
If the prison sentence and huge damages are maintained on appeal, that would likely force Kerviel to promise substantial monthly payments to secure his release on parole, she said.
Societe Generale spokeswoman Caroline Guillaumin called the verdict "an important ruling that acknowledges the moral and financial harm done to the bank and its staff."
"The bank can now turn the page, pursue its strategy and continue to rebound," Guillaumin said in an e-mailed statement.
Kerviel sat with his arms folded and his legs crossed during the first 45 minutes of the hour-long hearing, alone in the front row of the courtroom. He barely blinked as each guilty verdict was read out. He then stood for sentencing in a dark suit and tie, frowning and silent.
"He is disgusted," Metzner said of Kerviel's reaction, adding the court had judged the bank "was responsible for nothing, not responsible for the creature that it had created."
"I hope you all will donate a euro to Jerome Kerviel," the lawyer told TV cameras and reporters.
Kerviel, a soft-spoken and debonair man from western Brittany, has garnered considerable public appeal in France for his image of being a scapegoat for powerful corporate interests.
While trading for the bank, Kerviel took home a salary and bonus of less than euro100,000, or about $155,700 a relatively modest sum in the financial world.
In 2007, Kerviel amassed euro1.4 billion in profits for Societe Generale, the presiding judge noted.
But in the end, the bank's loss of euro4.9 billion stands as the largest-ever alleged fraud by a single trader, though the case has since been overshadowed by other financial world crises, from the fall of Lehman Brothers to Bernard L. Madoff's multibillion-dollar Ponzi scheme.
During the proceedings, both sides admitted to mistakes but Kerviel insisted his bank superiors knew what he was doing. Societe Generale's former chairman acknowledged there were problems in monitoring the trader's work, and an internal report by the bank found managers failed to follow up on 74 different alarms about Kerviel's activities.
The bank says Kerviel made bets of up to euro50 billion more than the bank's total market value on futures contracts on three European equity indices, and that he masked the size of his bets by recording fictitious offsetting transactions.
In the ruling, the court said Kerviel acted without the bank's knowledge and said it was "obvious" none of his bosses would have allowed him to bet sums exceeding the bank's capital.
"Through his deliberate actions, he endangered the solvency of a bank that employed 140,000 people including himself, and whose future was seriously put at risk," the ruling said.
No one else faced charges in the case. The bank's CEO Daniel Bouton and its head of investment banking Jean-Pierre Mustier stepped down in the wake of the scandal, with Bouton saying attacks on him risked hurting the bank.
The bank's earnings crumpled in 2007 after taking into account the losses on Kerviel's trades. Its profit rebounded in 2008 but were cut by more than half last year when the bank was hit by billions in new losses stemming from bad bets prior to the financial crisis. This year the bank's earnings have bounced back, thanks to strong retail banking in its home market.
Employed by Societe Generale since 2000, Kerviel worked his way up from a supporting role in an office that monitors trades to a job on the futures desk where he invested the bank's money by hedging on European equity market indices.
He was arrested in January 2008 and held for six weeks in Paris' La Sante prison.
Societe Generale's shares rose after the announcement of the verdict, closing up 3.6 percent at euro42.33 (US$58.33).
Kerviel's fraud eclipsed that of previous lone traders.
In one infamous case, Nick Leeson, a British trader working in Singapore for Barings Bank, made unauthorized futures trades that lost more than $1 billion and led to the venerable bank's collapse in 1995. That case prompted banks worldwide to tighten their internal checks.
Leeson was released from a Singapore jail in 1998 for good behavior after serving 3 1/2 years of a 6 1/2-year sentence. He claimed he did not make a cent from his disastrous trades but is still subject to an injunction from Barings' liquidators that seeks the return of 100 million pounds on any of his earnings relating to Barings.
Leeson's agent said Tuesday the former trader was willing to do an exclusive interview on the Kerviel verdict in exchange for a fee.