The group Société Générale confirms that they were a victim of an exceptional fraud : A trader, responsible for “plain vanilla” futures hedging on the european equity markets, had taken fraudulent directional positions during 2007 and early 2008 going well beyond the permitted limits on futures.
His detailed knowledge of control procedures, acquired during his previous functions within the back office administration of the group, enabled him to hide his trades through elaborate fictitious transactions.
The group claims not to have anymore residual exposure connected to these positions and that the impact of this fraud will amount to 4,9 billion euros.
The positions of the trader were reviewed and a detailed analysis of all his positions within his department confirmed the isolated and exceptional nature of this fraud.
The employee who is well aware of the facts, has been relieved of his functions and a dismissal procedure has been put into place. Management has also announced that those in charge of supervision will leave the group.
His detailed knowledge of control procedures, acquired during his previous functions within the back office of the group, enabled him to hide his trades through elaborate fictitious transactions.
Société Générale
All this came on the back of the depreciation on its portfolio of assets linked to the American residential real estate and to the risks of “Monolines” to a total of 2 billion euros.
Fitch decided to bring down SG?s long term rating.
The Société Générale will have a capital increase of 5,5 billion euros from a banking pool belonging to JP Morgan and Morgan Stanley.
In the face of these events, Daniel Bouton, CEO of the group offered his resignation but it was refused by the board of directors.
As a show of solidarity, Daniel Bouton and his assistant Philipe Citerne gave up their bonus in 2007 and will not receive a salary until June, 2008.
Dissatisfied and skeptical, the minority shareholders decided to lodge a complaint against X for swindle, breach of trust, forgery and use of forgeries.
The Bank of France is going to carry out an investigation which will be led by the banking committee.
BNP Paribas has not revealed any loss that would justify any particular warning to the market.
The Crédit Agricole did not make a comment: in September, 2007, traders of its subsidiary Calyon had hidden losses amounting to 250 million euros. Six employees had been dismissed.
Several market operators expressed their surprise at the amounts at stake: it seems difficult to believe that a single person was able to hide such colossal sums.
