Ex-trader at Société Générale claims bosses knew

In a hearing with investigating judges on March 6, however, the supervisor, Eric Cordelle, flatly denied Kerviel's claim, saying that at the time in question he did not even have the necessary software on his computer, the document shows.

In a second instance, however, Cordelle admitted that he had witnessed Kerviel entering trades on the computer of a trainee and even confronted him about this activity. But there was no indication that he ever followed up.

Details of testimony by Kerviel, Cordelle and several other employees of Société Générale's Delta One derivatives trading desk, were included in a six-page summary of arguments presented by the Paris prosecutor's office Wednesday to appeals court judges. The judges are to hear a request by Kerviel's lawyers on Friday that the trader be released from pretrial custody.

The disclosure came on the same day that Manuel Zabraniecki, a broker in Société Générale's cash equity trading department, was released from police custody without charges, following 24 hours of questioning related to the case.

According to the prosecutor's summary, Kerviel claimed that beginning in March or April 2007, "he asked his assistant, Thomas Mougard, to input fictitious transactions" and that Mougard "carried out his instructions knowing that they concerned hiding open positions and earnings."

Kerviel told investigators that at that time, he was making speculative bets on the order of €500 million or €600 million, or $780 million to $935 million, at current exchange rates, "at the work station of his direct superior, Eric Cordelle, and in his presence," the document said. Kerviel explained that these were "positions that he was unwinding, as a rule, during the day or that he would transfer onto his own computer, from which either he erased them immediately or kept them without Eric Cordelle's knowledge."

According to the prosecutor's summary, Cordelle said it would not have been possible for anyone to input trades from his computer because he "did not have the software tools at the time of the events and could not have witnessed the operations described by Jérôme Kerviel."

But Cordelle admitted that on a separate occasion he saw Kerviel input trades using the computer of a trainee on the desk, and confronted him about it. He said he saw Kerviel "take intraday positions for a few hours on the machine used by Bu-Ly Wu, a junior trader, as part of his training," the prosecutor's summary said. The document said Kerviel had not disputed Cordelle's account, but did not indicate when this episode took place.

According to excerpts of Cordelle's testimony published Thursday in the French newspaper, Le Monde, Cordelle said that he questioned Kerviel on several occasions, but "each time Mr. Kerviel's responses convinced me."

Jean Veil, a lawyer for Société Générale, confirmed the accuracy of the testimony cited in Le Monde.

Kerviel's assistant, Mougard, categorically denied ever knowingly entering fictitious transactions himself. He said that Kerviel, however, had justified fake trades of his own, arguing that because he was entering them after hours and through Société Générale's brokerage arm, Fimat, "it was necessary for him to have as a hedge a buy-sell share operation that had no actual existence."

Kerviel has said in the past that he used computer logons and passwords of other employees to execute some of his fictitious trades.

Mougard conceded that he "could have entered," under his own logon, some transactions from Kerviel's workstation, "but not all the transactions listed" by Kerviel. Mougard also said he "could not exclude" the possibility that on some occasions he "may have forgotten to log off when he was using Jérôme Kerviel's workstation to access certain timely information."

Cordelle, 36, became deputy head of the Delta One desk, in charge of eight traders, in the spring of 2007, shortly after returning to Paris from a four-year assignment at Société Générale's offices in Tokyo.

According to the excerpts of Cordelle's testimony in Le Monde, Cordelle admitted that he had been contacted by the bank's back-office staff in November following an inquiry from Eurex, the Frankfurt-based derivatives exchange. Eurex was seeking explanations about Kerviel's trades - in particular a purchase on Oct. 19 involving 6,000 DAX index futures contracts, valued at more than €1 billion.