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Date: Fri Apr 04 2008 - 04:02:47 CDT

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http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3671089.ece

By Adam Sage in Paris
The Times
April 3, 2008

Jerome Kerviel, the rogue trader accused of losing his bank .5 billion
(3.9 billion) in one of the financial world's biggest scandals, has hit
upon a new money-making scheme . he is to sue his former employer for
unfair dismissal.

In the latest twist to the scandal, which won Mr Kerviel a legion of
fans in France, the rogue trader has launched court proceedings against
Socit Gnrale to contest his sacking for gross misconduct, The Times has
learnt.

The 31-year-old operator was released on bail last month after 37 days
in prison on charges of breach of trust, fabricating documents and
illegally accessing computers. In a sign that he intends to fight the
allegations made by SocGen, Mr Kerviel claims his dismissal is unlawful
because the bank has failed to prove he did anything wrong.

Mr Kerviel and his lawyers are basing their case on two points. The
first is that Mr Kerviel.s massive gambles on markets were actually in
the black when his bosses stepped in. The losses only occurred when
SocGen sought to unwind his gambles. The second relates to a legal
technicality. French labour laws force employers to hold face-to-face
meetings with employees to outline the case for terminating their work
contract. But, as Mr Kerviel.s lawyers point out, the meeting is
impossible because Mr Kerviel.s bail conditions forbid him from entering
into contact with SocGen staff.

Lawyers have filed papers arguing that the dismissal process should be
cancelled, according to a source in Paris. If Mr Kerviel won the case,
SocGen could be forced to make him a compensation offer.

The trader does not envisage a return to his old job as a derivatives
operator at SocGen, The Times understands.

The scandal erupted in January, when the bank announced it had incurred
a loss of .4.82 billion after unwinding Mr Kerviel's unauthorised
positions. Daniel Bouton, SocGen's chairman, denounced the trader as a
"cheat, fraud, terrorist" who had masked his activities through fake
documents and fictitious deals. The bank says that the team with which
Mr Kerviel was working was barred from taking total positions of more
than .125 million. Mr Kerviel alone staked .50 billion on European
futures markets, according to the bank.

Mr Kerviel.s lawyers say that SocGen failed to enforce a limit on
traders in an environment where they were encouraged to take risks in
the search for profits. They also claim that Mr Kerviel.s superiors knew
of his huge stakes and never tried to rein him in.

A report into the scandal, commissioned by SocGen, found that the bank
had failed to follow up 75 separate alerts about his trading activities

Mr Kerviel.s counsel also point out that he was often successful when
betting the bank.s money on the stock market and was .1.4 billion up at
the end of last year. They argue that SocGen was responsible for the
.4.82 billion loss after executives took the decision to unwind Mr
Kerviel.s positions as shares were tumbling on the world.s markets in
January.

The 144-year-old institution was forced into a .5.5 billion capital
increase to shore up its finances after its profits slumped by 82 per
cent as a result of the loss, and of writedowns linked to the subprime
crisis.

SocGen declined to comment on Mr Kerviel.s decision to challenge his
dismissal last night.

How scandal unfolded

2007: Kerviel starts building up large positions. As his losses mount he
tries to cover up

January 19, 2008: SocGen.s investigation team calculates the total
exposure is .50bn (35bn)

January 21: The bank begins unwinding Mr Kerviel.s positions, resulting
in losses of .4.82bn. European markets suffer biggest falls since
September 11, 2001

January 23: Sell-off completed. The next day losses revealed

January 25: Mr Kerviel .confirmed as rogue trader.. He is taken into
police custody the next day

February 21: SocGen confirms a record fourth-quarter loss of .3.35bn. An
independent report finds that the bank missed 75 warning signs on Mr
Kerviel's activities.

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