Mystery behind trading scandal

NEUILLY-SUR-SEINE, France -- Dapper and disciplined, Jerome Kerviel taught judo to children, held the door for his elderly neighbors and lived in a surprisingly modest apartment building for someone on the glamorous futures trading desk of a major bank.

Somehow, and for reasons yet unknown, he also appears to have committed perhaps the biggest one-man bank fraud in history.

An emerging portrait of the 31-year-old futures trader filled out details of how he lived and worked but failed to explain why he overstepped his authority at France's Societe Generale to bet as much as $73 billion of the bank's money.

Four plainclothes police officers, trailed by a locksmith, searched Kerviel's apartment in this chic Paris suburb Friday evening. The officers used a ladder to search a false ceiling just outside the door of his apartment.

They emerged more than two hours later with two large, black leather cases and one briefcase, but did not talk to reporters.

Meanwhile, skeptics from Kerviel's neighbors to France's prime minister questioned whether Kerviel could have manipulated such unfathomable sums -- comparable to a small country's annual economy -- all alone.

The bank insists he was a lone operator.

"When we interviewed him during the night Saturday and Sunday, he imagined that he had discovered methods able to win money on the markets," said Jean-Pierre Mustier, chief executive of the bank's corporate and investment banking arm.

Societe Generale says Kerviel's actions cost it 4.9 billion euros, or more than $7 billion. It has not explained his motivations and said the transactions didn't earn him any money. Executives said he seemed to be irrational.

Family and acquaintances, however, described Kerviel as poised and trustworthy, unusually reserved and discreet. His whereabouts were unknown, though his lawyer said he was not fleeing.

An internal security photo taken from the bank's Web site shows Kerviel with short, dark hair and looking sternly into the camera.

There was no reply Friday at the apartment in the wealthy suburb of Neuilly-sur-Seine, and a note to reporters had been taped to a row of mailboxes in the entrance hall of the modest four-story building. One mailbox still bore Kerviel's name.

"Don't search here. He has been seeking refuge elsewhere probably for some time now," said the handwritten note.

Police ignored the plea, showing up after nightfall anyway to search his apartment.

A preliminary investigation is under way in the case following a complaint by Societe Generale SA accusing the trader of fraud and two complaints by minority shareholders.

It was unclear whether and when Kerviel could be questioned. The case could eventually lead to a prison term or fines.

In the Brittany town of Pont l'Abbe, where Kerviel grew up, his former judo teacher remembered him as a serious, helpful teenager.

"I liked him a lot, and I had total confidence in him," said Philippe Orhant, who has not seen his former student in about 10 years.

Kerviel's family said he was unmarried. His father died two years ago, said an aunt, Raymonde Kerviel. Three union officials at the bank said managers told them Kerviel had suffered from recent family problems that appeared to have deeply affected him.

Kerviel's mother traveled to the Paris area Thursday, when the bank revealed the scandal, to see her son, "because he wasn't doing well," said another aunt, Sylviane Kerviel.

"Jerome has done nothing wrong," she said. "He was a reserved, serious child. He didn't pocket a cent, I'm sure of it."

Bank officials also said Kerviel appears to have netted no personal financial gain from the alleged schemes.

Societe Generale said Kerviel was involved in "plain vanilla" trading -- the more basic forms -- and had "limited authority." He took home a relatively modest salary and bonus of less than $145,700.

In Neuilly, one of France's richest towns, the apartment building was relatively modest. He lived in a former maid's chambers converted into studios on the top floor of the walk-up, said Collette Thomas, 79, who has lived in the building for 30 years and whose apartment is one floor down from Kerviel's.

"He was very young, handsome, a beautiful one . . . but he was not at all talkative," she said. "He didn't talk, he petted my dog, whom he adored."

Her daughter, Isabelle, a nurse, said she would see him about once a week. "But he didn't talk -- he climbed the stairs four at a time and disappeared," she said.

Both said he never smiled, but held the door for them.

"He was physically seductive, always elegantly dressed. But he was always alone," said Anne Gillier, who works in a nearby real estate agency and saw him regularly -- until recently. "I never saw him with a woman, or even with another man, I always saw him alone."

Kerviel, described as a "brilliant" student by one of his former university teachers, both shocked and impressed executives with the complexity and scale of his trades. The bank's CEO called the fraud "extraordinarily sophisticated."

Employed by Societe General 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.

Going beyond his role, Kerviel took "massive fraudulent directional positions" in various futures contracts, the bank said, betting at the start of this year that markets would rise. He got caught when markets dropped, exposing him in contracts where he had bet on a rise.

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 more glamorous futures desk where he invested the bank's own money by hedging on European equity market indices. That means he made bets on how the markets would perform at a future date.

Undetected by the bank's multilayered security systems, Kerviel had for over a year been fraudulently using the company's funds to bet on European stock markets, Societe Generale said.

Kerviel's motive remains unclear. Three union officials representing Societe Generale employees said managers at the bank told them Kerviel was having "family problems."