UPDATE 1-Rogue trader Kerviel branded ‘liar’ in court

* Former SocGen exec hits out at “liar” -Kerviel

* Kerviel accuses SocGen of tolerating his actions

* Trading limits generally not “red lights” -ex-regulator

By Lionel Laurent and Thierry Leveque

PARIS, June 9 (BestGrowthStock) – Rogue trader Jerome Kerviel was
branded a liar who took “inhuman” risks by a former boss on
Wednesday during a trial over trading losses that brought
French bank Societe Generale (SOGN.PA: ) close to collapse.

The bank’s former head of investment banking, Jean-Pierre
Mustier, hit back at Kerviel’s claims in court that SocGen
tolerated unauthorised trading positions that eventually cost
the bank 4.9 billion euros ($6.57 billion) to unwind in 2008.

“You lied to me all along,” an animated Mustier told
Kerviel in the cramped courtroom in the Palais de Justice,
before telling judges Kerviel took “inhuman” risks that would
be termed “criminal” in the United States.

Kerviel, 33, risks five years in jail and a 375,000-euro
fine if found guilty of charges of breach of trust, computer
abuse and forgery. His trial began on Tuesday amid a media
frenzy over one of the most famous faces of the financial
crisis in France.

The ex-trader has said his bosses encouraged him to take
risks and his lawyer has painted him as a “pawn.” SocGen says
he acted alone and denies tacit complicity.

“We encouraged traders to know how to take risks. We did
not encourage them to take risks,” said Mustier, who quit
SocGen last August amid an insider trading probe that also
targeted non-executive director Robert Day.

Lawyers quizzed Mustier over the probe Wednesday, but the
ex-banker responded by saying the regulator’s sanctions
committee planned to recommend his acquittal.

NO SANCTIONS

Earlier on Wednesday, a seemingly tense Kerviel told the
court that during his career at SocGen he regularly exceeded
his trading limits without sanction.

“To the extent that it was exceeded every time, the limit
was porous and never bothered us (traders),” Kerviel said in a
faintly audible voice as he stood before the judges.

The 125-million-euro trading limit was a broad one applied
to Kerviel and the seven other traders on his desk without any
individual breakdown, he added.

SocGen’s representative in court said that even though data
on Kerviel’s positions was available to his superiors, it would
be “operationally unrealistic” to imagine them knowing exactly
where to look in the thousands of daily recorded trades.

The court also heard from witness Jean-Francois Lepetit,
former head of the French market regulator, on Wednesday.

After describing how risk controls were supposed to work
across the financial sector, Lepetit said: “If you exceed your
limits and you do not admit it, you are at fault.”

He added there were “degrees,” saying, “Limits are not a
red light.”

Judges grappled with the exact nature of Kerviel’s job.

The prosecution’s view is that he engaged in “arbitrage”
and reduced risk by taking inverse covering positions, while
Kerviel counters he saw himself as a regular trader with
one-way positions.

INVESTOR CONFIDENCE

Kerviel’s trial is being held as Societe Generale struggles
to restore investor confidence during a fragile economic
recovery and as it faces looming stricter regulation of banks.

SocGen has tightened risk controls since the scandal broke
and has tried to rebuild morale at its retail branch network
after the damage to its brand image and reputation allowed BNP
Paribas (BNPP.PA: ) to gain the advantage.

The trial threatens to overshadow SocGen’s planned investor
event on June 15 that is designed to promote Chief Executive
Frederic Oudea’s new strategy.

Kerviel’s trial is seen as an important case of whether
financial excess is to be viewed as inherent to the banking
system or the result of egregious individuals.

Kerviel quickly rose through the ranks of “middle-office”
and assistant roles before becoming a trader for the bank.

He has admitted to building unauthorised trading positions
that rocked world markets when Societe Generale revealed the
4.9-billion-euro loss in January 2008, after it had wound-down
Kerviel’s trading positions.

While the bank has insisted he acted alone, Kerviel has
said his superiors knew what he was doing and tolerated
breaches in the bank’s controls system.

Investing Tools

($1=.7453 Euro)
(Reporting by Lionel Laurent and Thierry Leveque. Editing by
Marcel Michelson, Simon Jessop and Robert MacMillan)

UPDATE 1-Rogue trader Kerviel branded ‘liar’ in court