Saturday, February 9, 2008

PARIS (AP) — A Paris court put French trader Jerome Kerviel behind bars yesterday, while the investigation into billions of dollars of losses he purportedly caused for bank Societe Generale took a new twist with a second employee taken into custody.

Investigators want to know whether Mr. Kerviel acted alone, and if so, how it was that a brokerage employee sent him a message before the scandal broke, saying: “You have done nothing illegal in terms of the law.”

The bank, prosecutors and France’s finance minister have said Mr. Kerviel appeared to have acted without help when he made massive unauthorized bets on European futures markets, which the bank said cost it more than $7 billion to unwind.

The 31-year-old futures trader was sent to La Sante jail outside Paris, said a judicial official who declined to be named because of the sensitivity of the case. Famous La Sante inmates of the past include Venezuelan terrorist Carlos the Jackal and Nazi collaborator Maurice Papon.

The court was concerned that, if left free, Mr. Kerviel could have jeopardized what promises to be a long and complex investigation — by contacting possible accomplices or exerting pressure on witnesses, the official said. The prosecutor’s office had urged the court to jail him.

Societe Generale, one of France’s biggest banks, has faced uncertainty over its future since the scandal broke Jan. 24, as well as questions about how Mr. Kerviel’s massive trades could have gone unnoticed. Bank officials have said repeatedly he did not appear to have had accomplices.

But the bank’s lawyer, Jean Veil, raised the possibility yesterday that Mr. Kerviel only claimed to have acted alone to avoid being jailed.

Christophe Reille, a spokesman for Mr. Kerviel, described the trader as “serene” after the judges sent him to jail.

“He faced up to it,” Mr. Reille said. “I saw him walk past me, with the gendarmes. He was very natural.”

Mr. Kerviel’s lawyer, Elisabeth Meyer, said she planned to appeal, and compared her client’s defense against the powerful bank to “David fighting Goliath.” Judges had allowed Mr. Kerviel to go free last month, after Ms. Meyer argued he did not pose a flight risk.

The revelation that a second employee was taken into custody on Thursday was a potentially big twist, and could add a whole new layer of complexity to the case if it turns out that he was an accomplice. The brokerage employee was still being held late yesterday.

The employee worked at Newedge, a 50-50 joint venture between Societe Generale and Calyon bank, according to another judicial official who spoke on the condition that her name not be used. Police investigators also searched the Newedge office on Paris’ Champs-Elysees in the case, the official said. Mr. Kerviel passed some of his trades through the brokerage, the official said.

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