TJ, the FRENCH re-make from January 2008 (page down for the STILL ON THE RUN ---ORIGINAL OHIO thief)

Wall Street Journal

Societe Generale Hit By Fraud, Write-Downs
Bank Sees $7 Billion In Fraud-Related Loss, $3 Billion in Write-Downs
By NICOLAS PARASIE

January 24, 2008 12:11 p.m.

PARIS -- Massive fraud by a rogue trader at Societe Generale SA has led to a €4.9 billion ($7.16 billion) write-down and is roiling markets as far away as Asia and further shaking investor confidence in Europe's biggest banks.

The bank, France's second largest after BNP Paribas SA, revealed early Thursday that it had detected a case of "exceptional fraud" due to a single trader who had concealed enormous losses through a scheme of "elaborate fictitious transactions."

Jerome Kerviel
The bank identified the trader as Jerome Kerviel. Mr. Kerviel, 31 years old, joined Societe Generale in August 2000 and was working as a trader on the futures desk at the bank's headquarter near Paris. He was in charge of futures hedging on European equity market indices, known as "plain vanilla" futures. The bank said he was able to dupe the bank's own security system because he had inside knowledge of the control procedures gained from previous jobs with the bank.

Though Societe Generale says it first learned of what it termed "massive fraudulent directional positions" on Jan. 19, it waited until it could close out those trades before going public with the problem. Winding down the trades, the bank said, resulted in a €4.9 billion write-down, making it potentially the largest loss ever from an alleged rogue trader.

But that wasn't the only bad news Societe Generale announced Thursday. It also said it was taking additional €2.05 billion write down in assets related to subprime exposure, and it would launch a capital increase of €5.5 billion in the "following weeks." The write-down and losses related to the trading incident will lead the company to post a net profit of €600 million to €800 million for all of 2007.

The disclosure of the write-downs comes a day after another massive sell-off in European markets, as investors reacted to worries about a slowing global economy, the potentially blunted impact of the Federal Reserve's rate cut and whether the subprime woes would continue.
Asian stocks also turned volatile following the news, as early gains in Hong Kong's Hang Seng Index were erased before the market's close, and shares in India traded lower.

Shares of SocGen were recently trading down 6.9% at €73.88 after having been suspended from trading at the market's opening. With a market capitalization around €38 billion, nearly half of its market value has been wiped out since the crisis began six months ago. SocGen is slated to report full-year figures Feb. 21.

At a press conference, Chief Executive Daniel Bouton apologized to shareholders and said the bank wouldn't offer staff stock options or bonuses for 2007. Neither Mr. Bouton nor co-CEO Philippe Citerne will take a fixed salary through June, he said.

The size of the SocGen incident could far surpass one of the most notorious "rogue trader" incidents in global corporate history, the more than $1.3 billion attributed to Nick Leeson in 1995 which bankrupted British bank Barings. Barings collapsed after Mr. Leeson, the bank's Singapore general manager of futures trading, lost £860 million pounds -- then worth $1.38 billion -- on Asian futures markets, wiping out the bank's cash reserves. The company had been in business for more than 230 years.

The fraud was not as big as the 1991 scandal that led to the demise of the Bank of Credit and Commerce International. Claims by depositors and creditors there exceeded $10 billion at the time. International bank regulators seized BCCI, which had headquarters in Luxembourg, London and the Cayman Islands, on July 5, 1991. They acted on auditors' reports that described huge losses from illegal loans to corporate insiders and from trading transactions.

In 2006, a 32-year-old trader named Brian Hunter at Amaranth LLC, a hedge fund, made a series of bad bets on natural-gas futures that led to losses of $6 billion. Credit Agricole SA, one of SocGen's French competitors, in August 2007 revealed a similar trading incident that wiped €230 million off third-quarter net profit.

Mr. Bouton said SocGen had lodged a legal complaint against the trader who perpetrated the alleged fraud, but the bank was unaware of his whereabouts. The bank said the trader, Mr. Kerviel, had worked at the bank since 2000 and that his salary was €100,000 including bonus.
Mr. Bouton said SocGen had to unwind the positions taken by the trader before they were revealed to the market because of their size. The trader, whose motivation was unclear, helped unwind the positions, he said, adding that Bank of France Governor Christian Noyer and the French market regulator, AMF, were informed Sunday. "Everything happened this weekend, we had zero suspicions before Friday," Mr. Bouton said. He said four or five other staff will leave SocGen, including the line of hierarchy above the trader.

The Bank of France and French Finance Minister Christine Lagarde are planning to issue statements later during the day, spokespeople at both institutions said. The Federation of French banks and AMF declined to comment.

Ratings agency Fitch downgraded Societe Generale's long-term issuer default rating to AA- from AA following the news.

--David Gauthier-Villars, Mimosa Spencer and the Associated Press contributed to this article.
Write to Nicolas Parasie at nicolas.parasie@dowjones.com

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Rogue trader blamed for 5-billion-euro French bank fraud
24jan08

PARIS (AFP) — French banking giant Societe Generale said Thursday a single trader who fooled his bosses carried out a massive 4.9 billion euro (7.15 billion dollar) fraud -- one of the biggest scams in financial history.Trading in the shell-shocked bank's shares was temporarily suspended but the stock fell five percent after they resumed, as a result of the fraud and a 2.05 billion euro loss in the US subprime mortgage market. The bank said the losses cut its 2007 profit to 600-800 million euros from 5.2 billion in 2006 and that it needed a 5.5 billion euro capital increase to restore its balance sheet.

The news of the fraud is another huge blow to shaky investor confidence in a global banking sector that is already suffering from multi-billion dollar writedowns at some of the biggest lenders in Britain and the United States. The case dwarfs that of Nick Leeson, the original British "rogue trader" who lost 1.5 billion dollars at Barings, causing the failure of the venerable British bank in 1995.

The Paris-based Societe Generale trader, a man in his thirties named as Jerome Kerviel by sources at the bank, is believed to have built up the huge losses gambling on share futures.The bank's chief executive and chairman Daniel Bouton said the rogue trader had used "extremely sophisticated and varied techniques" to carry out "fraud of a considerable scope" and that he "had the intelligence to escape all control procedures." Bouton also said he did not now know where the trader was.The bank, which said it was convinced he acted alone, said he took out "massive fraudulent directional positions in 2007 and 2008 beyond his limited authority."

Bouton said the trader had been suspended after confessing to the fraud and that legal action would be taken against him. He said the bank was also firing top executives "responsible for the supervision and controls on the operations concerned." "The transactions which involved the fraud were simple -- taking a position on shares rising -- but hidden using extremely sophisticated and varied techniques," he said in a statement. He said he found out about the fraud on Sunday and that the governor of the Bank of France had been informed. The French central bank confirmed it had been monitoring the situation since the weekend."The loss suffered is very big," said Bouton. "All measures were taken on the spot to contain this. The failure of control procedures has been identified and corrected to avoid any new risk of a comparable nature."

Bouton, whose offer of resignation was rejected by the bank, said both he and his deputy Philippe Citerne would not take a salary for the first half of the year and would forgo their bonuses for 2007.The chairman apologised to shareholders at a press conference, 100 of whom have lodged a suit for fraud and misconduct. Societe Generale's stock has lost 20 percent of its value since the start of the year and 50 percent since last May.

The Fitch credit ratings agency lowered its ranking for Societe Generale debt to AA- from AA and some analysts said the bank risked becoming a takeover target.But Bouton sought to reassure investors, noting that the bank was still producing "good and sometimes excellent operating results" and that the capital increase would more than offset any losses from the fraud and the subprime damage.

French Prime Minister Francois Fillon said the fraud was "a serious matter but at the same time, it has nothing to do with the current situation on the global financial markets."

Finance Minister Christine Lagarde said she had asked the country's banking regulator to bring in tougher controls in response to the scandal.Societe Generale said in a statement that the rogue trader had been carrying out what it called "vanilla futures hedging" on European equity markets -- industry jargon for the most most basic kind of futures purchase.

It said he had an in-depth knowledge of the bank's control systems, and managed to cover his tracks "through a scheme of elaborate fictitious transactions."These were discovered and investigated on January 19 and 20, it said.According to the company, the trader joined the bank's investment division in 2000, moving from the middle office which checked deals to the front office or trading desk in 2005.

A Societe Generale union source said it appeared that the trader -- who sources said earned less than 100,000 per year -- had not acted for personal profit."The trader in question was experienced, knew how the bank worked.

It seems he was playing the markets, but not for his own profit, and caused enormous losses," the source told AFP.A human resources official described him as a "fragile" individual, "without particular genius" and facing family problems.

The rogue trader scandal is one of the biggest to hit the international finance industry.

Three years after Nick Leeson caused the meltdown of Britain's Barings bank, the Japanese Yasuo Hamanaka was jailed in 1998 for a decade of rogue trading which cost the Sumitomo Corporation of Japan 2.6 billion dollars.And in 2002 John Rusnak, a trader employed by Allied Irish Bank, was jailed for seven-and-a-half-years by a US court for losing the company 750 million dollars through unauthorised currency trading.

Teddy at 20

My Story: Teddy J. Conrad

Cleveland Plain Dealer

http://www.cleveland.com/news/plaindealer/index.ssf?/base/cuyahoga/1200216634105730.xml&coll=2

Lakewood Class of '67 grad Ted Conrad, $215,000 still missing
Sunday, January 13, 2008

Jim Nichols
Plain Dealer Reporter

Lakewood- Theodore J. Conrad skipped the 40th reunion of his Lakewood High School class last Aug. 25.

That raised no eyebrows among the classmates who gathered at the suburb's Around the Corner Saloon on that warm, overcast Saturday evening.

No one expected to see Ted Conrad there, or at the Class of 1967's 10th reunion, or at its 25th.

It's not that he was an outcast in school: Conrad had plenty of friends, a bright mind and an IQ of 135. He made outstanding grades and had enough charm and affability to gain election to the Lakewood High student council.

Yet, not long after graduation, on his 20th birthday, Conrad turned his back on the Class of '67, on Lakewood and on all those friends he'd made. Everyone quickly found out why - especially the FBI.

On Friday, July 11, 1969, the young vault teller at Society National Bank's Public Square headquarters left work at quitting time with a paper bag, a smile and a wave.

On Monday, Conrad failed to show for work, for the first time in seven model-employee months on the job, and no one from the bank could reach him at home.

By then, Conrad, and the $215,000 he'd purportedly stuffed in that bag, had vanished like a puff of smoke from one of his Marlboro cigarettes.

Almost 39 years later, federal agents are still looking.

"It remains a mystery," said FBI agent Scott Wilson. "Certainly, he has covered his tracks quite well."

Federal agents from just about all of the FBI's 56 field offices around the country have helped investigate the case, and they've compiled enough interview notes and documentation to fill 20 binders. Still, the feds admit they've never even come close.

"He left town and hasn't been seen since," said Bill Edwards, a spokesman for the U.S. attorney's office in Cleveland.

The missing loot, adjusted for inflation, would equate to $1.23 million in today's dollars.


A quiet life, then just gone

Ted Conrad never made much of a splash in Cleveland until he left. Four days after he vanished, his photograph appeared on the front page of the old Cleveland Press, along with a 4-inch story about the bank's belated discovery of his apparent caper.

Before that, Conrad had lived what seemed to be a good but low-impact life.

He was born in Denver, and his father's Navy career kept the Conrad family bouncing around the country for most of Ted's childhood until his parents divorced during their son's elementary-school years. Conrad and his sister lived with their mom, who married Raymond Marsh, a father of two boys. They settled on Bonnieview Avenue in western Lakewood.

Ted was in the German club and was on the student council at Lakewood High, but school records indicate no other involvement. He worked at a Lakewood restaurant, then at a drugstore.

Classmate Jim Bartholomew of Westlake was student council president in their senior year. He recalled that Conrad didn't have a circle of close friends but "was a well-liked guy - quiet, but articulate."

Kathy Berkshire, who now heads the Lakewood Chamber of Commerce, remembers Conrad as a guy who was popular but kept a low profile.

"He was a really nice guy," said Berkshire, who shared a locker with a girl Conrad dated. "He was very clean-cut, very polite. He seemed like he had goals - like when he graduated, he wanted to accomplish things."

Conrad's first post-high school accomplishment was being elected freshman class president at New England College, a small liberal-arts school near Concord, N.H. His father, a retired Navy captain, was an assistant professor of political science there.

For reasons that are unclear, Conrad returned here after only one semester and enrolled in evening classes at Cuyahoga Community College.


Rising star, or schemer?

At the beginning of 1969, Conrad also took a job at the Public Square headquarters of Society National Bank.

Officials there told the FBI and newspaper reporters that they were impressed by his National Honor Society credentials, potential and excellent references from prominent Clevelanders. Every performance review hailed Conrad as "well above average." The young man was headed for the fast track, one banker said then.

Conrad worked in a cash vault, packaging money to be delivered to Society branches around town. It was a position for a trusted employee.

But by then, Conrad was inexplicably fascinated with deception. Several of his friends later told investigators that Conrad was nearly obsessed with the 1968 Steve McQueen film "The Thomas Crown Affair" and saw it over and over. In the movie, McQueen plays a bored high-society millionaire who orchestrates a $2.6 million bank robbery for sport - to pit his wits against investigators'.

Conrad began to fancy himself debonair, his friends told the FBI. He'd show off his fluent French and his billiards prowess, which one friend described as "tournament-quality." He drove a two-seat MG sports car and proclaimed his love for Porsches and Calvert gin.

And he may have been calculating his perfect crime. Retired Deputy U.S. Marshal John "Pete" Elliott, who dogged the case for decades, believes Conrad "had every intent of doing this, probably, from the first day he walked into the bank. It was premeditated - not a spur-of-the-moment act."


No idle boast

Conrad even joked to co-workers about how vulnerable the bank would be to a heist.

"He was clowning around and told people in the bank, 'I could do this and nobody would know it until it was over,' " said Elliott, whose son now heads the U.S. Marshals Service in Cleveland.

Conrad's chance came that second week of July: His supervisor was hospitalized for surgery, and he was left largely unsupervised.

Conrad returned from lunch that Friday, conspicuously carrying the paper bag and its contents - a fifth of Canadian Club whiskey and a carton of smokes - into the vault with him. No one thought twice when he signed out for the weekend carrying the same bag - filled, authorities believe, with $50 and $100 bills.

At 7:26 p.m., outside Conrad's Clifton Boulevard apartment, he waved goodbye to his landlady and climbed into a cab. He got out 26 minutes later at Cleveland Hopkins International Airport. There, he called his girlfriend and told her he was going to Erie, Pa., for a rock concert.

The next week, the story made the papers. But it was eclipsed by the buildup to Apollo 11's first-ever moon mission, El Salvador's invasion of Honduras and Broadway Joe Namath's declaration that he'd retire rather than lose a showdown with NFL Commissioner Pete Rozelle over Namath's ownership of a shady nightclub.

To Conrad's classmates, the news "was kind of a shock to the system," said Bartholomew. "He was the kind of guy everyone thought would be successful - but not as a bank robber."

The next time Conrad's girlfriend, Kathleen Einhouse, heard from him was on July 17, in a letter postmarked from National Airport in Washington, D.C. She got another letter on July 22 from Englewood, Calif., home of Los Angeles International Airport.

Those letters implicate Conrad, said Edwards, of the U.S. attorney's office.

A federal grand jury indicted Conrad on charges of embezzling and falsifying bank records in December 1969. That stopped the clock on the statute of limitations, Edwards said. Conrad faces about 10 years in prison on each charge.

Elliott and the FBI squabbled over manhunt jurisdiction, and each agency pursued leads. Elliott pulled fingerprints from documents Conrad had handled at the high school, bank and college and turned a dossier over to Interpol, the global police agency.

Periodically, federal authorities would get court orders permitting them to comb the telephone records of Conrad's friends and family, to little avail. FBI agents showed up at high school reunions.

Elliott followed leads from Melbourne, Australia, to Medford, Ore. Nothing flushed Conrad, who said in one intercepted communiqué to a friend late in 1969 that he had "undergone a drastic change in appearance."

Eighteen years after his retirement, Elliott still keeps computerized case files at his fingertips and admits Conrad grates at him.

"One of the reasons I stayed after this guy is that some people thought he was some kind of hero or Robin Hood. He's not," said Elliot, now 71.

"He was nothing but a thief - a young, smart-assed thief who managed to elude law enforcement for all these years. Hopefully, we can bring him to justice soon."