Traders run amok are often sentenced to pay restitution, in addition to serving jail time or forgoing any future dealings in the securities industry. But few have been held responsible for an I.O.U. as large as the one a French court pinned on Jérôme Kerviel on Tuesday: $6.7 billion.
That works out to the amount his rogue trades ultimately cost Société Générale, The New York Times’s Nicola Clark reports. But how does it equate to other famous (or infamous) traders gone rogue through the years?
It depends how you look at it, said William K. Black, a professor of economics and law at the University of Missouri-Kansas City, who specializes in financial fraud.
“In terms of dollar losses caused, he’s No. 1,” Professor Black told DealBook. “In terms of crushing institutions, he’s not No. 1.”
That’s because Mr. Kerviel did not actually bring down his firm, which other rogue traders have done. While only four people in all of France would be rich enough to pay what Mr. Kerviel’s owes in restitution – according to Forbes magazine’s list of the world’s billionaires, at least – his bank lives on.
So, too, do several other famous miscreant traders.Joel Saget/Agence France-Presse — Getty Images
Indeed, while Mr. Kerviel may have succeeded in amassing a fraud of historic magnitude, his rogue counterparts have brought distinction (or shame) upon themselves in other creative ways:
¶ Creating fake identities. John M. Rusnak pleaded guilty in 2002 to faking trades in order to hide nearly $700 million in losses through rogue trades of Japanese yen for Allfirst Financial, which was then a subsidiary of Allied Irish Banks.
Mr. Rusnak worked hard to keep his wrongdoing a secret. At one point, in order to trick auditors, he was said to have posed as a fictitious trader, David Russell, with whom he supposedly had dealings. He pulled it off by renting a box at a Mail Boxes Etc. on the Upper West Side in Manhattan; when bank auditors wanted to verify his trades with the supposed Mr. Russell, Mr. Rusnak had them write to that mailbox, where he then replied as if he were the fictitious trader.
Allied Irish Banks sold Allfirst Financial to the M&T Bank Corporation of Buffalo shortly after the scandal came to light. Mr. Rusnak, for his part, was released from federal prison last year and has remained out of the headlines since then.
¶ Earning clever nicknames.The Sumitomo Corporation of Japan in 1996 lost $2.6 billion because of a rogue trader, Yasuo Hamanaka, the chief of the company’s copper trading operations. Before his rogue trades became public, he had earned the nickname “Mr. 5 Percent” — referring to the share of the world’s copper market he was said to control.
Mr. Hamanaka pleaded guilty to forgery and fraud and was jailed until 2005. Paying homage to what made him famous, he told Bloomberg News upon his release that he was “amazed” at how the price of copper had risen while he was incarcerated.
¶ Making the best-seller list. In the mid-1990s, Daiwa Bank lost more than $1 billion as a result of a rogue New York-based bond trader, Toshihide Iguchi. Mr. Iguchi was sentenced to four years in prison, which he told The Wall Street Journal was less painful than the life of deceit he was living as a rogue trader trying to cover his tracks.
While in prison, he wrote a memoir, “The Confession,” that was widely read in Japan. But after settling in Georgia upon his release, the only work Mr. Iguchi could find was a $10-an-hour job at a furniture-building shop, so he eventually headed back to Japan, where he opened an English school, The Journal reported in 2008.
But Mr. Kerviel’s case brought back bad memories. Mr. Iguchi told The Journal that shortly after the French trader was accused, he had nightmares about his own rogue trading.
¶ Going Hollywood. Nicholas W. Leeson, a trader for the British investment bank Barings, managed to topple his bank in 1995 as a result of his rogue trading. Based in Singapore, Mr. Leeson lost more than $1 billion through ill-fated bets on Japanese stock prices and interest rates.
Mr. Leeson pleaded guilty in Singapore to fraud and forgery and served four years in prison. He is now the chief executive of an Irish soccer club, Galway United.
But perhaps best of all, Mr. Leeson managed to carve for himself a place in popular culture. He commanded a reported $700,000 advance for a ghostwritten memoir, “Rogue Trader” (1997), and more recently published a self-help book, “Back from the Brink: Coping With Stress” (2005).
His first book was made into a 1999 film starring Ewan McGregor. The film, like Mr. Leeson’s trading practices, was widely panned.
¶ Putting a spin on things. Joseph Jett, a former trader for Kidder, Peabody & Company, was said to have gone rogue in a decidedly modern way: he was accused of taking advantage of a glitch in his firm’s computer system to record his trades as profitable, even if they weren’t. While Mr. Jett was never charged criminally, Kidder blamed him in 1994 for $350 million in losses and dismissed him from the firm.
Mr. Jett maintained his innocence, and he still works in finance, serving as the chief executive of Jett Capital Management, according to its Web site. The site speaks proudly of his time at Kidder.
– Thomas Kaplan - The New York Times