SocGen Faces Tax Claim On Rogue Trader Gain

by Ulrika Lomas, Tax-News.com, Brussels

07 February 2008

It has emerged that French bank Societe General is facing a tax bill on trading profits booked by the rogue trader, Jerome Kerviel at the end of 2007.

Citing sources familiar with the situation, the Wall Street Journal reported that Kerviel had managed to book a "virtual" gain of EUR1.4 billion by 31st December last year which is now subject to corporate tax. This gain had lain undiscovered until recently, because Kerviel had put in place a set of fake positions in the market to create a fictitous loss of the same amount.

However, it is believed that any tax charge on the EUR1.4 billion profit will be more than offset by future tax breaks on the bank's total losses as a result of Kerviel's trades.

Prosecutors and bank officials are still trying to ascertain how Kerviel managed to evade internal control systems, placing massive bets on the direction of European stock markets and hiding subsequent losses for such a long period. Societe General was alerted to Kerviel's trades on Friday 18th January, by which time his bets on rising stock markets were EUR2.7 billion in the red. However, by the time the bank was able to unravel Kerviel's positions the following week, these losses had escalated to EUR6.3 billion, as stock markets plummeted.

On 24th January, the bank announced that actual losses as a result of Kerviel's trades were EUR4.9 billion, taking into account the EUR1.4 billion gain made in 2007.

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