Report Slams French Bank's Management on Biggest-Ever Fraud

The report, which was written by internal auditors and released Friday, states that Jerome Kerviel had managed to carry out unauthorized trades leading to a loss to the bank of 4.9 billion euros ($7.7 billion) because of flawed supervision.

"The fraud was facilitated or its detection delayed by the weakness of the supervision of the trader and of the control mechanism of market activities," the report states.

Kerviel's supervisors, "who formed the first level of control, proved to be negligent in the supervision of his activities," the report went on to say.

The auditors also found that Kerviel's direct supervisor had "exhibited an inappropriate tolerance for the taking of [unauthorized trading] positions" by Kerviel on the market.

Although the report does not name Kerviel's direct supervisor at Societe Generale's Delta One trading desk, a report Friday in the Paris-based International Herald Tribune identified him as Eric Cordelle. The newspaper said that Cordelle and Delta One head Martial Rouyere would be fired.

"Indications of complicity"

In addition, the auditors' report stated that Cordelle "lacked experience in brokerage and had not been sufficiently trained in his new functions."

The report also revealed that the auditors had found "indications of complicity" in the fraud by an "assistant trader" of Kerviel's, the first suggestion that he had not worked alone.

"Numerous operations of a fraudulent nature by Jerome Kerviel were carried out by this assistant trader," the report states, without naming him.

But the International Herald Tribune identified him as Thomas Mougard and reported that he, too, would be fired as a result of the findings.

High risk

The newspaper said that the conclusion that Kerviel was not the only employee at Societe Generale responsible for the fraud could make the bank vulnerable to a very costly class-action lawsuit filed in the United States.

Kerviel, who is under investigation on suspicion of forgery and breach of trust, said he did not carry out the scheme for personal gain but merely to make money for the bank and to impress his superiors.

The bank discovered the scheme in January of this year, after Kerviel had secretly exposed it to a risk of 50 billion euros through his unauthorized trades.