PARIS: French tax authorities are attempting to claw back a €2.2bn tax benefit Société Générale received in relation to losses made by “rogue trader” Jérôme Kerviel. Ten years after the so-called Kerviel affair came to light, SocGen is in discussions with the French tax authorities concerning the benefit, according to people familiar with the matter.
That discussion between the bank and the state continues a saga that began in 2008, when SocGen uncovered €50bn in hidden trades made by Mr Kerviel. Those positions cost the lender €4.9bn to unwind. Mr Kerviel on Wednesday welcomed the authorities’ decision to go after the €2.2bn tax benefit, describing it as “just and courageous”.
The news was first reported by French weekly Le Canard Enchaîné on Wednesday. According to the newspaper, the French tax authorities sent a tax adjustment notice to SocGen in the spring of 2017.
In November 2016, reports surfaced in the French media that the state was going to challenge its tax deduction, following a court ruling that partly blamed faults in the lender’s internal controls for the €4.9bn fraud. That report followed a decision by a French court of appeal to reduce to €1m the damages Mr Kerviel had to pay the bank, saying that while he was “partially liable” for rogue trading, the “patchy nature” of SocGen’s control systems limited its rights to damages.
During that period the bank said it had decided to deduct the losses it incurred when unwinding Mr Kerviel’s hidden trading positions “according to the applicable fiscal legislation” and that it would fight any request to reverse that decision. SocGen confirmed that position in a statement on Wednesday: “The bank reminds that the tax treatment of the loss caused by the fraudulent actions of Jérôme Kerviel has been the subject of in-depth expert analysis since 2008 and the ruling of the Court of Appeal of Versailles does not change its validity in accordance to the applicable case law.”
