Tag Archives: lies

Kerviel: The Sorcerer’s Apprentice?

Fraudster or non fraudster?

I normally concentrate on fraud perpetrated by executives but this exceptional story needs to have some of the research findings from my doctoral work (2010) applied to make some sense of the situation with accusations flying from all quarters.

Jerome Kerviel. Photo from:http://picses.eu/image/cd35ab46/

Kerviel‘s status qualifies in being a manager of resources and not people. The argument is that Kerviel cannot be a fraudster is that he received no monetary gain out of the massive transactions, although he would have gained a good bonus that year. The French tribunal ruled that this was not a case of fraud. But despite his seemingly altruistic motives of helping the bank to make money, he nevertheless nearly brought down Societe Generale in the process.

The case analysis and verdict.

Malevolent non-fraudsters as well as fraudsters lie. It is reported that he used fictitious emails and fake trades and lied to his senior managers about his losses. But was he a fraudster in fact?

The counter accusations are: that there is scepticism in the banking community that he did this on his own (in cahoots with other fraudsters); that he was a scapegoat for the bank’s own losses of the previous quarter (attributed fraudster) and that he has received cult status for having to put his career on the line as he was only doing his job of making money in the markets (non-fraudster).

From the information that is freely available on the internet, I have come to the conclusion that most likely Kerviel was an ‘Inferior Malevolent’ fraudster-in-the-making. This conclusion is based on:

  1. Kerviel was doing this rogue trading out of a sense of trying to impress his superiors
  2. He was quiet and introverted, and it is reported that he was liked by neighbours.
  3. “His father, who taught apprentices boilermaking in a local training centre, died less than a year ago.” (Jan 2008)
  4. He lost the woman whom he was going to marry about the same time.
  5. These two losses coincide with the beginning of his fictitious emails covering the trades
  6. He lived in a fantasy world where he existed as the Master Trader, duplicating massive amount of trades every 3 days as the losses grew.
  7. It takes a fair amount of time for this type of fraudster to develop; Kerviel’s activity was cut short after one year.

Although Kerviel did not profit directly from the trading at the point he was discovered it is my belief that he fits the profile of what respondents called in their interviews as the ‘Likeable’ fraudster. This type is quiet, friendly and liked by many. However, it takes a deep family crisis to erupt to spur them into the fraudulent activity and they see that the only way out was to gamble with their company’s money to feed his image of the successful trader. His only solution was gaining money in trades to offset his extremely low self image, and he used the bank’s money to do so.

Fraud investigators note: the Likeable Fraudster is the only type that fits with the Cressy Fraud Triangle (1973 Other people’s money: A study in the social psychology of embezzlement. Montclair, N.J.: Patterson-Smith.)

As a shocked neighbour who had known Kerviel since he was a baby reported: “The two things happening at the same time must have been why everything went wrong.” (2008)

The double losses were replicated in his trading, but this was NOT his intention, he wanted to impress his bosses with large earnings. He came from a different and lower echelon of French society – possibly his managers were seen as father figures to him. That of course is up to the psychologists to say and not my area of expertise. Likeable Fraudsters, are also noted in my research for becoming suicidal upon discovery, which is exactly what happened to young Jerome Kerviel.

It was with considerable luck that Societe Generale discovered the losses when they did, as he was unstoppable and would have continued literally until there was no money left in the bank but earning on the way very large bonuses.

Sorcerer’s Apprentice. Photo from: G.B. Ward’s website:http://brainrender.com/gallery/main.php?g2_itemId=353

It is quite clear that the Guardian Angel profiling (Sheridan 2010) would have picked up Kerviel before the major losses. The bank should have completed some pre-employment screening, however he came straight from University and had no work history. These applicants are typical of ones that slip through the normal background screening cracks, and Kerviel’s case demonstrates clearly that thorough screening must take place on an annual basis with key personnel, such as traders and financiers.

Under my assessment profiling, it would have been pointed out to senior management that Kerviel was at risk, and all that was needed was some spot audits on their part to verify and the whole scam would have unravelled.

It is now up to other banks to heed the lesson that Societe Generale learnt so painfully and nearly went broke in the process of Kerviel’s frenzied activity – just like Mickey Mouse did in the Fantasia version of the tale.

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Filed under Creating successful image, Likeable Fraudster, No monetary gain, Rogue trading

Herve Falciani: Case of the Disappearing Truth?

Since the news broke Falciani’s escapade has focused on countries getting their hands on the stolen data. However, I wish to comment here on the person: Herve Falciani himself.

Herve Falciani. Photo from: http://www.theepochtimes.com/n2/content/view/27369

According to my doctoral research (2010 see  website for more details) it is possible that Falciani is showing signs of the Predator type of fraudster. A Predator (who could have a psychopathic personality) will show the following behaviour:

1)     Their sense of superiority is maintained throughout the post discovery phase: Falciani has given frequent interviews with the media and online, giving his version over the banks and the Swiss Police.

2)     The Predator will adapt the truth to his or circumstances and has no hesitation in doing it. Falciani has changed his story from being a whistleblower to being interrogated by Mossad, to just wanting to expose to HSBC the risks in their data protection system. He also has lied that he only copied the data. In a logic defying statement to the Le Matin Dimanche newspaper he says: “I’m not against banking secrecy,” he told the newspaper. “On the contrary, I say there is none. HSBC clients were deceived, and harmed, because of a lack of computing standards.”

3)     Predators will drag out legal proceedings as long as possible, in a bid to outrun their opponents. The discovery of Falciani’s theft was back in 2007, and the story is not over by any means.

4)     Predators will show no signs of genuine remorse. Falciani has not said he was sorry for the theft from HSBC.

This brings up another issue that most whistleblowers would have copied the data but not stolen it – there is no point, a copy is enough to go public with. Falciani went to several governments to sell his stolen information.

From research by Lynn Clements (2005 Clements, L. 2005. Whistleblowing: Who, what, when, where, why and how? Journal of Forensic Accounting 6 (2): 429-440): “A universal truth about whistleblowers is that all whistleblowers act at moral risk to themselves, and most pay a heavy price. In a year-long discussion group of 12 whistleblowers, all but one lost both his or her job and career, eight lost their homes, seven lost their families, and many suffered from alcoholism and depression at some point after blowing the whistle.”

Rather than seeing Falciani suffering we see him delighting audiences around the world on TV and online.

Finally there is the observation that this man is inconsistent in his recounting of what has happened to him. At best my typology of a malevolent manager would fit, at worst we have a sinister fraudster on our hands.

Easy enough to identify after the horse has bolted…

Predators (and the other type of fraudster) can now be relatively easily uncovered beforehand using screening and profiling techniques. Ideally this would have happened at the point of entry into the organisation – in Falciani’s case in 2006. Then again when he was the senior manager in charge of the migration to a more secure IT environment, achieved circa 2006-07. In this manner an assessment would have discovered a likelihood of the planned theft and internal security and senior management could have minimised the risk. Unfortunately for HSBC, I had not completed my research and these identifiers were not known at that point.


Filed under Arrogant Fraudster, Data theft, Selling stolen assets