"THE MORALS OF THE MARKETPLACE"

Do managers ever learn from the past? Nick Leeson brought down Barings Bank because no one thought to double check the software that kept track of trades and now we learn another trader has done the same thing.

SocGen reels from record $7 bln rogue trader fraud
Thu Jan 24, 2008 6:07pm EST
By Sudip Kar-Gupta

PARIS (Reuters) - A junior computer whiz at French bank Societe Generale was accused of racking up a $7 billion loss in bad bets on stocks in the biggest trading scandal in banking history.

The trader had circumvented the bank's risk controls through in-depth knowledge of its computer systems, but was caught when he tried to cover up his losses.

The losses spiraled to 4.9 billion euros ($7.1 billion) -- nearly its net profit in 2006 -- as the bank tried to close out the rogue trader's stock index futures positions in Monday's sliding market.

The loss ranks as the biggest caused by a single trader, dwarfing the $1.4 billion loss by trader Nick Leeson that broke British bank Barings, and the $2.6 billion Sumitomo Corp lost in rogue copper trades in the 1990s.

According to Frank Partnoy in INFECTIOUS GREED, it wasn't a "rogue trader" at Sumitomo: the company deliberately tried to corner the world's copper market.