What a few days off might have saved

Stacey Vanek Smith Jan 29, 2008
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Jerome Kerviel Getty Images

What a few days off might have saved

Stacey Vanek Smith Jan 29, 2008
Jerome Kerviel Getty Images
HTML EMBED:
COPY

TEXT OF STORY

Kai Ryssdal: It’s getting predictable: First comes the crime, then the reports of addiction: drugs, alcohol, sex.

Now stock trading may be added to the list of reasons to head for rehab. French prosecutors looking for answers to rogue trader Jerome Kerviel’s audacious fraud say he was addicted to betting on the markets.

He cost his employer, French bank Societe General, more than $7 billion in losses.

If only they’d sent him on vacation. Stacey Vanek Smith explains.


Stacey Vanek Smith: Ted Weissberg is president of Seaport Securities. He’s been working on the floor of the New York Stock Exchange for nearly 40 years and he’s never taken more than five days off at a time.

Ted Weissberg:: I think the thing that has kept me close to the trading arena my entire life is the fear missing that one great trade.

Weissberg says most of the traders he knows are just like him:

Weissberg:: I don’t want to say that they’re addicted, but they’re certainly drawn to it. It is, at the end of the day, very, very exciting.

Sometimes too exciting. Jerome Kerviel hacked into computers, stole login codes and made billions of dollars worth of fraudulent trades. French prosecutors describe him as a trading addict.

That kind of addiction is part of the reason many banks encourage traders take two consecutive weeks of vacation. Kevin Ferry with Cronus Futures Management says the two weeks were also supposed to help banks detect fraud:

Kevin Ferry: If they made you go for at least two weeks at the same time, they’d be able to tell if you were allegedly doing something un-kosher.

In fact, Jerome Kerviel only took four days off last year and that’s in France, where most people take at least six weeks. If he had taken a couple of weeks vacation, audits might have exposed his multi-billion dollar fraud.

Or not. John Coffee directs the Center on Corporate Governance at Columbia Law School. He says forcing traders onto Caribbean-bound planes is no fail-safe against fraud:

John Coffee: You find out one particular technique to choose, you put in new controls to stop that and someone invents a new stratagem.

Coffee says it’s not addiction or vacation banks need to worry about; it’s watching the shop, plain and simple.

I’m Stacey Vanek Smith for Marketplace.

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