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Norb Vonnegut
Norb Vonnegut
"If anybody can turn international finance and hedge funds into a riveting thriller, it's Norb Vonnegut." (Jeffery Deaver) When the money talks…I listen. And I write about what happens behind the scenes in the bare-knuckled world of finance. THE TRUST, THE GODS OF GREENWICH, TOP PRODUCER.


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Posted in Business / Finance / Investing

Customer Sues Bank Over His Missing Millions

Oct. 21, 2010 9:28 pm
Categories: financial scandals

(Editor's Note: "Check your bank statements." How many times have we heard that familiar bit of advice? Brian Mahany's post describes an event where checking made no difference.)

Two Societe Generale Singapore bankers have been accused of losing $10,000,000 in a client's account and then attempting the hide the losses with phony statements. An Australian resident, Chan Leong Cheng, sued the bank and two of its private bankers for fraud. According to the suit, "the defendants' management of the assets in the account created massive losses." That appears accurate; according to the victim, the account went from about $10 million to $250,000 in just a few years.

While bank frauds are nothing new, Societe Generale is the second largest bank in France.

It is known for its private banking. According to the bank's website, Societe Generale has 2,900 private bank employees in 21 countries managing over $90 billion. For a bank that large and sophisticated, it continues to be plagued by internal fraud and theft.

In April of this year, the bank admitted "anomalies" in its Singapore operation, the same location currently being sued by Mr. Chan. The bank announced an internal audit and later reported that the affected clients were informed. Apparently that did not include Chan.

Although his account had dwindled to just $250,000, he continued to receive statements - phony statements - showing his account with an $8,000,000 balance.

In early October of this year, a French court sentenced Societe Generale trader Jerome Kerveil to 3 years in prison and ordered him to pay a record high fine of almost $7 billion after being convicted of forgery and breach of trust.

What is especially shocking is that despite its already tarnished reputation and bad publicity, the bank has refused to make good on Mr. Chan's account.

According to a published report, one of the two account managers has already confessed and admitted she withheld the loses from the bank's management.

For the bank's part, they claim that Mr. Chan was negligent and responsible for the criminal conduct of the bank's employees. Mr. Chan says that the account was reserved for his children's future, a future that is now in doubt unless the bank makes good.

Not every loss by a bank is the result of fraud. Most are not. For every winner in the investment world there is someone who loses money. Blaming the victim, however, does nothing to enhance the bank's already damaged credibility. Remember, one of the two bankers has already confessed and according to the lawsuit, the bank statements were complete fabrications.

Where did the money go?

Early speculation is that the two bankers made a series of unauthorized trades in the account, each one losing money. As the account's balance rapidly dwindled, the two made increasingly risky trades trying to recoup the losses. To compound the problem, the two altered bank statements sent to the client.

Societe Generale's website notes, "To maintain your standard of living and meet your future needs… we take everything into account." Perhaps after this latest investment fraud scandal that should now read, "we take everything IN your account."

Brian Mahany

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