17/01/2018 - Societe Generale’s position following the publication of a press article in
Le Canard Enchaîné
Societe Generale will not comment on the subject which is covered by tax secrecy. The bank reminds that the tax treatment of the loss caused by the fraudulent actions of Jerome 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. However, as the Minister of the Economy and Finance had already indicated, the tax administration examines the tax consequences of this loss and a dispute remains possible on this subject before the competent courts.
What is Societe Generale’s position as regards to the tax treatement related to the loss caused by Jérôme Kerviel?
Societe Generale confirms the validity of the tax treatment applied to the loss caused by Jérôme Kerviel, which has been completely transparent and in accordance with the tax legislation applicable to all companies. The recently confirmed precedent set by the French Council of State in this area is clear and well-established. It does not call into question the tax deductibility of the loss incurred due to the actions of Mr Kerviel, which have been definitively established as having occurred without the bank’s knowledge.
The question of the tax deduction has been addressed since 2008, based on the opinions of several lawyers, who advised that these losses were deductible and that, in particular, the notion of an irregular management action (“acte anormal de gestion”) did not apply as far as Societe Generale was concerned.
This position, adopted in 2008, took into account the Council of State case law, particularly the 2007 Alcatel ruling, which rejected the tax deductibility of a loss in the event of “clear shortcomings on the part of the company’s management in terms of the organisation or implementation of control systems that are apparently the direct or indirect cause of misappropriation”. This exception could in no way apply to this case, once Jérôme Kerviel was recognised by the examining magistrate, the first-level criminal court (Tribunal Correctionnel) and the Court of Appeal as the sole author of the fraud, which thwarted the bank’s systems, and the only party responsible for it.
Since 2008, the Council of State issued an opinion in 2011, and several rulings in 2016, that further reinforce Societe Generale’s position, notwithstanding the failure of its internal controls. On this basis, whatever the terms of the ruling made by the Versailles Court of Appeal, Societe Generale considers that it was entitled to deduct the loss it suffered, which Jérôme Kerviel is exclusively responsible for according to a definitive ruling by the Court of Cassation, which also held that the criminal conduct in question had been committed outside of the Bank’s knowledge.
Societe Generale believes there is no reason to consider a provision based on very explicit established case law set by the French Council of State, on its ruling issued in 2011 and on the opinion of our external legal experts.