French police step up investigation into SocGen fraud

By Thierry Leveque and Andrew Hurst

PARIS (Reuters) - French investigators have stepped up efforts to find out how a self-effacing dealer at Societe Generale ran up a $7 billion loss that hoodwinked his employers, saying he was not on the run and would soon face questioning.

Jerome Kerviel, 31, has not been seen in public since SocGen stunned the financial world on Thursday when it unveiled the record trading loss.

"Jerome Kerviel is not on the run. He will be questioned at the appropriate time, as soon as the police have analysed documents provided by Societe Generale," said an official speaking on behalf of the Paris chief prosecutor on Saturday.

Police on Friday visited the headquarters of Societe Generale where Kerviel worked until his dismissal last week, poring over his computer records, and also searched the apartment where he lived on the western outskirts of Paris.

Kerviel's family say he is being made a scapegoat for the world's worst rogue trading scandal.

The investigation is intensifying as authorities put pressure on SocGen's managers to explain how a bank which won accolades for innovation and boasted state-of-the-art risk controls could be tripped up by a rogue trader acting alone.

France's Economy Minister Christine Lagarde said on Saturday she would report shortly to Prime Minister Francois Fillon on Socgen's woes and would assess whether new legislation might be needed to ward off a repeat of the scandal.

The report would assess "how and why the controls did not work, and what additional controls are required, including appropriate legislation to avoid (this) occurring again," she told reporters at the World Economic Forum meeting in Davos.