French bank Société Générale was the victim of an alleged multi-million pound fraud which occurred within weeks of the much-publicised €4bn fraud by rogue trader Jerome Kerviel - but it was never disclosed to shareholders.
The Daily Telegraph reports the £127m hole uncovered in 2007 led to lawsuits and the liquidation of the Swiss subsidiary in which it took place. SocGen did not refer to the problems in any of its annual reports published at the time.
The loss occurred within weeks of the investment bank uncovering the much larger multi-billion fraud by Kerviel (pictured).
According to the Telegraph, the alleged fraud took place in December 2007 at Rosbank Switzerland, the Swiss branch of SocGen's Russian subsidiary Rosbank.
It is detailed in Rosbank's 2007 annual report in which it is described as a "fraud". Rosbank later gave more details including how the situation had been remedied - through the injection of Sfr174.7m of shareholder funds.
At the time of the fraud SocGen was a 20% shareholder in Rosbank with an option to increase its holding to 50%. By the time the cash injection took place, SocGen had increased its stake to over 50% in an acquisition that cost the bank $2.3bn (£1.5bn).
The Daily Telegraph has learned the loss at Rosbank was connected to problems at Iranian steel trading group Safa Industrial. Despite numerous lawsuits, Rosbank failed to establish any wrongdoing or liability on the part of Safa or its owner Mohammad Rostami Safa.
The issue of the loss was due to be raised again in the High Court in London today. A case alleging a multi-million pound fraud against Alphasteel by one of Rostami Safa's former business partners, Shahram Shirkhani, was settled over the weekend.
Alphasteel collapsed into administration in 2007 with the loss of 400 jobs. Alphasteel's failure was part of wider problems at Safa Group that led to the massive loss at Rosbank.
SocGen declined to comment on the loss or alleged fraud.
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