The Wall Street Journal-20080128-Hometown Boys- Tiny French Ville Drawn Into Scandal- Jerome Kerviel Is Blamed In --36-7-2 Billion Trading Loss- Mystery Surrounds Brother

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Hometown Boys: Tiny French Ville Drawn Into Scandal; Jerome Kerviel Is Blamed In $7.2 Billion Trading Loss; Mystery Surrounds Brother

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PONT L'ABBE, France -- Alleged rogue trader Jerome Kerviel and his older brother grew up on a quiet cul-de-sac near rocky potato fields. Their mother cut hair in a low-rent beauty salon off a parking lot; their father hammered metal into bed frames in a cinder-block workshop.

The last time anything really exciting happened in this windswept, coastal corner of northwestern France was back in 1961, when local potato farmers angry at slumping prices went on a violent rampage. The brothers missed that. Jerome was born in 1977; his brother, Olivier, seven years earlier.

"This place, if you have dreams, you leave when you're 18 and come back when you're 60," says Danielle Lautredou, a member of the local council.

The brothers Kerviel left town to pursue their careers. And Pont l'Abbe -- along with their employers and financial markets around the world -- is now struggling to fathom what its native sons have been up to since.

Accused last week of the one of the biggest individual financial frauds in history, the younger Mr. Kerviel is blamed for bad bets that lost his employer, Societe Generale SA, 4.9 billion euros (around $7.2 billion dollars). He surrendered to police in Paris Saturday.

Meantime, the Parisian banking community was abuzz with the possibility that Olivier had suffered a similar fate at a Societe Generale rival bank. An Olivier Kerviel resigned from his position at the online brokerage of Banque Nationale de Paris last spring after being questioned over alleged irregularities totaling a couple of thousand euros, according to a person familiar with the matter.

But like much else in the story, confusion was the order of the day: As yet, no one has been able to say for sure whether this Olivier Kerviel is Olivier frere.

All the talk ensures Pont l'Abbe can brace for a fresh round of scrums with tabloid reporters.

"We were never world famous, until now," says Jean-Pierre Le Gall, Pont l'Abbe's deputy mayor, who notes that "absolutely nothing" has happened here since the potato riots.

Jerome Kerviel's journey from a whitewashed stone house with a slate roof in Pont l'Abbe (population 7,800) to a holding cell of France's financial-crimes unit echoes a morality tale at the center of great French literature.

La Comedie Humaine, a series of novels by Honore de Balzac, features a provincial corrupted by the big city. (Balzac coined a dictum roughly translated as: "Behind every great fortune is a great crime.") Emile Zola and Stendhal also explored the travails of ambitious young Frenchmen derailed by Parisian greed and vice.

While his former bosses at Societe Generale have portrayed Mr. Kerviel as the mastermind of an elaborate fraud, locals here see him as a local hero led astray by sly urban sophisticates.

As reporters swarmed into this rugged patch of Brittany last week, town folk rallied to Mr. Kerviel's defense, presenting him as a model of the qualities they hold dear: discretion, modesty and industry.

Philippe Orhant, who taught a judo class attended by the young Mr. Kerviel, remembers how his former pupil gamely served as tackling dummy for demonstrations of throws, rolls and falls. "Each time I asked for something, he was there," says the judo teacher.

"He's a well-mannered, good guy," says Thierry Mavic, a computer engineer who serves as Pont l'Abbe mayor. "How could a man like that be guilty of anything?" He also praises Mr. Kerviel's older brother, Olivier. "A very solid family," he says.

In 2001, Mr. Mavic, impressed by Jerome Kerviel's hard-working sobriety, invited the young banker to join his conservative ticket for town council elections. Their main electoral pitch: financial discipline.

"We need to balance our budget," read a pamphlet Mr. Kerviel handed out to voters during brief trips from Paris to his hometown during the campaign.

"He was one of the most successful young people here, a young and fresh face," says Mr. Mavic, a supporter of French President Nicolas Sarkozy and his slogan of "work more to earn more."

Mr. Kerviel lost the election. He wasn't much of a campaigner, recalls the deputy mayor, Mr. Le Gall, who ran on the same ticket. Uncomfortable pressing the flesh, Mr. Kerviel mostly stuffed envelopes in mailboxes and did back-room work. "He was too shy to be a real politician," says Mr. Le Gall.

For a time, it also looked as if his banking career, too, might stay confined to the back room. After getting a degree in finance at Nantes University, Mr. Kerviel took a yearlong course in a second-tier business school in Lyon. The program combined classes on the mechanics of back-office operations with an internship at BNP Paribas in Paris. He graduated with the equivalent of a B+ -- "not brilliant, but good," recalls Lyon professor Valerie Buthion.

In 2000, he got a job at Societe Generale, France's second-biggest bank. He worked in the back office, known by staff as "the mine" because of its unglamorous drudgery processing trades. The work put him far from the hard-driving and very lucrative flashiness of the trading floor.

With only a modest salary, Mr. Kerviel rented a small studio apartment in Neuilly, a wealthy Paris suburb. He worked long hours, dressed well and passed mostly unnoticed, though he did impress the employee of a real-estate office across the street from his apartment. "He reminded me of Tom Cruise," says Anne Gillier, the property agent.

He still returned fairly regularly to Pont l'Abbe, where his family had slowly hoisted itself into the lower middle classes through generations of hard work. His grandfather worked as a blacksmith and his father, rising a rung, set up his own small metal-working business.

But these visits dropped off sharply following the death some two years ago of his father from throat cancer. "We stopped seeing him after that," says Patrick Guillemet, who runs a thrift store across the street from the Kerviel family home.

In 2004, Mr. Kerviel won a promotion to the trading desk on the seventh floor of Societe Generale's headquarters at la Defense, a business district in western Paris. His trading team had a glamorous title -- Delta One -- but its work was fairly humdrum. It got Mr. Kerviel out of the back office but still didn't make him a high flier.

Last year, by the bank's account, he set about trying to change that. He embarked on what Societe Generale says was a mass of unauthorized, high-risk trades. The edifice collapsed last week when the bank started to unwind his bad bets. The bank poured acid scorn on its wayward trader.

At Pont l'Abbe, though, Mr. Kerviel remains the star he never really was. A dozen people have called the mayor's office, located in a 14th- century castle, to ask where they can address letters of support.

Mr. Mavic, the mayor, says he can't even imagine the vast sums of money the young banker is accused of losing. "Five million euros means something, it's like the size of the town budget, but five billion is a crazy number, it doesn't mean anything."

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Charles Forelle in Brussels and Max Colchester in Paris contributed to this article.