French officials face investigation into €403m Tapie payment

Magistrates say settlment the result of a ‘sham arbitration’

France’s former finance minister Christine Lagarde and her then head of cabinet Stephane Richard in 2008. Photograph: Charles Platiau/Reuters

France’s former finance minister Christine Lagarde and her then head of cabinet Stephane Richard in 2008. Photograph: Charles Platiau/Reuters

Tue, Jun 18, 2013, 06:00

The magistrates who are investigating the €403 million settlement awarded to a friend of the former president Nicolas Sarkozy have concluded that the payment was the result of a “sham arbitration” orchestrated by the Élysée during Mr Sarkozy’s term, according to records of court proceedings.

Those proceedings have resulted in the mise en examen of three high-ranking officials for “fraud in an organised group”. Mise en examen can be translated as “placed under investigation” or “charged”.

As interior minister and finance minister, Mr Sarkozy repeatedly attempted to help his friend Bernard Tapie in his dispute with the Crédit Lyonnais over the sale of Tapie’s former company, Adidas. Mr Tapie is a businessman, former socialist cabinet minister and former football club owner who served seven months in jail in 1997 for match-fixing and has a tax fraud conviction.

When Mr Sarkozy was elected, Mr Tapie told associates he was expecting an “enormous” sum of money because Mr Sarkozy owed him for his support during the campaign.

“Mr Sarkozy is henceforward openly suspected of having worked since at least 2004 in favour of a solution that was profitable to Mr Tapie,” Le Monde reported yesterday.

Under questioning by police at the financial brigade, Stéphane Richard, who was the cabinet director of then finance minister Christine Lagarde, said the decision to seek private arbitration was taken at the presidential palace under the supervision of then secretary general of the Élysée, Claude Guéant.

At a meeting in late July 2007, Mr Guéant announced, “We’re going to do an arbitration,” Mr Richard told the magistrates. Later, as Mr Sarkozy’s interior minister, Mr Guéant paid himself €10,000 a month in cash bonuses.

As recently as May 24th, in an interview with Aujourd’hui en France newspaper, Mr Tapie denied having known the chief arbiter, Pierre Estoup.

The investigation has revealed that Mr Estoup earlier worked as a consultant to Mr Tapie in the Crédit Lyonnais affair and was recommended as an “independent” arbiter by Mr Tapie’s lawyer. In a book dedication, Mr Tapie had written of his “infinite gratitude” to Mr Estoup, signing the page “all my affection”.

Ms Lagarde, now director of the IMF, authorised the arbitration against the advice of her staff in the autumn of 2007 and later introduced the notion of “moral prejudice”, which gained a further €45 million for Mr Tapie. She is also criticised for refusing to appeal the arbitration panel’s decision in July 2008.

Ms Lagarde escaped being placed under formal investigation after 25 hours of questioning by the Court of the Republic on May 23rd and 24th. That decision may be revisited in view of recent developments.

An undated hand-written letter by Ms Lagarde to Mr Sarkozy, taken from her Paris home by police in March, has been retained as evidence.

“Dear Nicolas,” it begins, “. . . use me for as long as it suits you . . . If you use me, I need your guidance and support . . . With my immense admiration, Christine L.”

Elsewhere, Mr Richard and Ms Lagarde have implicitly blamed one another. Mr Richard was charged with “fraud in an organised group” after 48 hours in police custody on June 12th. His lawyer asked: “Why put underlings under investigation when they were merely obeying orders?”

In her testimony, Ms Lagarde repeatedly spoke of her “surprise” on learning certain aspects of the case. “I should have been more suspicious,” she said, claiming that an incriminating letter had been signed by a machine with Mr Richard’s approval while she was travelling.

Mr Richard is now the chief executive of France’s biggest French mobile phone company, Orange, which is 27 per cent state-owned. President François Hollande announced on Monday night that Mr Richard would continue to run Orange. Mr Richard has filed a lawsuit demanding the charge against him be dropped.