The well-connected arms dealer and his tax returns

InIn the first of this series of reports about businessman and arms broker Ziad Takieddine, Mediapart exclusively revealed the very close personal links between the 61 year-old businessman and key figures, including several ministers, of the inner circle surrounding French President Nicolas Sarkozy.

Mediapart also revealed that Takieddine, who holds both French and Lebanese nationalities, received payment totaling a value of 91 million euros between 1997 and 1998 from a sale of French frigates to Saudi Arabia, a contract authorized in 1994 by Nicolas Sarkozy when he was budget minister.

That same year, France also signed a deal to sell three Agosta-class submarines to Pakistan and the two contracts are currently under investigation by Paris-based examining magistrates Renaud Van Ruymbeke and Roger Le Loire. Their enquiry was opened last year into suspicions that the submarine sale to Pakistan served as a means for illegal party funding in France.

Several witnesses questioned by the magistrates have designated Takieddine as being a key intermediary in the submarine contract after he was imposed on the deal by the then-government of Edouard Balladur. The magistrates are notably investigating whether some of the significant sums officially destined as commissions - or bribes - to Pakistani officials ended up returning to France, through what are called retro-commissions, to illegally fund Balladur's political movement and unsuccessful 1995 presidential election campaign. Balladur's then-budget minister Nicolas Sarkozy also served as his official campaign spokesman.

This is what has become known as ‘the Karachi affair', so-called after the 2002 murders of 11 French naval engineers who were helping build one of the three submarines in the Pakistani port city. The credited lead in a separate, ongoing investigation into their murders is that they were the victims of a revenge attack for the non-payment of commissions surrounding the deal, halted immediately after Balladur's political rival Jacques Chirac beat him to the presidency in 1995. (For more on this far-reaching affair, see our Q&A guide here and a video presentation here).

Mediapart has learnt that Takieddine pays no income tax in France, despite being domiciled in the country. He also pays no wealth tax in France where, according to documents signed by him, he has a wealth estimated at more than 40 million euros.

His wealth is well-known to many close to the president. They often figured as guests at his apartment on the plush Avenue Georges Mandel in the 16th arrondissement of Paris, as at his villa Cap d'Antibes on the French Riviera, or on his boats, a yacht called La Diva and a Challenger motor launch.

But Takieddine, despite having his fiscal residence in France, did not declare his wealth for the ‘ISF' wealth tax, applicable to everyone with a wealth estimated at 800,000 euros or more. Furthermore, he also hid the commissions he received from the 1994 sale of three French La Fayette frigates to Saudi Arabia. These payments, with a total value of 91 million euros, were spread around several offshore bank accounts, disconnected from his official accounts.

Mediapart has gained access to Takieddine's tax return statements concerning the years 2002 to 2007, and that for 2009 (see images below). According to his taxable revenue returns, Takieddine declared only a salary from a Lebanese company that he controls.

In 2002, this amounted to 347,000 euros. In 2007, this totaled 150,443 euros. However, having paid a tax on these in the Lebanon, he benefited from an exoneration of also paying tax on the sums in France, as allowed under a Franco-Lebanese convention.

Ziad Takieddine's tax returns (in French): click on the images to enlarge.

The exclusive photos published by Mediapart in the first of our reports on Takieddine show the extent of his links with President Sarkozy's entourage and Balladur loyalists, despite the pretence of many of them to the contrary. The pictures also clearly illustrate his lifestyle and which could not have been ignored by his guests, generally invited at his expense.

A millionaire's lifestyle

According to an itemized statement of Takieddine's accounts, his spending on the maintenance and management of his residential properties alone - in Antibes and Paris, as well as in London, Beirut and Baakleen, Lebanon - came to 13.7 million euros from 2001 to 2008.

His home in Antibes cost 333,000 euros for 2003 alone, equivalent to the businessman's total officially-declared yearly income. 2003 was also the year when presidential advisor and former interior minister, Brice Hortefeux, and former budget minister now the head of Sarkozy's ruling UMP Party, Jean-François Copé, visited him there together with their wives.

These elements in a person's lifestyle are invariably scrutinised whenever a taxpayer gets audited. According to information received by Mediapart, several tax authority inspectors and auditors launched verification enquiries into taxpayer Takieddine between 2004 and 2005 - without taking any further action on the matter to date.

In reply to Mediapart's queries, Jean-François Copé, budget minister from November 2004 to May 2007, declined to say whether he knew of any tax investigations or tax fraud suspicions concerning the arms dealer.

"Whether he had any knowledge of that or not, he has no comment to make," his office said on July 12th. "In his capacity as Minister of the Budget, the law bars him from discussing an individual's tax situation. He could be prosecuted for breach of tax secrecy."

However, Copé, now the general secretary of the ruling conservative-right UMP party, has admitted to benefiting from jaunts to Cap d'Antibes, London, Venice and Beirut paid for by Ziad Takieddine. He received some of those favours whilst presiding over the budget ministry. Meanwhile, others close to the current president - Brice Hortefeux, Claude Guéant and Pierre Charon - were in post at the finance ministry, which oversees the budget, and which was under the stewardship of Nicolas Sarkozy from March to November 2004. (Click on the ‘Prolonger' tab at top of page for a list of French budget and finance ministers during the years in question).

Sailing offshore

Ziad Takieddine is a propertied man, to say the least. According to a statement of assets (see below) he signed on October 23rd 2008 in an application for a loan from Barclays Bank, the aggregate value of his assets was assessed at 97.2 million euros, over 40 million of which are located in France - where he pays no taxes.

In this document reproduced immediately below, Ziad Takieddine itemizes his personal assets (including houses, apartments, boats) as well as part of the offshore organization he uses to conceal his fortune from the tax authorities.

For example, the several thousand square-foot pied-à-terre he keeps in the Avenue Georges-Mandel in Paris (estimated value 12 million euros) belongs to a non-trading real estate investment company called Lamartine, which in turn is owned by two Luxembourg companies, Illor I SA and Illor II SA.

According to another document obtained by Mediapart, these two companies domiciled in Luxembourg currently belong to the Panamanian company Alveston International SA, "the sole ultimate beneficiary of whose shares" is none other than Takieddine himself, as the latter mentions in a letter of January 2nd 2009 to one of his financial advisers in London.

By that date the millionaire had finished revamping his entire hidden financial organisation, which a certain James Clark, another financial consultant to the arms dealer, had felt was too vulnerable. In a letter dated March 13th 2007, Clark had warned him:

"I believe that there is a weakness with the present structure in that control rests with one entity, attack that and you have control of everything. To some extent any attack is likely to be on a jurisdictional basis, accordingly I would recommend separating the ultimate ownership of the assets physically situate in France from those situate elsewhere."

Indeed, Ziad Takieddine holds a number of properties abroad as well. In London, he possesses a townhouse (estimated value 20 million euros) in a plush neighbourhood south of Notting Hill; in the Lebanon he has two flats in Beirut (worth 4 million euros) and a property (valued at 3 million euros) in his native town, Baakleen, in the region of Chouf.

Boats, classic cars and vintage wines

In France, the arms dealer has proved a past master in the art of discretion - at least in the eyes of the tax office, where his records are nowhere to be seen. He accomplished that feat by putting straw men at the helm of his organisation. The managing director of SCI Lamartine, for instance, nominal owner of his luxurious abode in Paris on the Avenue Georges-Mandel (photo below), is one Alain F., who happens to be one of Takieddine's domestic servants.

Likewise, SCI Sainte-Anne, the real estate company that owns his large villa in Cap d'Antibes (photo below), is run by Patrick M., one of Takieddine's bodyguards. Before that, it was nominally headed by one of Takieddine's former associates from Isola 2000, a ski resort in the French Alps that Takieddine ran in the 1980s.

Docked in France, at Port Gallice in Cap d'Antibes, Takieddine's two boats formally belong to foreign companies: ‘La Diva' to International Yacht and Motor Charter SA, in Luxembourg; and the Challenger to Yachting Boat International Ltd, which is registered in the British Virgin Islands. Both countries are tax havens, as are those in which the putative owners of his apartments and houses are domiciled.

Ziad Takieddine also collects cars, which he likes to show off at his home in Cap d'Antibes. His automotive fleet includes a pair of Jaguars (vintage 1955 and 1962), a classic Bentley, a Mercedes and an SUV. The cost of managing and maintaining the vehicles came to 751,484 euros during the period from 2001 to 2008.

Nor is the businessman to be outdone on the wine front. Mediapart has obtained a copy of an inventory of the wine cellars at his homes in Paris and Cap d'Antibes, which lists over 1,600 bottles of reds and whites, including some excellent vintages: among them are bottles of 1985 Lafite-Rotschild, 1982 Haut Brion and 1990 Château Latour.

In all evidence, Ziad Takieddine leads a millionaire's lifestyle. When Mediapart questioned him Sunday, July 10th on the subject of his tax returns, Takieddine immediately cut the interview short. "I don't feel like talking to you anymore," he said angrily.

The French budget ministry did not reply to Mediapart's requests for a reaction to the issues raised in this article.

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English version by Eric Rosencrantz and Graham Tearse

(Editing by Graham Tearse)